APPLICATION OF TERRORISM EXCLUSION RESULTS IN MULTIPLE REASONABLE INTERPRETATIONS

In Johnson v. PPI Technology Services, LP., et al., 2013 WL 6665996 (E.D. La 2013), Plaintiffs alleged that they received various injuries when gunmen attacked the High Island VII, an oil rig platform off the coast of Nigeria, on which both Plaintiffs were working. They sued their employer, PPI, which sought coverage under its insurance policy with ISOP. ISOP denied coverage based upon several exclusions, including the terrorism exclusion. The parties agreed that Texas law governed the interpretation of the exclusions contained in the insurance policy. The court held that the policy provisions regarding terrorism were clear. The policy’s definition of terrorism was divided into three relevant elements: (1) use of violence; (2) that is undertaken by a person or group of persons; (3) that has the effect of intimidating a segment of the population or disrupting a segment of the economy.

It was undisputed that the first two elements were met; however, it was unclear whether the gunmen’s actions had the effect of intimidating a segment of the population and/or disrupting a segment of the economy. On one hand, the court found it reasonable to determine that: (1) this was merely an act of a violent robbery and kidnapping for pecuniary gain, and (2) that it only had an effect on those present in the High Island VII, which was not a segment of the population. Conversely, it was also reasonable to determine that the gunmen’s actions were acts of piracy, which was an ongoing problem in some areas, and had the effect of chilling maritime activity in the waters on Africa’s coast, thereby affect that segment of the economy. The court concluded that both interpretations were reasonable, and thus, the court must err in favor of coverage.

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