Lady Gaga's production company and promoter are suing three Lloyd's of London insurance syndicates for not paying out on terrorism policies, after threats from Islamic extremists prompted them to cancel her concert in Jakarta.
The legal action has arisen after the singer pulled out last June from a sold-out show in the Indonesian capital, which the hardline Islamic Defenders Front (FPI) vowed to disrupt because it claimed the concert amounted to "satanic worship".
It comes amid growing concerns from companies that insurers are exploiting technicalities and semantics to turn down legitimate claims. The Law Commission in England is proposing to tighten the legal framework.
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Lady Gaga's production company, Mermaid Touring, together with Live Nation, a major American concert promoter, and The Atom Factory, which is owned by her manager Troy Carter, said in a claim filed in the US District Court in Los Angeles on March 3 that they had "suffered significant damages" as a result of the cancelled concert.
They claimed the insurers – two syndicates operated by Beazley and one operated by Talbot at the historic Lloyd's market – had refused to pay out based on "language and purported conditions that are not contained in the terrorism policies".
The plaintiffs said this was "unreasonable, without proper cause and in bad faith".
They are seeking damages of at least $150,000 for breach of contract and breach of good faith and fair dealing, as well as legal costs and further punitive damages.
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The Beazley syndicates are managed by the London-listed insurer, which also puts up 80 per cent of the capital. The remainder of the funding is supplied by so-called Lloyd's names, or private investors.
In a statement Beazley said: "We don't comment on matters that are the subject of litigation. We always seek to pay all valid claims as quickly as possible."
Talbot is owned by Validus, the Bermuda-based insurer. Both declined to comment.
A growing number of international artists, from Sting to Stevie Wonder, are going to Indonesia to tap into the rapidly increasing spending power of the middle class.
The proposed concert by Lady Gaga, whose real name is Stefani Germanotta, stirred up an enthusiastic response from her fans as well as the FPI, a small but vocal, and sometimes violent, group that saw an opportunity to flex its muscles and generate publicity.
After speaking out against her penchant for skimpy outfits and flirtatious lyrics, FPI members pledged to stop the concert from going ahead and the local police prevaricated over whether to grant a public performance permit.
Her promoters said they decided to cancel the concert on May 17 "in order to prevent bodily injury and property damage and to protect the lives and safety of Lady Gaga", her crew and the public.
Previous terrorist incidents have given rise to disputes over insurance coverage. The World Trade Center attacks resulted in legal debates about whether the losses arose out of two events – one for each tower – rather than one overall event.