Pan American World Airways, Inc. v. Aetna Cas. & Sur. Co.

Decision Date17 September 1973
Docket NumberNo. 71 Civ. 1118.,71 Civ. 1118.
PartiesPAN AMERICAN WORLD AIRWAYS, INC., Plaintiff, v. The AETNA CASUALTY AND SURETY COMPANY et al., Defendants.
CourtU.S. District Court — Southern District of New York

COPYRIGHT MATERIAL OMITTED

Cleary, Gottlieb, Steen & Hamilton, New York City, for plaintiff; Fowler Hamilton, James C. Blair, Luther Nadler, Roger E. Berg, New York City, of counsel.

Davis Polk & Wardwell, New York City, for the Aetna Casualty and Surety Company, and others, denominated first, second and third claim defendants; Lawrence E. Walsh, Henry L. King, Guy Miller Struve, Bartlett H. McGuire, Charles J. Moxley, Jr., Jack P. Levin, New York City, of counsel.

Bigham, Englar, Jones & Houston, New York City, Co-counsel for second claim defendants; John J. Martin, New York City, of counsel.

Paul J. Curran, U. S. Atty., S. D. N. Y., for the United States; Daniel H. Murphy II, Mel P. Barkan, Asst. U. S. Attys., of counsel.

Mendes & Mount, New York City, for defendants, Philip Gaybell Wright and others, denominated as fifth claim defendants; Matthew Corrigan, Stephen E. Cohen, New York City, of counsel.

Cahill, Gordon, Sonnett, Reindel & Ohl, New York City, Co-counsel for fifth claim defendants; William E. Hegarty, Floyd Abrams, Roger S. Fine, Michael P. Tierney, New York City, of counsel.

OPINION

FRANKEL, District Judge.

On September 6, 1970, the plaintiff, an international air carrier, was operating a Boeing 747 ("jumbo jet") airplane on its scheduled Flight No. 093 from Brussels, Belgium, to New York City, with a stop in Amsterdam, Holland. As the airplane proceeded from Amsterdam toward London, two of its passengers produced hand guns and grenades, took forcible command of the crew and the passengers, and ordered the pilot to proceed to Beirut, Lebanon. The hijackers, though not themselves Arabs, were working with and for the Palestinian organization called the Popular Front for the Liberation of Palestine (PFLP). In collaboration with other PFLP people who met them in Beirut, they laced the aircraft with explosives during and after a stop in the Lebanese capital. Then they caused the airplane to be flown to Cairo, Egypt, lighting fuses just before landing to ignite the explosives. The large complement of passengers and crew were thus given scant minutes to disembark as the plane landed at Cairo and flee (at a cost in terror and some substantial injuries) before the craft exploded, burned, and was totally destroyed.

The plaintiff carried a more or less seamless mosiac of "all risk" and "war risk" insurance policies written (at varying times) by an array of private insurers and the United States Government. Pieced together the policies covered all, or, at worst for plaintiff, nearly all, of the loss. The central problem, too simply put, is which piece or pieces of coverage apply — or, with slightly greater accuracy but still over-simply, whether the loss is among those excluded from "all risks" and included among "war risks." All of the insurers have disclaimed liability. The plaintiff has sued them all, invoking our undisputed diversity jurisdiction as against the private carriers and 49 U.S.C. § 1540 against the Government.1

We have been led by the nature of the insurance questions to touch in the trial upon large topics of history, politics, and human sorrow in the Middle East. The roster of witnesses has been impressive and cosmopolitan, including, for example, a former Judge and Minister of the Government of Jordan, a commanding general of the Palestine Liberation Army, articulate Middle East correspondents, Israeli intelligence and security officers, hijacked pilots, crew, and passengers, and a guerilla warrior-scholar, along with insurance underwriters, ticket agents, and other people at least equally important for us, if possibly less glamorous. We have learned probably a good deal more than was necessary for this insurance case about the origins and course of contemporary Arab-Israeli struggles. At the same time, we have learned at most a minuscule fraction of what would need to be known before beginning to make broad, objective, and responsible judgments worthy of note beyond the confines of this lawsuit. So it bears early emphasis and recognition throughout that the findings now to be announced have significance only as they affect plaintiff's insurance claims. They are not meant to be — the court is neither competent nor authorized to make — official or unofficial judgments concerning foreign policy, the virtues or vices of governments, movements, and individuals embattled in the Middle East, or the "justice" or wisdom of claims for which so many have been suffering and fighting and dying.

