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Volume XII, Number 182

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The War Exclusion Will Be a Leading Issue in the Months and Years Ahead

With the circumstances in Ukraine intensifying and companies either shutting down or suspending operations in the region, the sparingly used war exclusion will become more relevant as policyholders seek to recover losses. The economic effects will be broadly felt. Some companies may have to close operations entirely, some partially, and others may have their supply chains severely disrupted. This is compounded by the worldwide risk of cyber-incidents. The US government has been adamantly warning companies to protect themselves against cyberattacks. The impact on policyholders, however, may take different forms, potentially implicating their business interruption, contingent business interruption, cyber, shipping and cargo, and political risk insurance coverages. These are only a few examples. Other coverages could be implicated.

Insurance policies typically contain some form of a war exclusion, which generally bar coverage for damages caused by “war,” “warlike,” or “hostile” actions. Insurers may try to invoke the exclusion if they can link the loss to the events in Ukraine. Thus, how courts interpret the exclusion will be critical to the ability of policyholders to recover insurance proceeds. Courts have traditionally interpreted war exclusions to apply to attacks that ordinary people would consider an act of war between nation states or state actors. For instance, in deciding whether the war exclusion applies, courts have considered factors such as (i) whether the attackers wore uniforms, (ii) whether they used physical weapons, (iii) whether there was a governmental declaration of war, and (iv) whether medals for heroic acts were awarded. Recent decisions have likewise narrowed the scope of the war exclusion to traditional forms of warfare between sovereign states. Seee.g.Merck & Co., Inc. et al. v. Ace Am. Ins. Co. et al., No. UNN-L-2682-18 (N.J. Sup. Ct.); Universal Cable Prods., LLC v. Atlantic Specialty Ins. Co., 2019 WL 3049034, at *10 (9th Cir. July 12, 2019).

Given the rapidly developing circumstances, the full extent and impact of the conflict in Ukraine is unknown. Yet, we believe that the war exclusion, including the principles briefly discussed above, will be leading issues in the insurance industry in the months and years ahead. For now, however, our thoughts are with everyone whose lives have been affected by these unfortunate and tragic events.

Copyright © 2022, Hunton Andrews Kurth LLP. All Rights Reserved.National Law Review, Volume XII, Number 75
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About this Author

Lorelie S. Masters DC Partner Insurance Lawyer
Partner

A nationally recognized insurance coverage litigator, Lorie handles all aspects of complex, commercial litigation and arbitration.

Lorie has advised clients on a wide range of liability coverages, including insurance for environmental, employment, directors and officers, fiduciary, property damage, cyber, and other liabilities. She also handles various types of first-party property insurance claims, including claims under boiler and machinery, business-interruption, contingent business-interruption, extra expense, disability and other related coverages.

Lorie has handled and...

202-955-1851
Yaniel Abreu Insurance Lawyer Hunton Andrews Kurth Law Firm
Associate

Yaniel advises companies in complex insurance coverage matters. This involves analyzing the company’s risk profile to limit exposure and maximize recovery.

Yaniel handles insurance coverage disputes involving directors and officers, errors and omissions, cyber and commercial liability policies. He conducts comprehensive coverage evaluations tailored specifically to each client’s business operations. Taking into consideration the company’s risk profile, he advises clients on risk management and mitigation strategies. In addition to formidable preemptive efforts to minimize the...

305 810 2504
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