929 F.3d 1143
9th Cir.2019Background
- Universal Cable Productions relocated filming of the TV series Dig from Jerusalem in July 2014 after rocket attacks from Hamas and incurred substantial extra expenses; it filed a claim under its production insurance policy covering imminent peril and terrorism (no terrorism exclusion was added).
- Atlantic Specialty Insurance denied the claim relying on four "war" exclusions in the policy (including “war,” “warlike action by a military force,” and “insurrection, rebellion, revolution”), asserting Hamas’ hostilities were acts of war.
- Universal argued the insurance-industry (customary) meaning of “war” and “warlike action” requires hostilities between de jure or de facto sovereigns, and Hamas was not such a sovereign; Universal submitted industry treatises, caselaw, and expert testimony.
- The district court granted summary judgment to Atlantic, applying ordinary/plain meanings of “war” and “warlike action” and concluding the exclusions barred coverage and defeated Universal’s bad-faith claim.
- The Ninth Circuit reversed as to the first two exclusions: it held California Civil Code § 1644 requires application of customary industry meaning when parties have notice, found the insurance meaning of those terms requires sovereign actors, concluded Hamas was not a de jure or de facto sovereign in 2014, and directed entry of judgment for Universal on the first two exclusions.
- The Ninth Circuit remanded the third exclusion (insurrection/rebellion/revolution) and vacated the district court’s summary judgment on Universal’s bad-faith claim for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 1644 permits applying a specialized insurance meaning of “war” and “warlike action” rather than plain meaning | § 1644 and industry usage require applying the insurance trade meaning; parties had constructive notice via broker and industry forms | Plain, ordinary meaning controls; no intent to use technical meaning in negotiations | Court: Apply customary insurance usage when parties have actual/constructive notice; district court erred by using plain meaning |
| Whether the policy’s “war” exclusion covers Hamas’ rocket attacks | “War” in insurance context requires hostilities between de jure or de facto sovereigns; Hamas was not sovereign | Hamas’ actions constituted war/warlike hostilities and thus are excluded | Court: “War” exclusion does not apply because industry meaning requires sovereign actors and Hamas was not de jure/de facto sovereign |
| Whether “warlike action by a military force” exclusion covers Hamas’ conduct | Industry usage confines “warlike operations” to military operations by sovereign/quasi-sovereign forces; Hamas’ attacks were terrorist acts against civilians | The phrase covers Hamas’ conduct and Israel’s response makes exclusion applicable | Court: Exclusion has same sovereign-focused industry meaning and does not apply to Hamas; Israel’s retaliation does not make the exclusion applicable under efficient-proximate-cause analysis |
| Whether insurer’s denial defeats insured’s bad-faith claim | Denial was wrongful and may support bad-faith; triable issues exist | Denial was reasonable because exclusions applied; no bad faith as a matter of law | Court: Vacated district court’s bad-faith grant for Atlantic; remanded because denial was premised on erroneous exclusion interpretation |
Key Cases Cited
- Pan Am. World Airways v. Aetna Cas. & Sur. Co., 505 F.2d 989 (2d Cir. 1974) (in insurance context, “war”/“warlike operations” limited to hostilities involving entities with attributes of sovereignty)
- Holiday Inns Inc. v. Aetna Ins. Co., 571 F. Supp. 1460 (S.D.N.Y. 1983) (refusing to apply war/warlike exclusion to attacks by non-sovereign Palestinian and Lebanese groups; industry meaning differs from common usage)
- AIU Ins. Co. v. Superior Court, 799 P.2d 1253 (Cal. 1990) (contra proferentem principles and when to construe ambiguities against insurer; instructive on negotiated vs. form policy language)
- Mingtai Fire & Marine Ins. Co. v. United Parcel Serv., 177 F.3d 1142 (9th Cir. 1999) (recognition of foreign regimes is a political question; courts defer to executive-branch recognition when assessing de jure/de facto sovereignty)
- Julian v. Hartford Underwriters Ins. Co., 110 P.3d 903 (Cal. 2005) (efficient proximate cause doctrine governs interaction of exclusions and covered risks)