NBCUniversal loses out to insurance company over definition of ‘war’

November 10, 2017

Media giant NBCUniversal could lose $6.9 million after a California federal judge granted summary judgment to Atlantic Speciality Insurance Company in a dispute over the television series Dig. The claim revolves around Atlantic’s refusal to pay out Universal’s relocation expenses on the grounds that they were the result of ‘war’ rather than ‘terrorism’, and were therefore excluded from the insurance policy.

Business impact

This result in favour of insurers may have repercussions for those operating in war torn or otherwise dangerous countries, though it is subject to appeal. In regions where wars are fought with isolated guerrilla-style attacks, insurers may argue any such occurrence is part of an ongoing conflict, and therefore not covered by their policies.

Production companies will want to ensure such terms are clearly defined so as to avoid a similar lack of compensation. Regional-specific risks could be deliberately negotiated prior to entering into any policy to ensure companies are covered when necessary.

Background

In 2014, production of USA Network series Dig in Israel was halted after rockets were fired by Hamas into the country, leading to two months of conflict known as the ‘50-Day War’. The rockets were fired as a response to Israel blaming Hamas militants for the kidnapping and murder of three Israeli teenagers. Though no war was officially declared, the fighting escalated into an Israeli invasion of Gaza, and approximately 2,200 Palestinians were killed, most of whom were civilians, along with 64 Israelis. Additionally, 11,000 Palestinians were left wounded and 500,000 Gaza residents were left displaced.

After the rockets were fired, shooting of Dig was relocated to New Mexico and Croatia, and Universal sought to reclaim its additional expenses for having to relocate on the grounds that ‘terrorism’ was covered by its insurance policy with Atlantic. Atlantic refused Universal’s claim citing an exclusion under the insurance policy for war or warlike actions.

Universal argued that as the United States government does not recognise the Gaza Strip as a sovereign nation and does not recognise Hamas as a sovereign government, this could not have been an act of war. Indeed, Hamas is designated by the United States government as a terrorist organisation. Universal posited that Hamas does not want to conquer and govern Israel, a necessary condition for the war exclusion, but rather to destroy Israel altogether. As such, Universal insisted that the rocket fired by Hamas into Israel was terrorism, not war.

Atlantic took a different view, comparing the 50-Day War to the events of 9/11 to distinguish between war and terrorism. Atlantic’s lawyer argued that whereas the terrorist attacks on 9/11 occurred on a single day, the conflict between Israel and Hamas lasted fifty days, with more traditional weapons of war used by Israel, such as artillery, airstrikes and ground troops, as well as Hamas, such as rockets and mortars, though Universal suggested that the latter were weapons of terror.

Atlantic further argued that Universal was focusing ‘narrowly on the actions of only one of the combatants – Hamas – to the exclusion of the other – Israel’, in effect ignoring ‘the reality of warfare in the twenty-first century’. Conversely, Universal pointed to the numerous news articles, including ones written by Universal’s own NBC News, calling the conflict a ‘war’, as well as statements from Secretaries of State John Kerry and Hillary Clinton, and the statements of Israeli soldiers.

Universal countered by outlining what they saw as the end result of conflating the definitions of war and terrorism for insurance purposes: without restricting the definition of ‘war’ to a conflict between two sovereign or quasi-sovereign nations, the war exclusion would ‘extend far beyond its intended scope and improperly lead to absurd results’. The conclusion of this blurring of definitions would be, according to Universal, that a party paying for terrorism insurance would not get ‘the benefit of its bargain if coverage is precluded by the war exclusions’.

Decision

The U.S. District Court Judge has announced that Atlantic’s summary judgment motion has been granted but a more detailed opinion is to follow. Universal are set to appeal the decision, which will determine the future of conflict and insurance in an age when the lines between terror attacks and war are becoming increasingly blurred. Needless to say, Atlantic’s assertion in the course of proceedings that ‘war means war’ couldn’t be further from the truth.

Thomas Moore, Trainee Solicitor, Simkins