Interpreting war exclusions in cases involving cyber warfare will require nuance, as well as deference to the evolving landscape of government conflict.
- Sam Stalker
- September 2019
Depending upon the courts’ inevitable handling of this issue, insurers may be compelled to revisit the language of the war exclusions in their policies.
The traditional precept of warfare assumes physicality and kinetic military action resulting in human casualty and tangible property damage. The rapid evolution of and overwhelming reliance upon technology, however, has ushered in a new era of warfare that most often spares the traditional casualties of conflict and instead focuses on the disruption of electronic infrastructure. This brand of modern warfare—aptly dubbed “cyber warfare“—has resulted in a seismic shift of the traditional tenets of governmental conflict and military engagement.
Most commercial general liability policies include one or more war exclusions which typically preclude coverage for bodily injury or property damage arising, directly or indirectly, out of war, including undeclared or civil war; hostile or warlike action by a military force; or insurrection, rebellion or revolution.
In the United States, the sole power to declare war rests with Congress, as conferred by Article I, Section 8, Clause 11 of the United States Constitution. Congress last formally declared war on June 5, 1942, when declarations of war were simultaneously cast against Bulgaria, Hungary and Romania. However, it is unlikely that any person possessing even the most rudimentary understanding of American history would conclude that the United States has not engaged in a war since 1942. Certain courts in the 1950s adopted a technical approach to construing war exclusions, requiring a formal declaration for “war” to exist. Likely in response to this line of cases, modern war exclusions typically specify that “war” includes an undeclared war, which vitiates the technical approach requiring a formal declaration.
The majority of courts have taken a more pragmatic approach and assessed the practical elements of a given conflict rather than torturing phraseology. Not unlike the “I know it when I see it” obscenity test, courts in this camp have refused to wear judicial blinders in determining what does and does not constitute war. The United States Department of Defense seemingly favors the latter position, having stated that the precise definition of “war” often depends on the specific legal context in which it is used.
Further latitude is found in the portion of the exclusion barring coverage for “hostile or warlike action,” which has generally been interpreted more broadly than “war,” as it encompasses “war-adjacent” actions rather than conduct in furtherance of traditional warfare.
For example, the U.S. District Court for the Northern District of California has held that a hostile act “need not involve the overt use of a weapon which is in itself, capable of inflicting harm; it can be an operation such as the extinguishment of a navigational light or the outfitting of a ship—if done for a hostile purpose.”
Cyber warfare is rarely, if ever, a declared conflict and certainly does not align perfectly with the traditional mechanics of warfare. Interpreting war exclusions in cases involving cyber warfare will therefore require nuance, as well as deference to the evolving landscape of government conflict.
Depending upon the courts' inevitable handling of this issue, insurers may be compelled to revisit the language of the war exclusions in their policies or, alternatively, insureds may have to seek more comprehensive coverage to protect themselves against cyberattacks.
For more on the war exclusion, see An Act of War? (p. 48 in print)
Best’s Review contributor Sam Stalker is counsel in Cozen O’Connor’s Global Insurance Department (Chicago office), specializing in professional and commercial liability coverage. He can be reached at email@example.com.