Insurance Coverage of the World Trade Center: Interpretation of 'War Risk' Exclusion Clauses under New York Contract Law [September 18, 2001]   [open pdf - 53KB]

This report addresses the interpretation of war risk exclusion clauses under New York contract and insurance law. The purpose of excluding "war risks" from insurance policies is to prevent the insurer from being bankrupted by shouldering countrywide losses from war. The widespread characterization of the events of September 11th as an "act of war" raises the possibility that insurable risks to life and property in the World Trade Center may not receive coverage due to the enforcement of these clauses. This report suggests that any such enforcement might not be successful under New York law, as the insured enjoy favorable state rules of procedure and norms of contract construction. However, as this issue essentially boils down to one of contract interpretation -- where courts will construe the "exclusions as the parties would reasonably have expected them to be construed" -- how public officials characterize the events of September 11th could inform a judicial determination of whether those events constitute "acts of war" for purposes of insurance law

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CRS Report for Congress, RS21016
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