Page 28 - Insurance Times August 2023

War exclusion and its

implication on cyber

attack claims

Suvajit Chandra
AO, Underwriting
United India Insurance Co Ltd,
Regional Office, Kolkata.

ABSTRACT
War being a catastrophic event of unimaginable scale is generally kept as an exclusion in every property and
casualty policy. However, with time the nature of warfare has also changed, and traditional wording may not
be adequate. The cyber attack called the NotPetya attack was launched in 2017 and after investigation, various
governments put the responsibility for the attack on Russia and its military. It was seen as an extension of the
ongoing conflict between Ukraine and Russia. Two American corporations - Merck & Co. and Mondolez
International suffered significant damages due to the cyber attack and raised claims in their respective policies.
The claims were initially denied on the ground of war exclusion. The Court granted the claims and concluded
cyberattacks can't be termed as war. One of the significant impacts of the NotPetya-related events was Lloyd's
changed its wording for its cyber insurance.

xclusions in an insurance contract are specified attributable (directly or indirectly) to a consequence of war,
E events whose operation or occurrence doesn't give invasion, acts of foreign enemies, hostilities, civil war,
rebellion, revolution, insurrection, military, or usurped power.
rise to a claim when the said event proves to be
the proximate cause of any damage or loss. While
Both cyber insurance policies and all-risk property insurance
the list of exclusions may vary from one policy to the other,
policies are no exception to this, and war exclusion can be
and from one insurer to the other, one of the most common
found in any such policy. However, recent legal judgments
and prevalent exclusion which is found in every property and
show that circumstances involving cyber attacks or cyber-
casualty insurance policy is War Exclusion. Probably the only
warfare are unique, dynamic, and still under development
exception to this norm is Marine policy and Aviation policy.
and existing wordings of war exclusions may not fully serve
the purpose.
War is not covered in insurance because the scale of war
can't be judged beforehand and damages ensuing from it
The judgments in the case involving pharmaceutical firm
may well be beyond the cumulative capacity of all insurers
Merck and a separate case involving multinational food and
and reinsurers. Also, it's believed that the war exclusion to
beverage company Mondelez International are a case in
some extent may act as a deterrent to any conflict or
point.
aggression and incentivizes peace efforts. If war is covered
by insurance, not only it will no longer disincentivize conflicts
The attack:
but may also encourage them.
The genesis of the cases is a cyber attack which is generally
A typical war exclusion specifies that no loss is payable if it's referred to as the Not Petya cyber attack. The attack was
22 August 2023 The Insurance Times