Background information

War exclusion interpretations

Clauses in other policies

Relation to the nuclear exclusion

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Background Information

 The grandfather of modern war exclusion provisions is in the 1943 New York Standard fire policy, which states the following in lines 11 to 17:

 This company shall not be liable for loss by fire or other perils insured against in this policy caused, directly or indirectly, by: (a) enemy attack by armed forces, including action taken by military, naval, or air forces in resisting an actual or an immediately impending enemy attack; (b) invasion; (c) insurrection; (d) rebellion; (e) revolution; (f) civil war; (g) usurped power.

 This war exclusion clause was carried over from the standard fire policy to the standard special multi-peril policies (which were discontinued by the Insurance Services Office when it introduced the current commercial property program). Under the special multi-peril (SMP) policies, the war exclusion clause was expanded to include governmental action and applied to all covered perils. This clause read as follows:

 This policy…shall not apply to loss caused, directly or indirectly, by or due to any act or condition incident to the following: (a) hostile or warlike action in time of peace or war, including action in hindering, combating, or defending against an actual, impending, or expected attack, (i) by any government or sovereign power (de jure or de facto), or by any authority maintaining or using military, naval, or air forces; or (ii) by military, naval, or air forces; or (iii) by an agent of any such government, power, authority, or forces, it being understood that any discharge, explosion, or use of any weapon of war employing nuclear fission or fusion shall be conclusively presumed to be such a hostile or warlike action by such a government, power, authority, or forces; (b) insurrection, rebellion, revolution, civil war, usurped power, or action taken by governmental authority in hindering, combating, or defending against such an occurrence; (c) seizure or destruction under quarantine or custom's regulations, confiscation by order of any government or public authority, or risks of contraband or illegal transportation or trade.

 The version of the war exclusion clause that is found in the current Commercial Property Coverage form has been simplified from that found in the SMP policies, although the apparent intent behind the exclusion remains the same. The current version of the war exclusion is contained in the basic (CP 10 10 10 12), broad (CP 10 20 10 12), and special (CP 10 30 10 12) causes of loss forms. The clause excludes coverage for loss or damage caused directly or indirectly by (1) war, including undeclared or civil war; (2) warlike action by a military force, including action in hindering or defending against an actual or expected attack, by any government, sovereign, or other authority using military personnel or other agents; or (3) insurrection, rebellion, revolution, usurped power, or action taken by governmental authority in hindering or defending against any of these.

 Following the September 11, 2001, terrorist attacks, the war risk exclusion briefly came into the spotlight. Many wondered if insurers would invoke the clause to deny coverage for losses caused by the attacks, but insurers did not, presumably because the attacks were not perpetuated by a sovereign entity and did not fit into any of the categories described in the exclusion.

 As a result of the attacks, new endorsements became available for use with commercial property, crime, boiler and machinery, farm, commercial inland marine, and business auto policies. The endorsements exclude war, military action, and terrorism (with or without limited exception.) The exclusion for war and military action is the same as the exclusion found in the current commercial property causes of loss forms but with additional wording that the exclusion supersedes the nuclear hazard exclusion "with respect to any action that comes within the terms of this exclusion and involves nuclear reaction or radiation, or radioactive contamination." 

 War Exclusion Interpretations

 American courts, following British precedent, seem to adhere to a strict doctrine of what constitutes war, allowing the exclusion to be applied only in situations involving damage arising from a genuine warlike act between sovereign entities. The two following cases best sum up this idea that a sovereign or quasisovereign entity must engage in hostilities for there to be a war.

 In Pan American World Airways, Inc. v. Aetna Cas.& Sur. Co., 505 F.2d 989 (2d Cir. 1974), the court held that where members of a political activist group from Jordan hijacked an aircraft over London and destroyed the aircraft on the ground while in Egypt, the resulting loss to the aircraft was not due to war within the meaning of the term as used in the exclusionary clauses of the all risks policies covering the aircraft. The court, citing legal history, stated that "cases have established that war is a course of hostility engaged in by entities that have at least significant attributes of sovereignty; under international law, war is waged by states or state-like entities…and includes only hostilities carried on by entities that constitute governments at least de facto in character." The court reasoned that since the activist group had never claimed to be a state, it could not be acting on behalf of any of the states in which it existed when the plane was hijacked, especially since those states uniformly and publicly opposed hijacking. The hijackers were agents of a radical political group and not a sovereign government. The court concluded that although war can exist between sovereign states, a guerrilla group or radical political group must have at least some incidence of sovereignty before its activities can properly be defined as war.

