Caribbean terror. A legal analysis of the allocation of property losses in insurance contracts in the context of terrorist activity

Date11 October 2011
Pages296-318
DOIhttps://doi.org/10.1108/13590791111173669
Published date11 October 2011
AuthorJohn S. Jeremie
Subject MatterAccounting & finance
Caribbean terror
A legal analysis of the allocation of property
losses in insurance contracts in the context
of terrorist activity
John S. Jeremie
Faculty of Law, University of the West Indies, St Augustine,
Trinidad and Tobago
Abstract
Purpose – The purpose of this paper is to explain why, as a matter of law and policy, loss suffered as
a consequence of terrorism, insurrection and/or civil uprising is not generally compensable in
insurance law. The paper postulates that it is the duty of the state, particularly in small states,
to compensate loss of this type.
Design/methodology/approach – The paper achieves this objective by studying the attempted
coup d’e
´tat by Muslim fundamentalists in Trinidad and Tobago in 1990 and the devastating property
losses suffered during the attempted coup as a consequence of looting and arson. The standard terms
of two main policies then in use are meticulously set out and examined in the context of the relevant
case law and textbook learning on the subject of losses of this type.
Findings – The paper demonstrates that losses occasioned as a consequence of activity of the type
under reference – that is terrorist activity, insurrection and civil uprising – cannot be dealt with by
insurance companies and that it falls to the state as the guardian of national security and as an honest
broker in the development of the economy to ensure even development by compensating losses
occasioned as a consequence of terrorist activity, insurrection and/or civil uprising.
Originality/value – The paper for the first time puts in context losses of the type now being
experienced in many parts of the world and explains the limitations of the traditional insurance law
principles to treat with these losses. The solution of state compensation as a last resort to compensate
innocent victims in these circumstances is advanced as a possible solution.
Keywords Trinidad and Tobago,Property insurance, Terrorism, Insurancelaw, Terrorist activity,
State responsibility, Looting, Arson,State compensation, Loss
Paper type Research paper
Introduction
Twenty-one years after five of the most unlikely days of violent uprising unde rtaken
by an Islamic cleric and 130 heavily armed followers, in what had hitherto been the
sleepy Caribbean island paradise of Trinidad and Tobago, it is useful to understand
exactly why the putative terrorist activity did not achieve the economic dislocation so
obviously sought by the insurgents.
In this work, we attempt an analysis of why the overwhelming majority of
insurance contracts then in use did not, and still will not today cover losses of the type
and on the scale experienced by many in the then embryonic commercial and business
sectors in Trinidad and Tobago.
Ultimately, we attempt to draw certain conclusions from the activity undertaken by
the insurgents against the future treatment of activity of this type on the economic
development of Trinidad and Tobago.
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1359-0790.htm
JFC
18,4
296
Journal of Financial Crime
Vol. 18 No. 4, 2011
pp. 296-318
qEmerald Group Publishing Limited
1359-0790
DOI 10.1108/13590791111173669
Background
The commercial rationale for excluding losses of the type experienced during the
attempted coup is well recognized and generally accepted.
Although it may be premature to speculate, the wave of riots which are taking place
throughout the Middle East and North Africa and which has resulted in damage to
property and life on a vast scale not yet been precisely quantified is likely to engage
these very well recognized and established rational commercial underpinni ngs. It is not
here suggested that these actions in the Middle East are illegitimate-as a coup must
by definition be to the established order, the sole point which is advanced here is
that from a legal point of view loss on an accopalyptic scale is generally treated
differently from accidental loss for the purposes of insurance law and the treatment
of claims[1].
In Kluwer[2] the author sensibly and succinctly captures the commercial rationale
which underpins the reluctance of insurance firms to underwrite these types of
accopalyptic losses in the following terms: “[...] the potentially wide ranging
consequences of war destroy the statistical basis of insurance[2]”. One may well
conclude that damage to property and life in a war zone or an area which is the subject
of accopalyptic terrorist action is inevitable. Such a conclusion is inimical to the very
concept of insurance which is premised on the measurement and weight of risk.
As Channell, J. put it in his oft quoted remarks in Prudential Insurance Company v.
Inland Revenue Commissioners[3]:
There must be either uncertainty whether the event will happen or not, or, if the event is one
which must happen at some time, there must be uncertainty as to the time at which it will
happen[4].
Whatever the commercial reluctance of insurers generally it is necessary to analyze in
some detail the legal means by which the particular insurance companies in Trinidad
and Tobago sought successfully to translate commercial reluctance into complete
evasion of all liability to pay any of the some 300 claims which were ultimately filed
against them arising from terrorist acts which both resembled and predated those of
the more well publicised attacks which took place a decade later on September 11,
2001 in the USA.
To assert that this type of insurance non intervention is applicable to most
jurisdictions one has only to examine the American case of TRT/TFC Communications
Inc. v. Insurance Company of the State of Pennsylvania[5] and the administrative
as well as legislative response of the federal government of the US to the so-called
9/11 attacks[6]. Those acts bore a striking similarity to the ones which form the subject
of this article both in terms of the sheer audacity of the actions themselves and the utter
senselessness of those actions as being capable of achieving the goals sought for
themselves by their authors.
This paper recounts not only the events of July 27, 1990 but it seeks to analyze the
insurance contracts then in widespread use in Trinidad and Tobago (and elsewhere as
we have stated in the preceding paragraphs) against the claims which flowed
from the virtual eradication of large parts of the business centre of the capital city of
Port of Spain with the resultant catastrophic losses to businesses and enterprise which
were then located in the capital city.
Caribbean terror:
property losses
297

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