Universal Cable Productions LLC v. Atlantic Specialty Insurance Co., 278 F. Supp. 3d 1165 (C.D. Cal. 2017) was decided by the United States District Court for the Central District of California on October 6, 2017 (No. CV 16-4435 PA (MRWx)). The district court granted summary judgment to Atlantic, holding that the summer 2014 hostilities were "war" and "warlike action by a military force" in the ordinary sense and that both exclusions therefore barred coverage. It also entered summary judgment against Universal on the bad faith claim, which followed from that construction, and did not reach the third or fourth war exclusions. The Ninth Circuit reversed in part and vacated in part, holding that section 1644 required the insurance-trade meaning and that Hamas was neither a de jure nor a de facto sovereign.
The question before the court
Does a policy exclusion for "war" and "warlike action by a military force" take its lay, dictionary meaning — so that any sufficiently violent armed conflict qualifies regardless of the combatants' sovereign status — or must the insured first prove the parties intended a narrower insurance-trade meaning?
The governing rule
The district court applied California Civil Code sections 1636, 1638, and 1639 (intent ascertained from clear contract language) together with AIU Insurance Co. v. Superior Court, 799 P.2d 1253, 1264 (Cal. 1990): "if the meaning a layperson would ascribe to contract language is not ambiguous, [California courts] apply that meaning." It read Civil Code section 1644 and section 1645 through Supervalu, Inc. v. Wexford Underwriting Managers, Inc., 96 Cal. Rptr. 3d 316, 325 (Ct. App. 2009), for the propositions that section 1644 "is just one of many rules," that industry-usage evidence cannot contradict express terms, and that under section 1645 technical words are not read in the trade sense when clearly used in a different sense. Insurance policies are to be "read as a layman would read it and not as it might be analyzed by an attorney or an insurance expert." Haynes v. Farmers Insurance Exchange, 89 P.3d 381, 389 (Cal. 2004). Ambiguity is assessed in the context of the particular policy and circumstances. Bay Cities Paving & Grading v. Lawyers' Mutual Insurance Co., 855 P.2d 1263, 1271 (Cal. 1993).
How the court applied it
Judge Percy Anderson began with the ordinary meaning and found it dispositive. Hamas rocket fire, Israeli airstrikes and a ground operation in Gaza, and seaborne attacks by both sides were, in his view, what a layperson calls a war — a reading confirmed by Black's Law Dictionary, which even recognizes "mixed war" as war between a nation and private individuals. Having found no ambiguity, the court refused to construe the policy against Atlantic. It then treated Universal's trade-usage showing as a technical-meaning argument and rejected it for want of evidence that the negotiators had the Pan Am and Holiday Inns meaning in mind, since industry declarations cannot contradict clear policy language; it also faulted Universal for assuming Hamas must be a terrorist group for all purposes. On the second exclusion it added an alternative ground that never depended on Hamas: Israel is indisputably a sovereign state, its counter-campaign contributed to the conditions forcing the relocation, and the exclusion's text requires warlike action by only one side. On the Ninth Circuit's view this was error at three points: it collapsed section 1644's separate clauses for technical meaning and customary usage; it shifted to the insured a burden belonging to the insurer invoking an exclusion; and it never engaged Universal's unrebutted expert evidence, or Atlantic's own denial letter, on the trade meaning of war. The right question was not whether Hamas is always a terrorist group but whether it acted as a de jure or de facto sovereign in July 2014.
What the court concluded
The district court granted summary judgment to Atlantic, holding that the summer 2014 hostilities were "war" and "warlike action by a military force" in the ordinary sense and that both exclusions therefore barred coverage. It also entered summary judgment against Universal on the bad faith claim, which followed from that construction, and did not reach the third or fourth war exclusions. The Ninth Circuit reversed in part and vacated in part, holding that section 1644 required the insurance-trade meaning and that Hamas was neither a de jure nor a de facto sovereign.
From the opinion
- “Here, the events causing the relocation of the Dig production constitute a "war," and therefore the first War Exclusion applies.” — Part III.A.1, concluding the ordinary-meaning analysis of the first war exclusion
- “In the common meaning, "war" can include conflicts both between sovereign entities and between other groups” — Part III.A.2, explaining why the court thought sovereign status irrelevant to the exclusion
- “the clear language of the second War Exclusion requires warlike action only by one side” — Part III.B, the court's alternative ground — Israel's own military response sufficed to trigger the second exclusion
Why it matters for cyber conflict
This decision is the template for the insurer-friendly reading of a war exclusion — measure the loss by how much destruction it looks like, not by who caused it — and its reversal is why an insurer facing a cyber claim cannot win simply by showing that an intrusion resembled a military operation. Any war-exclusion dispute over a state-linked cyber attack will turn on which of these two opinions the court follows.
Editorial note: this case note was drafted with AI assistance by the JLCW Research Desk, checked against the text of the opinion, and reviewed by a human editor before publication. Every quotation above is carried through from the opinion itself. See our editing policy.
Read the opinion: Universal Cable Productions LLC v. Atlantic Specialty Insurance Co. on CourtListener. This note is a summary prepared by the Journal, not legal advice, and not a substitute for the opinion itself.
The scholarship behind this: Cyber Insurance and Corporate Risk in Cybercrime
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