War Exclusions in Insurance Policies

The Ukraine-Russia war has brought the concept of war exclusions into relief. Most policies include war exclusion clauses, and the conflict is undoubtedly affecting coverages.

A war exclusion clause is found in most insurance policies. It specifically excludes coverage for acts of war, such as invasions, insurrections, revolutions, military coups and terrorism.

The definition of war can also apply to damages sustained in locations that are not located in the countries of war. These types of exclusions are not black and white, making it important for insureds to examine the specifics concerning different types of coverages.

Below is a short list of war exclusions and their effects on policies:

Cargo war risk exclusions: Some insurance carriers are sending notices to insureds with cargo policies that include a cargo war risk exclusion. After 48 hours of receiving such a notice, a company’s cargo will no longer be covered in the event of war-related damage.

FC&S warranties: A Free of Capture and Seizure (FC&S) warranty clause in ocean marine policies excludes war risk coverage from hull insurance. This means losses incurred from nuclear weapons, mines, torpedoes, war, piracy and confiscation or nationalization are not covered.

Trade credit insurance: Trade credit insurance protects businesses against unpaid invoices. It protects defaults due to bankruptcy, protracted default, political events or acts of war. In many cases policy language known as a political risk endorsement covers acts of war. However, some trade credit insurance carriers exclude coverage for acts of war involving specific countries. That makes it important for insureds that export receivables to verify the details of their trade credit policy with their insurance provider.

Foreign package policies: International or foreign package policies generally include war exclusions as part of property, commercial general liability and business auto. However, some carriers also include these war exclusions for voluntary worker’s compensation coverage. In addition, each carrier has its own definition of what constitutes war. Companies with foreign package policies should review them to verify their carrier’s definition of war and how the war exclusion is applied to different aspects of their coverage.

Cyber insurance: While most cyber insurance policies contain war exclusions, cyberterrorism is generally covered. It is often defined as an attack motivated by political, ideological, or religious motives. Consequently, attribution (who did it) and intent (why it was done) must be determined to judge whether the war exclusion applies.