Terrorism as a risk in aviation insurance
Janse van Rensburg, Y.
MetadataShow full item record
As early as 1914 (World War I), a growing relationship started between the airline industry and aviation insurance. What complicated this relationship was the exclusion of certain risks within a policy. One of these excluded risks was the "war" risk. Years later (especially 2001 after the 9/11 attacks), another complex term, namely "terrorism" emerged. In order to obtain more clarity about the relationship between terrorism and the airline industry, this study examined terrorism as a risk in aviation insurance. Furthermore, recommendations are given as to how terrorism must be interpreted within the aviation insurance context. Reference is made to the meanings and interpretation of the general all-risk policy and the war-risk policy. Both policies were interpreted considering the facts and the court's interpretation of Pan American World Airways Inc v Aetna Casualty and Surety Co 505 F2d 989 as this case refers to certain legal considerations and policies of insurance coverage for terrorist acts in aviation of transport of cargo. More recent court cases were also examined and principles compared. Chapter one of the investigation gives a brief history and a problem statement that illustrate the complexity of the interpretation of terrorism within the aviation insurance industry. From the problem statement, certain questions arose, which were the focus point throughout this investigation. Chapter two to Chapter five is a thorough investigation and research of the interpretation of terrorism in the aviation insurance context. In Chapter two the two focus points are the interpretation of the all-risk policy and both the War Exclusion and Institute War Clause (Air). It is established that an all-risk policy does have limitations and only covers things that happen by accident, fortuitously or unexpectedly. One of the exclusions in an all-risk policy is the war exclusion. Therefore, provision is made to obtain an Institute War Clause where cover is given to damages suffered in terms of the war-risk exclusion. The Institute War Clause makes provision for covering damages/loss suffered due to war, civil war, military or usurped power, insurrection and civil commotion and riots. Within the discussion of the Institute War Clause, it appears that terrorism is not an express term discussed within one of these war exclusions. Therefore, Chapter three investigates terrorism as a risk in aviation insurance. It is important to know that there is currently no specific definition for terrorism in the insurance context. The United Nations also has expressed its concerns for its inability to define terrorism. Before no universal accepted definition is established, terrorism will not be totally countered in any field (including the insurance industry). After examining different meanings and interpretations of terrorism, the writer hereof defines terrorism within the context of aviation insurance of cargo as a threat or action which involves serious violence against a person and/or involves serious damage to property (cargo), with the main purpose to influence the government or advancing political, religious, or ideological beliefs. Notwithstanding, when interpreting the 9/11 attacks in the USA, it is clear that these attacks were not acts of war as discussed in Chapter two. Caban makes the point that "terrorism exclusions will become as prevalent as war exclusions in insurance". Because of the 9/11 attacks, terrorism per se has been incorporated within the newest edition of the War Risk Clause. The last important aspect dealt with in this investigation is the proximate cause test. This test is important when deciding whether damages/loss may be claimed under the all-risk policy, or Institute War Clause. After the investigation, it is submitted that terrorism must be interpreted as a separate occurrence and should the circumstances be tested before one establish that damages/loss was caused by terrorism. In terms of insurance claims, one must bear in mind that the question is not whether a certain event defined within the policy has occurred, but rather if the damages were the result of the certain event defined in the policy. Therefore, an insurer will be liable if the certain event is defined within the policy and if the damages/loss was proximately caused by this event.
- Law