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SXSW Sues Insurance Company for Not Funding Defense in Class Action Lawsuit

SXSW
SUZANNE CORDEIRO/AFP via Getty Images

SXSW 2020 banners are seen in the Red River Cultural District on March 6, 2020 in Austin Texas.

The Austin festival is being sued over refunds to its canceled 2020 event.

Organizers of the annual South by Southwest festival in Austin are suing Federal Insurance Company for not covering the event's legal fees in an ongoing class action suit from attendees wanting thousands of dollars in refunds for last year's canceled event.

After being told it's policy excludes coverage for refunds, Austin attorney Peter D. Kennedy filed a complaint Wednesday in the U.S. District Court for Western Texas, saying SXSW purchased a $1 million policy from Federal Insurance in August 2019 and argued that the company is not living up to its obligation to defend and indemnify the event.

SXSW was one of the first major music events to be canceled in March 2020 due to the coronavirus pandemic. Organizers could not provide refunds "because SXSW must spend enormous sums of cash to prepare to host a festival," Kennedy wrote, but the event did offer the option to defer 2020 credentials to a future date as well as the right to purchase credentials for another year at a 50% discount. Approximately 80% of credential purchasers accepted this offer. A number of attendees did not, however, leading to an April 27 class action lawsuit against South by Southwest filed by attendees Steven Leventhal, Maria Bromley and Kleber Pauta alleging breach of contract, conversion and unjust enrichment.

Kennedy argues that South by Southwest's Federal Insurance policy includes liability coverage and requires the company to pay for SXSW's legal defense in the class action lawsuit, but Federal Insurance says there is language in the policy excluding coverage related to contractual disputes and professional services. Kennedy argues that Federal Insurance is misreading the contract and is still obligated to defend the organization against the conversion and unjust enrichment claims.

Kennedy is asking a district court judge to force the insurance provider to fund SXSW's legal defense and pay damages, interests and legals costs as a result of charges of breach of contract and violations of Texas' insurance codes.

Billboard's parent company P-MRC made a 50% investment in SXSW in April.