Court Rules Against Star Entertainment’s COVID-19 Insurance Claim

Judge rules against Star Entertainment's insurance claim

Star Entertainment suffered massive financial losses as a result of the ongoing COVID-19 pandemic. Several lockdowns ordered by the Australian government resulted in Star not welcoming patrons to its vast casinos. Furthermore, attendance restrictions applied to accommodation, dining, and conference facilities.

Casinos and hotels have insurance that protects them from a whole range of possibilities. For example, they have public liability insurance if a customer injuries themselves whilst on their property. Star Entertainment’s bosses took out an insurance policy with Chubb Insurance Australia Ltd to cover financial losses. However, the insurance company refuses to payout Star’s COVID-19 claim.

Star Entertainment claimed under its business interruption insurance policy. Its policy is worth $1.75 billion for its Gold Coast property, $1.43 billion for its Brisbane casino, and $4 billion for its flagship casino in Sydney. The policy started November 1, 2019, and ran until January 25, 2020.

Judge Rules “This Is Not Catastrophe Insurance”

The insurance company point-blank refused to pay anything to Star Entertainment. Chief Justice James Allsop of the Federal Court studied the insurance policy in great detail. He called the policy “a carefully worded document.”

Star’s claim hinged on two specific sections of the policy. First, a section relating to indemnity for physical loss, destruction, or damage to property. Second, indemnity for losses resulting from business interruption from physical loss, destruction, or damage to property. “Insured perils” are what those in legal circles call the latter.

Chief Justice Allsop ruled against Star, throwing the casino giant’s claim out of court. Star claimed it suffered physical damage from the acts and orders of various governments relating to lockdowns. The judge ruled against Star Entertainment’s claim. He cited financial losses incurred as a result of the COVID-19 pandemic are not insured perils.

“This is not catastrophe insurance,” Chief Justice Allsop informed Star lawyers.

Star Entertainment Considers Appealing Insurance Decision

The Chief Justice informed Star its insurance did not cover financial losses resulting from lockdowns. However, he instructed Star to submit claims within 14 days regarding spoiled goods. Star, like many businesses, saw vast stocks of food and beverages spoil due to a lack of customers.

Star’s portfolio contains seven hotels with more than 60 bars and restaurants. It welcomes more than 22 million guests each year. The company has not announced how much stock it has lost to date, but the figure will run into tens of thousands of dollars.

The company has 28 days to lodge an appeal. Star will likely appeal because of the massive sums of money involved.

Star Queensland Set to Reopen

Star’s properties in Queensland reopens on August 8 following yet another COVID-19 related lockdown. The Queensland properties (Gold Coast and Brisbane) are two Star attempted to claim for on its insurance. The casino there closes on July 31 for three days. However, the Queensland government extended lockdown measures until August 8. Star paid its staff during the eight-day lockdown period.

Crown Merger is a No Go

The insurance setback comes a fortnight after Star Entertainment pulled out of a proposed merger with Crown Resorts. Star threw its hat into the ring with an official merger proposal that would save up to $200 million per annum.

Star withdrew its offer due to the uncertainty surrounding Crown’s future.

“To date, The Star has had limited engagement with Crown on its proposal. Also, issues raised by Victoria’s Royal Commission into Crown Melbourne have the potential to materially impact the value of Crown, including whether it retains the licence to operate its Melbourne casino or the conditions under which its licence is retained.”

“We continue to believe substantial benefits could be unlocked by a merger, however, the uncertainty surrounding Crown is such that The Star is unable to continue at the present time with its proposal in the form announced on May 10, 2021. The Star remains open to exploring potential value-enhancing opportunities with Crown. The Star will continue to closely monitor the Victorian Royal Commission and Perth Casino Royal Commission, with final findings expected later this year.”