These preliminary observations would be superfluous if it were not for some incidental facts in and around the litigation. For one thing, all involved have been made aware that people called as witnesses, as well as others allied in political interest with them, have seen fit to hope or believe that their causes might be advanced or obstructed by an American court's reasons for saying one group of insurers rather than another must pay for the destroyed airplane. In the charged circumstances this belief is understandable. But it is, or should be, entirely mistaken. In a more arguable and legally apposite vein, but also erroneously in the court's view, one group of defendants has pressed upon us that our subject is governed by a "consistent policy" of the American State Department and that treatment of the loss as falling within certain of the war risks "cannot help but be construed as granting some measure of legitimacy to * * * acts of terrorism in direct contravention of the foreign policy of the United States." The court perceives no such constraint and no such danger. The "United States" is here only coincidentally, as an insurer. The State Department, also coincidentally in this aspect, has been here as a source of documents and information. We have had no official intimation of how this case might be affected by American foreign-policy concerns and, even more clearly, no suggestion that what we say or do could imaginably graze the course of the nation's foreign affairs.

It is stressed again, therefore, that nothing said herein is intended or suited (or should be read) to affect in the slightest the momentous' subjects of foreign policy and international judgment that are outside our province. Today's opinion decides nothing of right and wrong among Palestinians, Syrians, Israelis, Egyptians, Iraquis, Saudi Arabians, Lebanese, Libyans, or, indeed, Americans and Russians, as they have been encountering each other in the events of the Middle East.

The court has made only the relatively minute determination that the all risk insurers are liable for plaintiff's entire loss. We now proceed to state the findings and conclusions deemed to require that result.

I. FACTS

The insurers and insurance policies

The defendants are three groups of insurers:

(1) The all risk insurers, named in the first three claims of the amended complaint, issued identical policies affording coverage in the year beginning November 12, 1969, for the full agreed value of the aircraft, $24,288,759. Defendants named in the first claim are American companies which covered one third of the total. The second claim defendants are Lloyds underwriters, plus other British and foreign companies, collectively covering one sixth of the insured value. The defendant in the third claim covered one half.

As its familiar shorthand label conveys, the all risk insurance covered "all physical loss of or damage to the aircraft," except as limited by specified exclusions. The major subject of this lawsuit has been whether any of these exclusions defeats recovery from the all risk defendants. The pertinent exclusions are these:

"1. capture, seizure, arrest, restraint or detention or the consequences thereof or of any attempt thereat, or any taking of the property insured or damage to or destruction thereof by any Government or governmental authority or agent (whether secret or otherwise) or by any military, naval or usurped power, whether any of the foregoing be done by way of requisition or otherwise and whether in time of peace or war and whether lawful or unlawful (this subdivision 1. shall not apply, however, to any such action by a foreign government or foreign governmental authority following the forceful diversion to a foreign country by any person not in lawful possession or custody of such insured aircraft and who is not an agent or representative, secret or otherwise, of any foreign government or governmental authority);
"2. war, invasion, civil war, revolution, rebellion, insurrection or warlike operations, whether there be a declaration of war or not;
"3. strikes, riots, civil commotion."

In July 1970 the all risk coverage afforded by the first and third claim defendants was increased at plaintiff's request. The exclusions in paragraph 3 ("strikes, riots, civil commotion") were deleted by these American insurers, but only up to a limit of $10,062,393 in excess of $14,226,290 on each 747 aircraft. Within this limit the first and third claim defendants each assumed 50% of the additional coverage. This would mean, if the third exclusion were found applicable, that the first and third claim defendants would be liable for $10,062,393, and the fifth claim (war risk) defendants for $14,226,290.

For all risk coverage of its 747 fleet, plaintiff paid premiums totaling $4,571,635 for the period January 1, 1970, to September 21, 1970.2 The added coverage of strikes, riots, and civil commotion, was given by the first and third claim defendants from July 27, 1970, to November 12, 1970, for a premium of $29,935.

(2) The defendant in the fourth claim is the United States, which, under the aegis of the Federal Aviation Administration pursuant to the Federal Aviation Act, 49 U.S.C. §§ 1531-42, supplied insurance coverage for...

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