Universal Hotels has won a decision in the NSW Supreme Court over an insurance claim that was denied over a technicality and suggestion the policy was not completed properly.
In February 2011, a patron of the public bar at the Civic Hotel fell down the stairs on his way to a basement bathroom. He sustained spinal injuries and was rendered a paraplegic.
Mid-2014 the man initiated public liability legal proceedings against operator and licensee James Kospetas and Universal 1919.
The Hotel held a renewed policy with Neon Underwriting (previously Marketform), acting for a Lloyd’s syndicate, with the policy through ASR Underwriting Agencies.
The Pitt Street venue was detailed as having a ground floor public bar and gaming area, an upstairs restaurant and bar, and a below street level function area with seating, dance floor and a DJ console, listed as part of the entertainment.
The public liability claim was declined, on the grounds that the underwriter would not have issued the policy had correct disclosures been made on the renewal application about the nature of the basement area.
In facts tendered to the court, the policy included exclusions that applied even if the premise is not licensed as a nightclub, but where dancing is regularly undertaken and arrangement of the venue is such that is offers “permanent dancing and musical entertainment”.
Reputedly to further clarify its position the policy listed seven features, stipulating if a venue possessed any three of these, the exclusion would apply. These included purpose lighting, permanent sound system, or security personnel managing the entrance.
Kospetas testified he had responded “no” to the question regarding whether the Civic Hotel had a nightclub, as he said it was not a nightclub.
“It had a function room on the basement level, which was sometimes hired by promotors to organise DJ nights at which music was played,” he told the court.
Supreme Court Justice Julia Lonergan agreed that the basement arrangement was provided to conduct various functions, and ruled Universal had not misrepresented or breached its duty of disclosure, suggesting Kospetas genuinely believed there was not a nightclub.
“He presented as an honest businessman who did his best to describe the premises and activity at the Civic Hotel that occurred based on his understanding of the range and spread of functions in the three storey multi-use hotel.”
Justice Lonergan was critical of the definition in the policy, suggesting the “questions arising from the vagaries of expression in the ‘nightclub’ definition are almost endless”.
The court was also provided evidence suggesting Neon may agree not to exclude certain activities if full details are provided, and where necessary an additional premium is paid, but a spokesperson for provider ASR claimed they see nightclubs as “never an acceptable risk”.
Justice Lonergan suggested it was not clear what might have occurred if the area was deemed a nightclub, and found against Neon on whether insurance renewal would have been declined if the different information had been provided, citing evidence was “contradictory” and “incomplete and unsatisfactory”.
The full decision can be viewed here.
