9th Circuit: Policy’s War Exclusion Doesn’t Apply to Attacks by Hamas

Missiles fired by Hamas from the Gaza Strip into Israel did not constitute an act of war that triggered an exclusion to a blanket insurance policy issued to Universal Cable Productions by Atlantic Specialty Insurance, the 9th Circuit Court of Appeals ruled.

The appellate panel ruled that a district court judge in Los Angeles erred when he found that exclusions in the policy for damages caused by “war” or “warlike action by a military force” applied to a policy purchased by Universal and Northern Entertainment Productions — both of them subsidiaries of NBCUniversal. The companies were seeking $7 million in damages after attacks by Hamas forced them to move production of a USA Network television series called Dig out of Israel to Croatia.

Universal filed the 90-minute pilot for Dig in June 2014 and was planning to film the remaining 10 episodes in Jerusalem and Tel Aviv. But during a period of escalating tensions, Hamas began firing missiles from the Gaza Strip into Israeli population centers. Universal first delayed the production by as hostilities continued the company decided to move production elsewhere.

The United States government considers Hamas to be a terrorist organization.

Universal’s insurance agent, OneBeacon Entertainment, initially said the relocation costs would be covered by the policy, according to the company’s civil complaint. But after Universal submitted a claim, Atlantic denied it, citing the war exclusion. Universal filed suit charging that the carrier had breached the contract and acted in bad faith.

Both sides sought partial summary judgment. U.S. District Court Judge Percy Anderson sided with Atlantic, finding that the rocket and mortar attacks by Hamas were acts of war under the ordinary definition. The judge said Universal did not present any evidence that the parties intended for the terms “war” and “warlike actions” to have any special meanings when the policy was drafted.

Universal asserted that industry custom requires an absolute distinction between acts of war and the acts of terrorist groups, but Anderson said Hamas cannot be considered a terrorist group for all purposes. The court record notes that Hamas delivers social services in the Gaza Strip exercises “governmental activities.”

“Hamas is a readily identifiable group that was openly engaged in a protracted campaign of violence during the 2014 conflict, and it is apparent from news characterizations of the hostilities as a war that Hamas’s actions would best be described, to put it mildly, as having military overtones,” the judge wrote in his order granting partial summary judgment to Atlantic.

The appellate panel, however, found that the judge had misinterpreted California law. The 9th Circuit said that under Civil Code Section 1644, terms in an insurance policies are understood in the popular sense, “unless a special meaning is given to them by usage, in which case the latter must be followed.”

Universal argued that case law has defined war to mean only hostilities carried on by entities that constitute governments, at least de facto in character. Insurance treatises also describe war as the act of a sovereign, the 9th Circuit panel opinion says.

Atlantic argued that the term “war” was not used in a formal sense because the exclusion included damages caused by “undeclared war.” The 9th Circuit rejected the argument, finding that undeclared war also refers to actions between governments, which the conflict between Hamas and Israel was not.

“The United States, the European Union, Canada, Australia, and multiple other countries do not recognize Hamas as a legitimate authority in either Palestine or Gaza — the relevant territories for our analysis,” the court said. “Hamas does not engage in formal relations on behalf of Palestine (or even Gaza). The record does not indicate that Hamas controls Palestine’s borders, airspace, or immigration.”

The ruling does not put an end to the case. The district court ruled only on two specific paragraphs within the war exclusion provision of the policy; it did not issue a decision on a third paragraph that excludes damages caused by “insurrection, rebellion, or revolution.”

Because Judge Anderson never addressed whether that exclusion applies to Universal’s claim, the decision must go back the district court for a ruling, the 9th Circuit decided.

The Dig series, about an FBI agent who discovers a 2,000-year-old conspiracy while investigating the murder of an American citizen in Israel, aired on the USA Network starting in May 2015.