(Article from Insurance Law Alert, September 2025)
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Holding
Claims alleging that the policyholder made protection payments to a terrorist organization constitute only intentional acts rather than an “occurrence” under the policies. Travelers Prop. Cas. Co. of Am. v. Ericsson Inc., 2025 U.S. Dist. LEXIS 159243 (E.D. Tex. Aug. 18, 2025).
Background
Two underlying suits alleged that Ericsson violated the Federal Anti-Terrorism Act by aiding and abetting foreign terrorist organizations (“FTOs”) in various attacks that resulted in the death of Americans. The suits alleged that Ericsson paid protection money to the FTOs to avoid being attacked and that such money was used to fund attacks against other American targets.
Travelers filed suit, alleging it had no duty to defend or indemnify for four reasons: (1) the injuries alleged in the underlying suits did not arise from occurrences; (2) the alleged injuries were expected and intended; (3) a war exclusion barred coverage; and (4) Ericsson was not a “Named Insured” under the policies.
Decision
The court agreed with Travelers that the suits did not allege an occurrence, defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The court reasoned that the payments to FTOs were knowing and intentional, not accidental. The court emphasized that under Texas law, the question of intent is based on the voluntariness of the policyholder’s conduct, not the intended outcome.
The court rejected Ericsson’s assertion that allegations of reckless conduct triggered Travelers’ duty to defend. Focusing on the factual allegations in the underlying suit rather than the legal theories asserted, the court concluded that all allegations involved intentional conduct rather than involuntary actions or accidents.
Comments
While a finding of no duty to defend typically means that there is no duty to indemnify, the court ruled that the issue of indemnification was not ripe under Texas law. The court noted that the underlying suits were still pending and that the facts established in those proceedings could affect whether Travelers ultimately owed indemnification under the policies.