Is Your War Exclusion Fit for Purpose?

May 6, 2025

As global threats evolve, so does the question of what constitutes a ‘war’ risk under a standard property insurance policy, and how this might impact coverage.

by José Umbert, Olu Dansu, and Tom Papa

Russia’s Shadow War

Historically, a war was a physical conflict between two or more states, with little doubt as to its participants. Modern warfare has evolved. Russia’s war against Ukraine has created a new front in war risks that was not previously envisaged: orchestrated attacks and acts of sabotage in Western countries offering support to Ukraine.

These attacks include parcel fires in July 2024, caused by Russian agents sending parcels containing hidden explosives via courier companies at depots in Poland, Germany, and the UK. Likewise, in October 2024 a man pleaded guilty under the UK’s National Security Act 2023 to aggravated arson for burning down a warehouse in London at the behest of Russian agents. There have also been reported acts of Russian-inspired sabotage on warehouses and railway networks in Sweden and the Czech Republic. Security officials have confirmed that these were part of an orchestrated campaign by Russia’s intelligence agency to cause fear and disruption in Western nations who are supporting Ukraine.

These developments demonstrate that the risk of damage arising from wars is no longer confined to the geographic location of the direct warring parties. Consequently, as the nature of war evolves, so too must the underwriting considerations.

Application of War Exclusions to Modern Warfare

Standard property policies typically contain war exclusion clauses to combat the exposure to war damage. However, do the relevant exclusions cover scenarios where property located in a non-warring country is targeted for damage (usually by arson) due to the property’s perceived connection to a distant war enemy?

Most policies will cover damage caused by fire or malicious damage, so it is likely that those claims will be covered unless a war exclusion applies. A typical war exclusion excludes cover for any liability caused by or arising from war. The issue for determination therefore is whether property damaged in, for example, London, at the instigation of Russian agents specifically due to the property’s connection with Ukraine, can be said to have been ‘caused by’ or ‘arisen from’ the war in Ukraine. We consider this question under both English and United States law.

The English Law Approach: Act of War as Proximate Cause of the Loss

Under English law, causation in an insurance policy is determined by the ‘proximate cause’ test.[i],[ii] A proximate cause is that which is proximate in efficiency. This means that it is the dominant, effective or efficient cause of the loss.

In Allianz Insurance plc v University of Exeter,[iii] the court decided that damage caused in 2021 by the controlled detonation of a WWII bomb was proximately caused by war notwithstanding the fact that the WWII ended almost 80 years prior to the occurrence of the damage. The court held that the dropping of the bomb by German forces over England was an act of war. Although the bomb did not cause any damage until decades later, this did not alter the fact that the dropping of the bomb was a war act sufficient to bring the damage within the scope of the policy’s war exclusion.

Based on this decision, if property insured under a policy with a ‘proximate cause’ war exclusion becomes damaged by arsonists acting at the behest of Russian agents, could it be argued that the damage is excluded by the war exclusion clause (on the basis that the proximate cause of the damage is war because the property was targeted because of its connection to Ukraine)?

It is unlikely that such a view will find attraction with the English courts. Under English law, an insurance policy is to be interpreted objectively, as it would reasonably be understood by an ordinary policyholder at the time the policy incepted. The burden of proving the application of the exclusion falls on the insurer. Therefore, the question is whether, at the time the policy incepted, the parties intended that the war exclusion would apply in cases where there was no physical war taking place in the country where the insured property is located.

In Allianz Insurance plc v University of Exeter the Court of Appeal stressed that it was not being asked to consider issues such as whether the “war” referred to in the policy could mean a war that had ended at the time the policy was incepted; or whether the damage caused by the bomb did not result from a war-like desire to damage. This was because the parties agreed on the proper interpretation of the war exclusion clause, so the court only had to determine the proximate cause of the loss. Consequently, an insured could argue that the reference to ‘war’ in the exclusion must have been intended by the parties to mean a ‘war’ taking place in the country or vicinity where the insured property is located, as opposed to a war occurring in a separate country. In other words, as the argument would go, there must be a physical connection between the war and the insured property for the damage to be deemed to be proximately caused by war, as opposed to a looser and tangential connection.

United States Law: Clear Connection to War or Military Action Required

Courts in the United States have followed a similar analysis when considering war exclusions in commercial property insurance policies.

First, as stated by the Second Circuit in the seminal case in this area, Pan Am. World Airways, Inc. v. Aetna Cas. & Sur. Co.,[iv] when policies exclude “loss or damage due to or resulting from” perils such as war, a proximate cause test applies, and the causation inquiry is limited “to the facts immediately surrounding the loss.”[v] In other words, a court will look “only to the ‘causes nearest to the loss’” as opposed to “more remote causes.”[vi] Further, as with exclusions in general, the insurer has the burden to prove that a war exclusion applies, and the exclusion “will be given the interpretation which is most beneficial to the insured.”[vii]

In Pan Am., an American airline sued its all-risk insurers to recover the loss of its aircraft, which was hijacked over London by members of a Palestinian terrorist group, flown to Lebanon, and destroyed in Egypt. The insurers argued that several exclusions, including a war exclusion, precluded coverage.[viii]

The court found that, for insurance purposes, “war refers to and includes only hostilities carried on by entities that constitute governments at least de facto in character.[ix] Further, the court concluded that the insured Pan American was not “involved in a warlike operation,” as the aircraft “carried no cargo of military stores” and “no cargo destined for a theater of war,” “was not near or over the territory of any belligerent or any theater of war,” and the insured “was not the national of any Middle Eastern belligerent” and served no routes to those countries.[x] Therefore, the Second Circuit affirmed the district court’s holding that the exclusions did not apply.

