One event or two: it all depends on the facts and the wording

The events of 11 September 2001 spawned more than a decade’s worth of litigation, a large proportion of which has been directed at the effect of aggregation clauses in insurance contracts. Most recently, the English Commercial Court has entered into the fray and, in the decision of Aioi Nissay Dowa Insurance Company v Heraldglen Limited and Advent Capital (No.3) Limited [2013] EWHC 154 (Comm), found that the attack on the twin towers of the World Trade Center (WTC) amounted to two events for the purpose of applying the policy limits.

The case considered by the English court had, as its genesis, the multitude of property, personal injury, business interruption and other losses that flowed from the collapse of the twin towers. In the years that followed, proceedings were brought in the US against the airlines involved and the security companies who had been responsible for screening the passengers who boarded the affected flights. Those proceedings were settled by the various liability insurers and claims were subsequently made on reinsurance contracts underwritten by Heraldglen and Advent Capital. Those claims, in turn, were settled on the basis that the destruction of the towers amounted to two events. Heraldglen and Advent then made claims on their retrocession excess of loss policies with Aioi Nissay.

Aioi Nissay’s policy provided cover in respect of “each and every loss or accident or occurrence or series thereof arising out of one event”. Aioi Nissay argued that the WTC losses were caused by one or more occurrences arising out of a single event. The dispute proceeded to arbitration where the arbitrators found that the losses were caused by two separate occurrences arising out of separate events. Aioi Nissay appealed that decision.

In February, the English Commercial Court upheld the arbitral award and found that the destruction of the twin towers of the WTC was two events.

In coming to its decision, the Tribunal considered that the relevant facts had to be considered “in the round and in the context of the particular contractual wording and the overall contractual purpose”. They then found as follows:

  • Although there were similarities in the timing of the events from the commencement of boarding of the flights to the collapse of the towers, these similarities did not justify a conclusion that there was one occurrence or one event.
  • The fact that the twin towers were located in close proximity to one another and were part of a single property complex did not give rise to a sufficient degree of geographical unity to conclude that there was one occurrence or one event. Each tower was a separate building, albeit connected by a single mall. The towers did not stand or fall together. If only one of the hijackings had succeeded, only one tower would have been destroyed.
  • With respect to the purpose of the persons responsible, the Tribunal acknowledged that the hijackings were both the result of a coordinated plot paid for by Al Qaeda. But the Tribunal observed that a conspiracy or plan cannot of itself constitute an occurrence or an event for the purposes of clauses in insurance contracts which refer to each and every “loss, occurrence or event”. On that basis, this did not justify a finding that there had been one event.
  • There was no unity of cause because “there were two separate causes…two successful hijackings of two separate aircraft, admittedly in execution of a plot to turn each into a guided missile each directed at one of the two signature towers that was a single property complex”.

On these bases, the Tribunal found that the hijackings, death and injury on board each flight and death, injury and property damage consequent on the towers being struck, constituted two separate occurrences that arose out of two separate events. In upholding the Tribunal’s award, the Court found that the Tribunal had accurately summarised and correctly applied the law.

It is interesting to contrast this decision with:

  • The decision of the US Court of Appeals in World Trade Center Properties v Hartford Fire Insurance Co 1: In that case, the Court held that the destruction of both towers of the WTC constituted one occurrence. That decision, however, was based on a policy in which the definition of “occurrence” referred specifically to losses attributable directly or indirectly to one cause or one series of similar causes. The court found that the co-ordinated terrorist plot was the cause of the damage and therefore held that the terrorist attacks constituted one occurrence.
  • The decision of Kerr QC in the Dawson’s Field Arbitration: In that case, Mr Kerr was asked to decide whether the destruction of 3 aircraft hijacked by the PLO arose out of one event. The 3 aircraft were flown to Dawson’s Field, a remote desert airstrip in Jordan, where they were blown up in close proximity to each other, within a time span of a few minutes, and as a result of a single decision by the terrorists to do so. Mr Kerr concluded that the destruction of the 3 aircraft was one occurrence and one event.
  • The decision in Kuwait Airways Corporation v Kuwait Insurance Co SAK 2: In that case, the court was asked to decide whether the seizure of 15 aircraft from Kuwait Airport by Iraqi forces was one occurrence for the purpose of an aggregation clause in a single direct war policy. Critically, in that case, Iraqi forces invaded Kuwait on the morning of 2 August 1990 and within hours were in control of Kuwait Airport. The seized aircraft were flown to Iraq over the course of several days or weeks. The court concluded that the aircraft were all lost on 2 August 1990 and accordingly, there was unity of time, location, cause and intent. In those circumstances, the court found that there was one occurrence. This decision was based on a conclusion that the occurrence for the purposes of the war risks policy was the successful invasion of Kuwait, incorporating the capture of the airport and with it the aircraft.

The Lessons

On reviewing the outcome in each of the above cases, it is clearly important to consider the specific facts of each case and, critically, the precise wording of the applicable policy. From policy to policy, a “loss” will not necessarily be the same thing as an “occurrence” and there may be subtle but important differences between the meaning of “occurrence” and “event”.

It is interesting to note that although the Court in the Aioi Nissay decision acknowledged the existence of a single terrorist plot and numerous similarities in the ways in which each of the twin towers was destroyed, it ultimately approved the emphasis placed by the Tribunal on the specific facts and on the proper construction and purpose of the particular policy. When contrasted with the outcome in the Hartford Fire Insurance case, it is also clear from the Aioi Nissay decision that there are important distinctions between the effect of aggregation clauses that operate with reference to “events” and those that operate subject to “cause”.