Star Entertainment Loses Pandemic Insurance Appeal

Star Entertainment Group's appeal against the decision of not paying it out under its pandemic insurance policy fell on deaf ears this week.

Star Entertainment has lost its appeal regarding a pandemic insurance payout. Star’s legal team threw its weight behind the appeal but the Federal Court rejected their appeal claim. The judge ordered Star to pay their opponent’s legal fees, further rubbing salt into an expensive wound.

Chubb Insurance Australia insures Star Entertainment’s casino and hotels in Brisbane, Gold Coast, and Sydney. The company insures Star for many things, including public liability in the case of accidents or injury. However, it is the loss of earnings policy that is under the spotlight.

Star’s policy provides cover worth up to $4 billion. The casino giant is adamant the policy provides pandemic insurance due to the policy’s wording. Its latest financial figures show Star lost $73.7 million during the previous financial year. Star’s CEO, Matt Bekier, pointed the finger of blame squarely at the COVID-19 pandemic. Star neglected to put a figure on the cost of enforced pandemic related closures. However, rivals Crown Resorts claim similar closure cost them more than $79 million. No wonder Star is keen to recoup some money.

The casino’s policy states it covers the policyholder for “loss resulting from or caused by any lawfully constituted authority in connection with or for the purpose of retarding any conflagration or other catastrophe.” A judge ruled the COVID-19 pandemic is not a catastrophe within the meaning of the policy.

Star’s Policy Does Not Cover the Ongoing Pandemic

Lawyers for Star Entertainment argued the COVID-19 pandemic is, indeed, a catastrophe. The Federal judge decided otherwise. Star turned its attention to another clause in its policy, one addressing losses notifiable diseases caused. The policy expressly excluded any disease listed under the Commonwealth’s Biosecurity Act.

“COVID-19 is such a disease,” Justice Mark Moshinsky said.

Moshinsky informed Star the policy would not cover pandemic losses even if deemed a catastrophe because of the second clause.

Star’s share price remained almost exactly the same despite the bad news. This is because investors knew winning the appeal was a long shot at best.

It was not only Star who lost its pandemic insurance appeal, five other companies lost theirs. LCA Marrickville, Market Foods, Meridian Travel, Taphouse Townsville, and the liquidator of Educational World Travel were unsuccessful.

Latest in a Long Line of Bad News

There was a time when Crown Resorts received all the negative press while Star looked like the good guys. How times change. Although not their fault, the appeal failure is more negativity after a period of negative headlines.

Star fired and banned one its gaming managers just before Christmas. Minh Nguyen repeatedly borrowed money from Star employees and used it to fund her gambling addiction. This came at a time when the Independent Liquor & Gaming Authority (ILGA) were looking into Star’s seemingly lax anti-money laundering procedures.

Mende Rajkoski gambled $106 million on Star’s pokies in one week. Nobody from Star approached Rajkoski and asked where the money came from. Police later arrested Rajkoski for his part in the importation of three tons of cocaine.

In addition, Star admitted underpaying 2,200 staff a combed $13 million. The underpayments went unnoticed for six years, leaving those affected an average of $5,909 out of pocket.

Furthermore, the Sydney Morning Herald published a story claiming Star Sydney encouraged lying by its high roller customers. New South Wales government receives 10% tax on revenue from non-local high rollers. However, it receives 20% from local high roller revenue.

Several Star employees went on record claiming the casino actively encourage high rollers to lie about their residence. Star offered these high rollers access to lucrative rebate programs. The newspaper asked Star if the claims are true. It responded with a two-sentence statement.

“The Star runs a rebate program where the eligibility of domestic international players is determined by criteria known to the regulator. The Star operates in a highly regulated environment.”