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The long-standing legal clash between South by Southwest (SXSW) festival organizers and their insurer, Federal Insurance Co., has come to a quiet conclusion. The dispute, rooted in coverage issues after a COVID-19 cancellation prompted a ticket-holder class action, has now been settled, according to a joint motion filed in a Texas federal court on Monday.

Settlement Ends Bitter Legal Feud

SXSW LLC and Federal Insurance Co. have agreed to dismiss the case with prejudice, meaning neither side can refile the claims, and both parties will cover their own legal costs and fees. The terms of the settlement remain confidential, but the agreement puts an end to the heated debate surrounding the insurer's obligation to defend and indemnify SXSW.

The festival, an annual event in Austin, Texas, known for showcasing music, film, and technology, was forced to cancel in March 2020 due to the pandemic. The cancellation sparked a class action lawsuit by frustrated ticket holders, who accused SXSW of breach of contract, unjust enrichment, and conversion, claiming they were owed refunds.

SXSW Coverage Dispute Settlement : Courtroom Drama Over Policy Exclusions

SXSW filed suit against Federal Insurance in October 2021, asserting that their directors and officers policy should cover the legal costs arising from the ticket-holder class action. However, the district court initially ruled in favor of the insurer, citing a contract exclusion in the policy that appeared to block coverage.

The court’s ruling handed Federal a significant victory in September 2022. But the legal battle did not stop there. On appeal, SXSW and the insurer continued their sparring over whether certain claims, such as unjust enrichment and conversion, fell outside the policy’s exclusions.

SXSW Coverage Dispute Settlement : Appeals Court Reverses Insurer’s Win

In a twist, a three-judge panel of the appeals court reversed the insurer's summary judgment win in March 2023. The court found that the unjust enrichment and conversion claims should have been covered under the policy, as these claims did not arise from any contractual obligations. Federal’s argument that the claims were tied to the ticket agreements failed to sway the judges.

Despite Federal’s bid for a rehearing in May, the court stood firm, refusing to revisit the decision. This left the insurer with little choice but to negotiate a settlement with SXSW.

A Quiet Conclusion to a Public Legal Saga

Though the parties involved have opted to stay silent on the details of their settlement, the resolution brings an end to a contentious chapter for SXSW. The class action by ticket holders, now settled, and the coverage dispute that followed, marks a turning point for festivals and other events grappling with the fallout of pandemic-related cancellations.

Representatives for SXSW declined to comment on the settlement, and Federal Insurance Co. did not immediately respond to inquiries.

SXSW was represented by Peter D. Kennedy of Graves Dougherty Hearon & Moody PC and David A. Gauntlett of Gauntlett & Associates. Federal Insurance Co. was defended by Paul F. Matousek, Tony L. Draper, and Avniel J. Adler of Walker Wilcox Matousek LLP.