In the world of insurance, words frequently have a defined or accepted meaning that is different from the popular or intuitive understanding of the term. “War” and, in particular, war in the context of aviation insurance, is one of these.
A common provision in commercial aviation hull and liability policies is known as Lloyd’s wording AVN 48B (or similar). This provision could appear in the basic policy form (i.e., the main text), or might appear by way of endorsement. It provides:
EXCLUSIONS APPLICABLE TO ALL COVERAGES:
WAR, HI-JACKING AND OTHER PERILS EXCLUSION CLAUSE (AVN 48B)
This policy does not cover claims caused by:
- War, invasion, acts of foreign enemies, hostilities (whether war be declared or not), civil war, rebellion, revolution, insurrection, martial law, military or usurped power or attempts at usurpation of power.
- Any hostile detonation of any weapon of war employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter.
- Strikes, riots, civil commotions or labor disturbances.
- Any act of one or more persons, whether or not agents of a sovereign power, for political or terrorist purposes and whether the loss or damage resulting therefrom is accidental or intentional.
- Any malicious act or act of sabotage.
- Confiscation, nationalization, seizure, restraint, detention, appropriation, requisition for title or use by or under the order of any government (whether civil, military or de facto) or public or local authority.
- Hi-jacking or any unlawful seizure or wrongful exercise of control of the aircraft or crew in flight (including any attempt at such seizure or control) made by any person or persons on board the aircraft acting without the consent of the insured.
Furthermore, this policy does not cover claims arising while the aircraft is outside the control of the insured by reason of any of the above perils. The aircraft shall be deemed to have been restored to the control of the insured on the safe return of the aircraft to the insured at an airfield not excluded by the geographical limits of this policy, and entirely suitable for the operation of the aircraft (such safe return shall require that the aircraft be parked with engines shut down and under no duress).
(This is not the only form of this exclusion, but is a common form. Other versions are AVN 48C and AVN 48D, which specify, for example, that loss caused by electromagnetic pulse and chemical and biologic pathogens also is excluded).
As can be seen, the scope of the activities addressed by this exclusion is quite a bit more broad than the title immediately suggests. Moreover, by way of attempting to list things that are excluded, the provision introduces numerous terms that are not defined, yet are not necessarily open to only one interpretation. Subparagraph (a) is an example, in that it uses terms that might frequently appear in press accounts of international affairs, but that are not subject to official declaration by any acknowledged authority. The terms “hostilities” and “rebellion” stand out in particular.
Another feature of AVN 48B is that it combines perils that ordinarily are excluded on the basis that they otherwise would result in unmanageable correlated losses (e.g., nuclear detonation and declared war) with events (not really “perils”) that effectively are “one-offs” and are highly unlikely to be correlated (e.g., a “malicious act”).
AVN 48B has a potentially broad scope, and therefore a policyholder that wishes security under the circumstances encompassed by the exclusion, no matter how implausible those circumstances might seem, ordinarily should seek a specific write-back of coverage. Fortunately, such coverage can be found in a variety of extended coverage endorsements (actual availability, and pricing, will depend on the market circumstances at the time of placement). Such endorsements commonly provide that, notwithstanding the AVN 48B exclusion, coverage is extended to certain of the enumerated perils. Moreover, wordings are available for partial write-backs such as, for example, coverage only for hull risks, or coverage only for certain liability risks.
Write-backs of coverage must be carefully scrutinized, because they generally will not write back all of the coverage excluded (such as hostile nuclear detonations), might contain definitions special to the endorsement (i.e., a definition that applies to a word in the endorsement that gives it a meaning different from the same word in the basic policy text), might contain additional exclusionary language as to the coverage that is written back, and might contain a rather open-ended ability on the part of the insurer to cancel coverage. A proper understanding of the availability, cost, scope and meaning of coverage for war, terror and similar perils requires the involvement of the policyholder’s risk department, its aviation broker, and legal counsel.