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California Federal Court Applies War Exclusion to Deny Claim of TV Production Disrupted by 2014 Israel-Hamas Conflict

Blogs, Cyber Risks, Liabilities, Insurance and Litigation

Universal Cable Productions LLC v. Atlantic Specialty Insurance CompanyCase No. CV 16-4435 (C.D. Cal. Oct 6, 2017). Universal Cable Productions LLC was required to move production of a TV series from Jerusalem to Croatia and New Mexico because of the conflict between Israel and Hamas in the summer of 2014. Atlantic Specialty Insurance Company insured Universal under a Motion Picture/Television Producers Portfolio Policy. Atlantic denied a claim for the Extra Expense resulting from the move, citing the War Exclusion. The court agreed with Atlantic.

The court held that the word “war” should be applied in its common understanding, and not be construed under the interpretation in insurance case law in other jurisdictions that require the conflict to be between two sovereign or quasi-sovereign entities. Nonetheless, the court went on to distinguish the prior case law by noting that unlike the entities in those cases, Hamas had a sufficient connection to the Palestinian Authority to give it the characteristics of a sovereign entity.

The court also applied the portion of the Exclusion for “warlike action by a military force, including any action in hindering or defending against an actual or expected attack, by any government, sovereign or other authority.” The court concluded that Hamas constituted an “authority,” and that in any event, the exclusion only required warlike action by one side, thereby indisputably applying to Israel’s actions.

In its discussion of warlike actions, the court noted that the exclusion extended to actions of “other agents,” which are distinguished from “military personnel.” This may have an application to other cases involving groups acting on behalf of a government. For example, some cyber attacks are conducted by “Cyber Militia” or “Cyber Privateers.” These could implicate the war exclusion if, for example, they cause significant bodily injury, death, or property damage, or even arguably if they involve attacks on health facilities or attacks having widespread financial consequences. Those possibilities are discussed in greater detail in this White Paper