War of the Words: Ninth Circuit Reverses Judgment for the Insurer in Rare War Exclusion Case
In Universal Cable Prods. LLC v. Atlantic Specialty Ins. Co., 2:16 cv-04435 PA, (9th Cir. July 12, 2019), the Ninth Circuit reversed the district court’s determinations as it relates to the application of two war exclusions.
In the summer of 2014, Universal Cable Productions was filming a television series, Dig, in Jerusalem. During filming, hostilities arose in the region as Hamas, a Palestinian political movement, began firing rockets from Gaza into Israel. The ongoing and escalating Israeli-Palestinian strife caused Universal to halt production, and ultimately move it out of the area. Not surprisingly, the move resulted in significant expenses, prompting Universal to file a claim under its television production policy in order to cover the costs.
The insurer denied coverage for the claim, relying, for apparently the first time, on the applicability of the policy’s war exclusions. The exclusions, which the insurer argued were triggered by Hamas’ firing of rockets, barred coverage for expenses resulting from: war, warlike action by a military force, or insurrection, rebellion, or revolution. Universal countered that the exclusions are not applicable because the terms in the exclusions had a specialized meaning in the insurance context, and the Hamas action did not comport with that meaning. The district court, refusing to apply any specialized meaning and instead using the plain meaning of the terms, sided with the insurer and found that Hamas’ actions clearly constituted war or warlike action which triggered the application of the exclusions. Universal appealed.
On appeal, the Ninth Circuit disagreed with the district court’s analysis—namely the district court’s refusal to apply the alleged specialized meaning of the exclusions’ terms—finding that a provision of the California Civil Code required the application of specialized meaning when the meaning has been developed from customary usage. The appellate court first found that the principal construing any ambiguity in favor of the insured was not applicable. In doing so, the court noted that “the typical concerns animating [that principle] do not exist here.” Next, the court found that because the terms “war” and “warlike action by a military force” had acquired a special meaning via usage, that special meaning must be followed and failure to do so “is reversible error.” The court determined that in the insurance context, “war” and “warlike action by a military force” required the existence of “de jure” or “de facto” governments and because the court found that Hamas is neither, the exclusions did not work to bar coverage. Consequently, the court reversed the district court’s ruling in favor of the insured.