10:18am PT by Eriq Gardner
Universal Wins 'Dig' Appeal Against Insurer Using "War" in Israel to Deny Coverage
The Ninth Circuit Court of Appeals has come to a different conclusion about what Hamas is up to in Israel. And while this geopolitical issue would at first blush seem to have nothing to do with entertainment, the federal appellate court's conclusion Friday amounts to a victory for Universal Cable Productions, which has been locked in a $6.9 million insurance dispute with Atlantic Specialty Insurance Company.
The dispute emanates from the way that USA Network's Dig, a mystery-thriller miniseries set in Jerusalem about an American FBI agent investigating a death, began filming in Israel before halting and then moving production to New Mexico as a result of security tensions in the region. After Hamas hurled rocket attacks into Israel, production was suspended. Later, Universal sought reimbursement, but Atlantic put up a fight by claiming a coverage exclusion for war or warlike action. Universal's position was that coverage should have been provided because acts of terrorism are not excluded. That led to a debate over the realities of warfare in the 21st Century.
At the district court level, the insurer prevailed.
But an appeals court now says this decision was in error.
"Both 'war' and 'warlike action by a military force' have a specialized meaning in the insurance context and the parties had, at the least, constructive notice of the meaning," states the opinion. "The district court erred when it failed to apply that meaning. Under that specialized meaning, both 'war' and 'warlike action by a military force' require hostilities between either de jure or de facto sovereigns, and Hamas constitutes neither.
The 9th Circuit reverses the decision in favor of Atlantic and holds that the insurer was the one to breach contract.
Writing for the panel, Circuit Judge A. Wallace Tashima details the history of Israel, Palestine and Hamas through the decades and the crucial fact here that the United States has never recognized Palestine or Gaza as sovereign territorial nations.
The June 2014 conflict that disrupted Dig then gains attention. There, three Israeli teenagers were kidnapped. A Palestinian teenager was abducted and killed. And rocket fire escalated the mutual reprisals as Israel countered with "Operation Protection Edge."
Once the U.S. Department of State issued its own warnings, the Universal security team advised the production team of its concern. Universal postponed production and advised Atlantic. Atlantic’s chief underwriting officer, Peter Williams, then wrote in an internal email to the claims investigator stating that this was a “covered claim they have immanent [sic] peril. Unless you are going to invoke the war exclusion.”
Eventually, that's just what Atlantic attempted.
When looking at the insurance agreement, the district court judge ruled there was no presumption in the studio's favor when it came to the disputed meaning of the policy because of its sophistication, while Universal argued that any ambiguity should be construed against the insurer.
Ultimately, Tashima applies usage of terms including "war" in the insurance context. That meant looking at all sorts of old disputes, including ones arising from the 9/11 attacks in New York as well as political considerations.
"Even if the executive branch’s position were not per se binding on this court, its position certainly informs our analysis when we face a political question," continues the decision. "After considering the factual and historical record and the executive branch’s position, we conclude Hamas is not a de jure or a de facto sovereign. Thus, Hamas’ conduct in the summer of 2014 cannot be defined as 'war' for the purposes of interpreting this policy."
Although not meant to be any sort of commentary on what happened in Israel, the decision nevertheless comes close to treading on some potentially controversial ground.
"Here, the record demonstrates that the efficient proximate cause for the relocation was Hamas’ rocket fire from Gaza into Israel," states the opinion. "The district court’s reliance on Israel’s indirect contribution to continued hostilities from Hamas was not supported by any evidence in the record. Atlantic’s letter denying coverage noted that Universal had to relocate because of 'heightened violence in [Israel]' due to Hamas 'firing rockets into those cities [Tel Aviv and Jerusalem]' where filming was likely to occur. More importantly, the district court did not consider what the predominant cause of Dig’s relocation actually was, and Atlantic provides no evidence that Israeli retaliation was the predominant cause of Universal’s losses. The district court erred in holding that because Israel indirectly contributed to Hamas’ conduct, Israel’s conduct as a sovereign nation triggered the war exclusion here."