The claims manager of an all risks insurer is notified that damage has occurred to a factory in an area which he knows has been recently subject to riots and possibly civil war. What should he do to protect his company’s interests?

Often an initial reaction on the part of the claims manager is to say: “It is quite obvious that a civil war is taking place and therefore the loss is obviously excluded from the policy.” This attitude of course overlooks three important features:

– there is considerable difference between proving that, for example, a state of civil war exists and proving that civil war caused the loss;

– even if the exclusion includes a reverse burden of proof clause, the insurer must establish a prima facie case, not only as to the existence of the excluded risk, but also causation; and

– it is almost impossible to obtain sufficient evidence if the insurer delays too long after the events allegedly causing the loss.

Therefore, the first step that the insurer should take is to create his team which should include:

– a lawyer specialising in war risk claims;

– his favoured loss adjuster, again specialising in this type of claim; and

– investigators with the contacts and/or the ability to infiltrate the particular country; the investigators should have a forensic scientist employed.

The solicitor should then consider the contract wordings and, in particular, evaluate the requirements of proof and the jurisdictional aspects referred to above. It will then be necessary to deal with the assured’s claim.

A careful letter should be drafted specifying that:

– there is prima facie evidence that a state of civil war exists (for example) and, as a result

– the insurer reserves its rights whilst

– an investigation is undertaken.

Three separate types of investigation should then be undertaken: