To Cover Or Not To Cover – That Is The Question (NY)
Many insurers are now receiving claims for damaged or lost property due to the protests in major cities across the United States, and are probably wondering whether their policy covers such loss or damage during this period of unrest. In short, it’s tricky. Of course, the answer depends on the language of the specific policy and the circumstances concerning the claimed loss or damage. But generally, many policies contain a “War Risk” exclusion provision, such as the following:
EXCLUDED FROM COVERAGE: loss or damage 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.
Much of the legal analysis on War Risk exclusion provisions hinges on the word “insurrection,” which is seemingly the most applicable word to the current state of affairs. “Insurrection” is defined as a “violent revolt against an oppressive authority.” Insurrection, Black’s Law Dictionary (11th ed. 2019). Based on this definition, a reasonable plain language reading of a boiler-plate War Risk exclusion provision could be a basis to exclude coverage for loss and damage under these circumstances. However, case-law in various jurisdictions does not support this interpretation.
The Third Circuit adopted the following definition of “insurrection”: to constitute an insurrection or rebellion within the meaning of these policies, there must have been a movement accompanied by action specifically intended to overthrow the constituted government and to take possession of the inherent powers thereof. Youngis Bros. & Co., 91 F.3d at 14 (citing Home Ins. Co. of New York v. Davila, 212 F.2d 731, 736 (1st Cir. 1954) (quotation marks omitted); accord Pan Am. World Airways, Inc. v. Aetna Cas. & Sur. Co., 505 F.2d 989, 1005 (2d Cir. 1974) (stating “for there to be an ‘insurrection’ there must be an intent to overthrow a lawfully constituted regime”).
Under leading American authority, the test for insurrection is two-pronged: was there an identifiable group or movement; and, if so, did that group or movement have the requisite intent to overthrow the established government and assume at least de facto governmental control itself. Holiday Inns Inc. v. Aetna Ins. Co., 571 F. Supp. 1460, 1487–88 (S.D.N.Y. 1983). Thus, a demonstrative understanding of the movement’s objectives is critical to determine whether the violence constitutes “insurrection” under a War Risk exclusion provision.
As current events unfold, only time and context will dictate whether a legal basis exists for coverage denial based on damage and loss caused by the protests.
Thanks to John Amato for his contribution to this post. Please email Heather Aquino with any questions.