In early February of this year, we wrote about a New Jersey court’s recent decision in Merck & Co., Inc. et al. v. Ace American Ins. Co. et al., Case No. UNN-L-2682-18 (N.J. Sup. Ct.) regarding the applicability of a “war exclusion” for acts of cyberwarfare. Shortly thereafter, the Russian invasion of Ukraine once again brought to the forefront images of war—both in the traditional sense—as well as in the context of cyberwarfare. While the war in Ukraine has thus far comprised of mainly mostly low-impact cyberattacks by Russian-linked hackers, the perceived increased risk of cyber-attacks in the Russia/Ukraine conflict certainly has the insurance market evaluating its appetite for coverage in this area and looking for ways to clarify coverage in the event of a cyber-attack.
One way the market has sought to clarify coverage is through the use of the “war exclusion” that is typically found in property and casualty policies, cyberliability policies and other forms of coverage. This exclusion was originally designed to exclude damage arising from these “traditional” warlike acts between sovereign and/or quasi-sovereign entities. See Pan American World Airways, Inc. v. Aetna Casualty & Surety Company, 505 F.2d 989 (2nd Cir. 1974) (“[W]ar is waged by states or state-like entities and includes only hostilities carried on by entities that constitute governments, at least de facto in character”).
But, traditional notions of warfare are evolving. “Attacks” are now often committed behind the shield of computer screens and in a technological territory. Unsurprisingly, this evolving landscape of war is translating to evolving views on insurance coverage and evolving arguments around the interpretation of the “war exclusion.”Continue Reading War exclusion: changing battlefields and coverage implications