Many insurance policies contain a war exclusion precluding coverage for loss caused by war. But in world where violent conflicts involve a wide variety of different groups and parties, what exactly constitutes “war”? In a recent coverage dispute presenting this issue, a federal judge concluded that the 2014 armed conflict between Israel and Hamas disrupted its film production activities involved both “war” and “warlike action,” and therefore that coverage for the Universal Cable Production for the costs it incurred as a result of the conflict was precluded under the company’s insurance policy. The case raises a number of interesting issues that are likely to recur in our current unstable and violent world. Northern District of California Judge Percy Anderson’s October 6, 2017 decision in the Universal Cable case can be found here.
Universal Cable Productions began filming a television program in Israel in June 2014. Shortly after filming began, three Israeli teenagers were kidnapped and later killed. Hamas was suspected of involvement in the kidnapping, and, after the three missing teenagers’ bodies were found, of involvement in their deaths. After the involvement of Hamas was alleged, Hamas began firing rockets into Israel. The Israeli government began taking steps to protect Israeli citizen.
After the U.S. Department of State issued a safety and security warning, Universal suspended filming. The same day, Israel launched “Operation Protective Edge,” an offensive campaign against Hamas. Universal subsequently relocated its filming activities to locations in Europe and the United States.
The conflict between Israel and Hamas was, according to the court, “referred to worldwide as a war,” and because it lasted about fifty days, was known as the “50-Day War.” Hamas fired over 4,000 rockets into Israel. Israel conducted over 5,000 airstrikes within Gaza and a 20-day military operation in Gaza. Hamas and Israel conducted sea borne attacks against each other. Over 2,000 Palestinians were killed and over 11,000 wounded. 67 Israeli soldiers and six Israeli civilians were killed. Thousands of person in Gaza and in Israel were displaced. Estimates of the damage to infrastructure ranged as high as $8 billion.
Hamas controls the Palestinian Authority in Gaza. According to the U.S. Department of State, the Palestinian Authority is not a state, but is organized like one, with democratic mechanisms, security forces; and executive, legislative, and judicial organs. Hamas is of the largest Palestinian political movements, although, as the Court noted “Hamas has also been characterized as a terrorist group.” In 2006, Hamas won a majority of the seats in the Palestinian Legislative Council. Since 2007, when Hamas took over the Gaza Strip from competing factions, Hamas has “exercised some amount of power and has performed political, military and social welfare activities.” In June 2014, Hamas reached a new agreement with Fatah to establish a consensus Palestinian Authority government.
Universal sought to recover from its insurer the costs it incurred in suspending and relocating its film production. Among other things, the relevant policy provides coverage for “such extra expense you necessarily incur as a result of interruption, postponement, cancellation, relocation, curtailment or abandonment of an Insured Production.” The insurer denied coverage for the claimed expenses in reliance on the policy’s war exclusion. The war exclusion precludes coverage for losses caused directly or indirectly by:
- War, including undeclared civil war; or
- Warlike action by a military force, including action in hindering or defending against an actual or expected attach, by any government, sovereign or other authority using military personnel or other agents.
Universal filed a coverage lawsuit against the insurer. The parties filed cross-motions for summary judgment.
The October 6, 2017 Order
In an October 6, 2017 Order, Judge Anderson, applying California law, granted the insurer’s motion for summary judgment and denied Universal’s cross-motion. In granting the insurer’s motion, Judge Anderson ruled that both the war exclusion and the warlike action exclusions precluded coverage.
Applying the word’s “ordinary and popular sense,” Judge Anderson had “little trouble” in concluding that the events in Israel and Gaza in the summer 2014 “constituted war.” There were “substantial casualties on both sides, many wounded, hundreds of thousands of persons displaced, and billions of dollars in damage to infrastructure.” The conflict was referred to around the world as a war. After consulting multiple dictionary definitions, Judge Anderson said, “clearly, then, the ordinary meaning of the term ‘war’ applies to the summer 2014 conflict as it arose between two adversaries or opposing forces and it reflected a high degree of hostility.”
Universal tried to argue that the word “war” as used the policy has a “technical or special meaning.” Universal submitted expert testimony that in the insurance context, courts have repeatedly required “war” to require the existence of a conflict between two sovereign or quasi-sovereign entities. Universal also argued that Hamas is a terrorist group and cannot constitute a military force of any origin.
Judge Anderson said that the insurer’s attempt to present an alternative definition fails because it contradicts “the clear language of the policy.” He said further that Universal offered no evidence to demonstrate that the individuals negotiating the policy intended anything other than the plain and ordinary meaning.
Judge Anderson declined to follow two other cases (one involving actions by the Popular Front for the Liberation of Palestine and the other involving religious groups in Lebanon) as distinguishable. By contrast to the groups involved in those other cases, Hamas is “neither a guerilla group nor a private militia … it is a distinct group that exercises control, directly or indirectly, over the Gaza Strip, and it engages in governmental activities.” Hamas “participated in the formation of the government in Palestine and the continuing exercise of government-like powers.” Thus, even if often described as a terrorist organization, “Hamas has sufficient characteristics of a sovereign entity that it can wage ‘war’ within the meaning of the Policy.”