In a recent decision, Merck & Co., Inc. v. Ace Am. Ins. Co.,[xi] the New Jersey appellate court considered whether a “Hostile/Warlike Action” exclusion applied to a claim for coverage under all-risk policies after the NotPetya cyberattack, allegedly orchestrated by actors working for or on behalf of the Russian government, infected and damaged thousands of the insured’s computers and severely disrupted its operations.[xii] The court affirmed summary judgment in favor of the insured, holding that the exclusion did not apply under the circumstances of the case.

In reaching this conclusion, the court reviewed prior cases addressing war exclusions, including Pan Am., noting that these exclusions “have never been applied outside the context of a clear war or concerted military action.”[xiii] The cases “demonstrate a long and common understanding that terms similar to ‘hostile or warlike action’ by a sovereign power are intended to relate to actions clearly connected to war or, at least, to a military action or objective.”[xiv] The court found that “the NotPetya attack is not sufficiently linked to a military action or objective as it was a non-military cyberattack against an accounting software provider.” Therefore, the exclusion was inapplicable.[xv]

Under this caselaw, a U.S. court could conclude that a standard war exclusion does not preclude coverage for losses caused by acts of sabotage and disruption carried out by Russian agents, in Western nations and affecting companies not involved in military operations, such as owners of warehouses or transport networks. Similar to Pan Am. and Merck, a court could find that such losses lack the requisite connection to the Russia-Ukraine war or to military operations, and therefore do not trigger the war exclusion.

Drafting a Broader War Exclusion

If insurers want to rely on a war exclusion in the hypothetical scenario described above, they should consider drafting the war exclusion to be broader than the standard proximate cause test and give the court a stronger basis in the wording for the application of the exclusion.. Such a wording needs to be clear in its intent that it is designed to apply to circumstances where the cause of the damage is not only proximately caused by war, but also where the cause is directly or indirectly connected with a war, irrespective of whether the war takes place physically within the territory where the insured property is located. As the Pan Am. court put it, “if the insurer desires to have more remote causes determine the scope of [a war] exclusion, he may draft language to effectuate that desire.”[xvi]

Consequently, rather than an exclusionary wording simply excluding cover for loss/damage “caused by” or “arising from” war, a more appropriate sample wording looking to exclude cover for loss/damage could read, “directly or indirectly caused by or connected to or as a consequence of war (whether or not such war occurs physically within the territory where the Insured Property is located)”.

Obviously, the consideration of any claim will turn on the wording of the relevant policy and the specific facts of each case, so it is not possible guarantee that any particular exclusion would apply in every case. Nonetheless, a broader exclusion along the above lines should at least afford the insurer better grounds for arguing that the war exclusion applies where the motive for the loss or damage is linked or connected to a war event.

The reality is that the evolving nature of modern warfare will continue to create new and unexpected risks which standard property war exclusion wordings may not be suited to fully capture. Property insurers should regularly review their war exclusion wordings as new war threats emerge, to ensure their war exclusion wordings

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[i] Unless the wording itself expresses a wider or narrower test.

[ii] The Financial Conduct Authority v Arch Insurance (UK) Ltd & others [2021] UKSC 1.

[iii] [2023] EWCA Civ 1484.

[iv] 505 F.2d 989 (2d Cir. 1974).

[v] Id. at 1006.

[vi] Id. at 1007 (citation omitted).

[vii] Id. at 999.

[viii] Id. at 993-94.

[ix] Id. at 1012. See also Universal Cable Prods., LLC v. Atlantic Specialty Ins. Co., 929 F.3d 1143, 1154 (9th Cir. 2019) (noting that the insured “provided the district court with substantial unrebutted evidence that, in the insurance context, the term ‘war’ has a special meaning that requires the existence of hostilities between de jure or de facto governments.”).

[x] Pan Am. at 1017. In Universal Cable, the Ninth Circuit explained that “warlike action” or “warlike operations” require “(1) ‘operations of such a general kind or character as belligerents have recourse to in war,’ and (2) that such operations be carried out by the military forces of a sovereign or quasi-sovereign government.” 929 F.3d at 1160 (citation omitted).

[xi] 475 N.J. Super. 420, 293 A.3d 535 (App. Div. 2023).

[xii] Id. at 425.

[xiii] Id. at 439.

[xiv] Id. at 445.

[xv] Id.

[xvi] 505 F.2d at 1007.

The opinions expressed are those of the authors and do not necessarily reflect the views of the firm or its clients. This article is for general information purposes and is not intended to be and should not be taken as legal advice.