Background

In 2014, the Donetsk People's Republic (the "DPR"), a Russian-backed separatist group in eastern Ukraine, shot down a passenger plane, Malaysia Airlines Flight 17 ("MH17"). One of the victims of that attack was Quinn Schansman, an American college student. Schansman's family filed a lawsuit against Western Union and other financial institutions for providing ongoing and essential financial support to the DPR from around the world.

Western Union tendered the lawsuit to its insurer, Hartford Fire, seeking coverage under a commercial general liability insurance policy (the "Policy"). Hartford Fire declined to provide coverage. Western Union requested that Hartford Fire reconsider its position. In response, Hartford Fire sought a declaration that it has no duty to defend or indemnify Western Union in connection with the Schansman lawsuit under two exclusions in the policy: 

1. the “War Exclusion” which excluded bodily injury, arising, directly or indirectly, out of “war, . . . warlike action by a military force, . . . or insurrection, rebellion, revolution, [or] usurped power"; and,
2. the "Financial Services Exclusion", which excluded bodily injury "resulting from the rendering of or the failure to render financial services by any insured".

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Decision

In Hartford Fire Ins. Co. v. Western Union Co., 2022 U.S. Dist. LEXIS 171694, 2022 WL 4386836 (S.D.N.Y. September 22, 2022), the United States District Court for the Southern District of New York held that the Schansman case fell within the scope of both the War Exclusion and the Financial Services Exclusion, and therefore, Hartford Fire was not obligated to defend Western Union in the lawsuit (at 7-8 and 17).

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The War Exclusion

The Court held that the Schansman case fell squarely within the exclusion for "insurrection.”

The Court explained that “insurrection” means a violent uprising by a group or movement acting for the specific purpose of overthrowing the constituted government and seizing its powers. Any intent to overthrow, no matter how quixotic, is sufficient. The Court held that this definition plainly encompassed the DPR's downing of MH17, and therefore, the War Exclusion applied (at 7-10).

The Court explained that it did not matter if the DPR had additional motivations for its surface-to-air missile attack on MH17 beyond its desire to overthrow the Ukrainian government and establish a pro-Russia state. An "insurrection" may exist even if a group's objective is to create a series of civil commotions, to cause embarrassment to the constituted government, or to spread propaganda, so long as it also had in mind the maximum objective of overthrowing the government (at 10-11).

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The Financial Services Exclusion

The Court held that the Financial Services Exclusion also plainly encompassed the factual allegations against Western Union in the Schansman Complaint. Per the Schansman Complaint, Western Union's sole role in the downing of MH17 was its "ongoing and essential” financial support to the DPR through the rendering of financial services. The Schansman Complaint did not accuse Western Union of doing anything other than facilitating money transfers to the DPR, an activity squarely within the Financial Services Exclusion (at 13-14).