MH17: How gunning down a plane complicates insurance coverage

MH17: How gunning down a plane complicates insurance coverage

MH17: How gunning down a plane complicates insurance coverage The tragic loss of civilian airliner, Malaysia Airlines Flight 17, has left the world reeling. And while it may seem insensitive in the aftermath of so much loss, insurance brokers are left stumped too—given that officials now believe the jet was “blown out of the sky,” who will be left to pay for the loss of the plane?

The issue at hand is a “wartime exclusion” often included in aviation hull and liability policies, which may negate coverage for the jetliner. Dr. Robert Hartwig of the Insurance Information Institute noted that separate “war risks” coverage fills in the gaps here, but it not yet known if Malaysia Airlines holds such a policy.

That leaves the tricky situation on the Ukraine-Russian border up to interpretation.

According to a Mashable report, the key issue is whether an area of conflict will trigger the wartime exclusion despite no official declaration of war. Experts differ in their opinion, with some believing the war clause will apply, eventually adding up to liability costs of up to $1 billion.

Rick Roberts, vice president of the Risk and Insurance Management Society (RIMS), took a more positive view.

“I’m not aware that there’s any coverage for an act of war, anywhere around the world,” Roberts told Mashable.

In that case, a war exclusion would be moot and the airline would get its payout.

“There hasn’t been a war declared, and that knocks down the exclusion,” he added. “Unless Russia has declared war on Malaysia, that would knock out the exclusion. Based on the early facts it falls out of both of those categories.”

The only thing hedging up the way is a possible act of terrorism, which must be certified.

Other factors complicating coverage includes the Malaysian government’s ownership of Malaysia Airlines. Some experts believe that depending on how the policies were written, it could entitle the government to seek damages from the governments of Russia or Ukraine in an international court.

The insurance broker for the gunned-down plane is Willis. The lead underwriter has not yet been disclosed, and Hartwig noted it will probably take a while for more information on coverage specifics to emerge.

  • John Broersma 7/21/2014 10:21:55 AM
    I understand this would not be a general liability claim but the ISO form CG0001 contains not only a war exclusion but goes on to include undeclared war and civil war in the war exclusion.

    In addition to actual war, the war exclusion also includes warlike action, insurrection, rebellion, revolution, etc.

    It will be interesting to watch this play out.
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  • Martin Gore 7/21/2014 11:29:02 AM
    What about any life insurance on the victims? Are those death benefits in jeopardy if the event is declared an act of war or terrorism?
    Post a reply