 In Holiday Inns, Inc. v. Aetna Ins. Co., 571 F. Supp. 1460 (D.C.N.Y. 1983), the court, quoting extensively and approvingly from the Pan American case previously cited, declined to apply the war risks exclusion to a claim for damage to a hotel that was shelled during battles in Beirut, Lebanon. The insurer argued that the conflict in Lebanon involved three clearly defined independent entities, each having the attributes of sovereignty or, at the least, quasisovereignty, and that therefore, the war exclusion could be applied to deny coverage. The court focused on the faction occupying the Holiday Inn at the time of the fighting and concluded that it was not a sovereign entity. The court further stated that even if the group could be argued to possess the necessary sovereignty, it was not fighting with another sovereign government at the time of the damage, and therefore, the war exclusion clause could not be invoked by the insurer.

 On the other hand, one court ruled that the war exclusion applied to property stolen during a period of hostilities between the United States and Panama in TRT/FTC Communications, Inc. v. Insurance Co. of the State of Pennsylvania, 847 F. Supp. 28 (D.C. Del. 1993). Civil disorder erupted in the central business district of Panama City, where TRT operated a sales facility. Armed men in civilian clothing, carrying military assault rifles, broke into the facility and stole merchandise and equipment.

 At the time of the theft, Panama had declared war on the United States and was in a war preparedness status. The court determined that the men who robbed TRT were part of some arm of the Panamanian government's forces involved in the war effort. However, the court stated that "regardless of whether the men were part of the Panamanian forces or a band of looters, there is ample evidence to support the conclusion that their actions against TRT were enabled by the military hostilities occurring between Panama and the United States."

 Although those perpetuating the theft may not have been part of the military or government of Panama, the loss that they caused would not have occurred absent Panama's declaration of war and the United States invasion of Panama.

 A similar decision was reached in an unreported case, CIGNA Worldwide Ins. Co. v. Elegant, Inc., No. CIV.A. 01-0438GMS, 2002 WL 1402348 (D. Del. June 25, 2002). Several businesses insured by CIGNA and located in Liberia, West Africa suffered property damage during civil unrest and violence in that country. CIGNA denied their claims, stating that the damage arose due to Liberia's civil war and citing the war risk exclusion as precluding coverage. During the time the damage was done, a violent overthrow of the government was attempted by Charles Taylor, who eventually killed the previous president and became president himself in 1997. The court said that such actions fit into the accepted definition of civil war: "[A] casting off of all allegiance to the established government, a proclamation of a new government, and the waging war to oust the former and establish the latter."

 The court also said that even if the conditions in Liberia at that time were not considered a civil war, they would still qualify as an insurrection, which the Third Circuit Court of Appeals stated "must have been accompanied by action specifically intended to overthrow the constituted government and to take possession of the inherent power thereof."

 Either way—if the events were civil war or insurrection—the court reasoned that the war risk exclusion applied. 

 It is easy to understand and accept a court declaring that the term "war" is limited to hostilities between sovereigns and that the war exclusion must be accordingly interpreted. However, there is more to the war exclusion than that one word—"war." Warlike action by a military force, insurrection, rebellion, revolution, and usurped power are all terms that are found in the war exclusion, and it is proper for a court to apply these terms to any claim that may arise and that could be subject to the war exclusion. The court in the Pan American case did just that and effectively discussed why none of those terms applied to the claim; but the important point is that insurers and insureds know that the war exclusion applicability need not be limited to a war and that there are other parts to the war exclusion. Courts also need to analyze all parts of the exclusion if a dispute over coverage is to be settled justly, just as the court in the Elegant case pointed out—an insurrection would still trigger the war risk exclusion.

 Another conclusion that has arisen from past interpretations of the war exclusion is that, to be excluded by that clause, a claim must involve a hazard distinct from that of peacetime. In other words, neither aggravation of a hazard existing in peacetime nor removal of a peacetime safeguard constitutes a war risk or a warlike operation. The following cases discuss this point and emphasize that courts will relegate the war exclusion to a nonperforming role if it can be shown that damage to covered property can otherwise be attributed to some specified cause of loss.

 In Queen Ins. Co. v. Globe & Rutgers Ins. Co., 263 U.S. 487 (1924), the United States Supreme Court held that damage from collision of two merchant ships sailing in separate convoys during World War I, with no hostile warships apparently present, was not a war risk, although the convoys were traveling at night without lights and one convoy had changed its course because of a submarine attack a few hours earlier. The damage was due to collision, was such that it could have occurred at any time, and so was not the result of war.