Judge Anderson also concluded that the “warlike action” clause precludes coverage, as well. He rejected Universal’s argument that this exclusion required the involvement of a sovereign government. He noted further that as worded the exclusion precludes coverage “warlike action” by an “other authority” using “other agents” – as distinguished from “military personnel.” In any event, Israel is indisputably a sovereign state which took warlike action using military force, and for this added reason the “warlike action” exclusion applies.
This coverage dispute is outside of my usual bailiwick and so I am reluctant to express too many opinions here. I will say that the questions involved are fascinating and raise a host of challenging issues.
I find it hard to argue with Judge Anderson’s conclusion that the summer 2014 conflict constitutes a “war” in some sense. The summer 2014 events were extraordinary in both their scope and in the level of organized hostile action, involving as it did not only extraordinary death and destruction, but extended adversarial hostilities on the ground, in the air, and at sea.
Moreover, in the end, the Court’s interpretation of the “war” exclusion may not make any practical difference, as coverage does appear to be precluded by the “warlike action” exclusion, given that the provision precludes coverage for “warlike actions” by any “other authority” using “other agents,” and given further that Israel undeniably did engage in “warlike actions” using military force.
However, I do worry about what the logical stopping place might be on the “ordinary and popular” meaning of the word “war.” We live in a time of nearly constant violent conflict somewhere in the world, involving all kinds of different actors and participants; in many cases, the violent activities are carried out by political groups and ideological or religious factions, none affiliated with any formal government. In addition, we now have cyber activities carried out by non-official groups that are commonly referred to as “cyberwarfare.” In this context, the idea that the meaning of the term “war” is to be determined solely according to ordinary or popular meanings makes me very nervous about how extensively the war exclusion might potentially be interpreted to extend. (More on the this particular concern about the limitations of relying on the ordinary meaning of the word below.)
Though I am reluctant to get too forward about what insureds should want to do in this context, I do wonder if given the outcome of this case it might be in the best interests of insureds procuring these kinds of policies to modify the policy to provide a specific definition of the term “war.” Even if the definition cannot be narrowed along the lines that Universal urged here, at least some specificity could be provided to reduce the likelihood of disputes. The potential breadth of the term “warlike action” should also be considered, as it could also be interpreted broadly (as indeed it was here) resulting in an expansive preclusion of coverage.
On the other hand, from the insurers’ perspective, the nature of violent conflict in our current volatile world presents some particularly challenging issues. Today, armed conflicts of all kinds have characteristics that are different from the more normal insured perils. The level of destruction can be immeasurably higher and can compromise normal loss suppression efforts. Armed conflict these days now regularly involves groups that are not state actors in the traditional sense, although (as for example in this particular case and in the case of the current war in Syria), a sovereign country may also be involved. These kinds of armed confrontations may represent a category of risk that insurers may feel they can’t accept and therefore must broadly exclude.
A related problem for everyone is differentiating “war” and “warlike actions” from terrorist actions and activities. One of the many ways this particular case was complicated was the involvement of an organization that has been labelled as a terrorist group. Although as Judge Anderson said, not every activity of a terrorist group is necessarily terrorism, but that does raise the question of when a terrorist group’s actions are or are not terrorism. Clearly, the current conditions around the world present a number of different circumstances where these issues will be difficult to answer.
I will say that the issues involved here are absolutely fascinating, involving as they do activities of a type that unquestionably raise complex issues.
The Extraordinary Meaning of the Term “War”: In thinking about the issues in this case, it occurred to me that “war” is a word that has been expanded through use to the point where it has myriad meanings. In our time, our political leaders have declared a “war on drugs”; a “war on terror”; and a “war on crime.” We also have “culture wars,” “political wars,” and even a “war on words.”
I know that all of these more expansive uses of the term “war” are in a sense metaphorical, not literal, but they all reflect the contemporary usage of the term “war.”
This rhetorical expansion of the meaning of the term “war,” to my mind, shows both the limits of and the logical problems with relying on the “ordinary and popular sense” of the word to define its meaning within a policy of insurance.
To be sure, all might agree that the policy’s use of the word “war” was not meant to include these metaphorical or rhetorical meanings of the word. But if we agree that the word as used in the policy does not include these common usages, it clearly has a more specific meaning than just its “ordinary and popular sense,” as the ordinary and popular sense of the word includes these metaphorical and rhetorical usages. Just as clearly, if we accept that the policy’s use of the word “war” does not include these metaphorical or rhetorical usage, the policy’s use of the word war means something less than just its ordinary and popular sense.
In other words, the word “war” as used in the policy has a narrower and more specific meaning that just its “ordinary and popular sense” — it means something specific to the policy: it has a technical meaning adapted to the purposes of the policy.
None of this necessarily establishes that the armed conflict between Hamas and Israel was not a “war,” or that it did not involve “warlike action.” What I am saying is that referring merely to ordinary and popular meaning of the word war may not be the best path to determining its meaning in a policy of insurance. The term means something specific, something related to the policy’s insurance purposes.
My concern is that referring to the “ordinary and popular” meaning of the word could lead to an over-expansive view of its meaning — resulting in an overly-broad application of the policy’s war exclusion and in inappropriately narrow scope of coverage.