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Insurers cannot pursue lawsuits against Libya in connection with two terrorism acts, including the 1988 bomb explosion of Pan Am Flight 103 over Lockerbie, Scotland, that killed all 243 passengers, says a federal appeals court in upholding a lower court ruling.
In November 1985, EgyptAir Flight 648 was hijacked, which resulted in the death of passengers and the aircraft hull’s destruction, according to Monday’s ruling by the United States Court of Appeals for the Federal Circuit in Washington, D.C., in Aviation & General Insurance Co. Ltd. et al. v. United States. The U.S. State Department determined the terrorist group involved had received considerable support from the Libyan government,
Then in December 1988, explosives concealed in the luggage compartment of Pan Am Flight 103 as it crossed Scotland killed all 243 passengers, as well as 16 crewmembers and 11 bystanders, according to the ruling.
The terrorist responsible was acting as an agent of the Libyan government, according to the ruling.
Libya’s sovereign immunity was suspended following passage of the State Sponsors of Terrorism Exception to the Foreign Sovereign Immunity Act in 1996 and the National Defense Authoritative Act in 2008, according to the ruling.
A number of insurers, including Lloyd’s of London underwriters, who had paid a total of $97 million in claims in connection with the two terrorist acts, filed suit against Libya. But these lawsuits were terminated following Congress’ passage of the Libyan Claims Resolution Act in 2008, which restored Libya’s sovereign immunity. Libya then paid the government $1.5 billion, according to the ruling.
President George W. Bush subsequently signed an executive order terminating any pending lawsuit in U.S. court related to Libyan-sponsored terrorism.
The insurers filed suit in the U.S. District Court of Federal Claims in an effort to continue their litigation. The court ruling granted the federal government summary judgment in the case.
The ruling was upheld by the appeals court’s 2-1 opinion. “After considering Appellants’ arguments, we agree with the Court of Federal Claims that the government’s action in changing the status of Libya’s sovereign immunity was neither novel nor unexpected and thus could not have interfered with Appellants’ reasonable investment-backed expectations,” said the ruling.
“Appellants’ argument that they nonetheless held a reasonable expectation of compensation, following the Government’s termination of their claims based on historical examples, is of no moment,” said the ruling, in upholding the lower court’s ruling.
The dissenting opinion states the judge could have affirmed the lower court’s summary judgment on a different basis.
A new report from the Risk & Insurance Management Society Inc. suggests that purchasing terrorism insurance is one of the proactive measures risk managers can take to deal with the reality of terrorism exposures.