 This case is old but still valid since courts in the United States have not departed from the fundamental principle laid down in the decision. And, on its authority, most insurance professionals assumed even during World War II that such things as the aircraft damage section of the extended coverage endorsement would cover damage from the crash of a military or naval aircraft during training maneuvers and that damage from an otherwise insured peril would not be excluded merely because it occurred during a blackout.

 In Airlift International, Inc. v. U.S., 460 F.2d 1065 (5th Cir. 1972), the court was presented with a claim wherein an insured aircraft was lost over Viet Nam in a collision with a military aircraft during the war. The insurer denied coverage based on the war exclusion, but the court held that the loss was due to an aviation peril, notwithstanding the fact that the two aircraft were flying over Viet Nam only because there was a war raging. The court decided that the collision was not a hazard existing only in wartime and so the exclusion was not applicable in this instance.

 In American Fire and Cas. Co. v. Sunny South Aircraft Service, Inc., 151 So. 2d 276 (Fla. 1963), a Florida court heard arguments that the war exclusion should apply against a claim for loss to an aircraft that was hijacked to Cuba and then damaged by a Cuban military plane. The court found that the loss was proximately caused by theft rather than warlike activity and thus the war exclusion did not preclude coverage. Theft was deemed not to be a hazard distinct from that of peacetime so even though the insured plane was damaged by a warplane, the war exclusion would not be stretched to apply to this type of loss.

 Finally, a number of cases arising early in World War II established the conclusion that war need not be officially declared in order for an insurer to invoke the war exclusion. Cases involving life and accident insurance (but with war exclusions worded similarly to that found on a standard property insurance form) held that the 1941 attack on Pearl Harbor was war within the meaning of the exclusion clauses even though there had been no formal declaration of war at the time of the attack. Typical of these cases is Bennion v. New York Life Ins. Co., 158 F.2d 260 (10th Cir. 1946).

 In contrast, another life insurance case, Stinson v. New York Life Ins. Co., 167 F.2d 233 (D.C. Cir. 1948), held the war to be over, as far as an insurance exclusion was concerned, after the cessation of actual fighting in 1945, even though there had been no official and formal declaration of peace. Of course, the war exclusion on property forms of today specifically refers to undeclared war, so any hostilities carried on by a sovereign state against another sovereign state, such as a Pearl Harbor-type of attack, will be considered subject to the war exclusion regardless of whether or not war has been officially declared.

 Clauses in Other Policies

 Other coverage forms pertaining to property contain a war exclusion clause that is close in wording and in intent to that which is found on the commercial property form.

 For example, the standard crime coverage forms exclude loss due to war, whether or not declared, warlike action, insurrection, rebellion, revolution, or any related act or incident. Like the nuclear exclusion clause found on the crime forms, this war exclusion clause is simple and to the point. Unlike the nuclear exclusion, though, the war exclusion on crime forms may be more inclined to be the subject of legal disputes; for example, see the Sunny South Aircraft Service case mentioned previously. The point to remember, however, is that courts will be looking for the proximate cause of the loss and, in most instances (as in the Sunny South Aircraft Service case), that proximate cause is going to be the theft of the property and not war.

 The homeowners forms declare that the insurer will not pay for loss caused directly or indirectly by war, undeclared war, civil war, insurrection, rebellion, revolution, warlike act by a military force or personnel, or destruction, seizure, or use for a military purpose. The last part of the exclusion (destruction, seizure, or use for a military purpose) is akin to that part of the war exclusion on the commercial property form that speaks of "action taken by governmental authority in hindering or defending against" warlike action or insurrection or rebellion. Basically, the homeowners form will not respond to a claim if, for example, the government seizes the insured's home and then uses the home as a military command base against an enemy force.

 The war exclusions on the builders risk coverage form, the businessowners policy, the boiler and machinery coverage form, the inland marine coverage forms, and the farm property coverage form read the same as that found on the commercial property policy.

 The personal automobile physical damage coverage excludes loss due to or as a consequence of declared or undeclared war, civil war, insurrection, or rebellion or revolution. Under the business auto coverage form, the garage form, and the truckers form, the wording of the war exclusion affecting the respective physical damage coverage sections reads the same as the exclusion on the commercial property coverage form.

 Relation to the Nuclear Exclusion

 There is no necessary relationship between the war exclusion and the nuclear exclusion as found on the various property coverage forms. However, as stated earlier, the endorsements excluding war risks say that the exclusion supersedes the nuclear hazard exclusion on the policy.

 The language in the older fire forms concerning the discharge of weapons of war employing nuclear fission or fusion (which was part of the war exclusion clause) was for some years the only direct reference to nuclear energy. Today, however, the nuclear clause stands on its own; for more information on this clause, see Nuclear Exclusion Clauses.