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Chapter 7 Contract wordings 7/41

E2 Pollution (or environmental contamination) exclusion clauses
These clauses exclude reinsurers’ liability for environmental contamination claims.
Non-marine reinsurance
Following issues with coverage of pollution losses arising from the North American market which were
LMC drafted clauses
spread over a number of policies over various years and the ensuing litigation which was extremely which covered
costly for the London Market, the London Market Committee (LMC) clauses LMC1 and LMC2 were drafted pollution losses
to counteract this problem both in the North American market and elsewhere:

• LMC1 is intended to remove liability for losses from gradual pollution from reinsurance cover of public
liability and general third-party policies covering operations located outside North America.
• LMC2 is intended to specifically exclude from reinsurance cover any liability for losses from pollution
(both ‘sudden and accidental’ and ‘gradual’) for operations located in the USA and Canada. The
difference is due to the fact that as a result of litigation in the USA, the definition of ‘sudden and
accidental’ is no longer clear.

Marine reinsurance
The standard marine seepage and pollution exclusion can be found as exclusion 8 of appendix 7.1,
which is available on RevisionMate.

E3 War and terrorism exclusion clauses

Traditionally, war risks were uninsurable and, in the light of recent events and the increasingly
Traditionally, war
destructive and widespread nature of warfare, it remains general practice in all non-marine standard risks were
lines of business to exclude war and terrorism risks, although specific reinsurance of terrorism has uninsurable
arisen. In practice, however, and with exceptions for the use of nuclear weapons, cover is usually
available for such risks either by an extension to the basis cover or by means of an entirely
separate cover.

Activity
Look up the War and Civil War exclusions on the BRMA website (www.brma.org) and the IUA clauses websites Reference copy for CII Face to Face Training
(www.iuaclauses.co.uk).

The Terrorism Act 2000, stipulates how the term ‘terrorism’ is to be interpreted. To summarise, terrorism
must involve an ‘action’ that :
• involves serious violence against a person; Chapter
• involves serious damage to property;
• endangers a person (other than the offender’s) life ; 7
• poses a risk to the health or safety of the public; or
• is designed to seriously interfere with or disrupt an electronic system.
In addition to the perpetration of any of these ‘actions’, terrorism can also include the use or threat of
these defined ‘actions’ that designed to:

• influence the Government;
• influence an international Governmental organisation;
• intimidate the public; or
• advance a political, religious, racial or ideological cause.

Useful website
You can access the Terrorism Act and its complete interpretation of terrorism at: http://bit.ly/11Qowcv

The interpretation in the Act is used as the base for the standard London Market terrorism exclusions
NMA 2930 a, b and c.
By contrast, in the USA, an act of terrorism is certified as such by the Secretary of Treasury for the
purposes of the Terrorism Risk Insurance Act (TRIA) and related Acts. This Act provides reinsurance
coverage to insurance companies following a declared terrorism event, resulting in damage within
the USA.