Pan American World Airways v. Aetna Casualty & Surety (1974)
1974 Second Circuit ruling: the destruction of a Boeing 747 hijacked by the PFLP in 1970 was neither war nor insurrection, and fell on the all risks insurers.
On September 6, 1970, the Popular Front for the Liberation of Palestine hijacked Pan Am Flight 93, a Boeing 747 flying from Amsterdam to New York. Pan Am v. Aetna, the case that set the meaning of war in insurance, grew out of that hijacking. The aircraft landed in Beirut, flew on to Cairo, where it was emptied of passengers and blown up minutes later. Pan Am claimed about 24 million dollars. Its all risks insurers, led by Aetna, invoked the exclusions for war, warlike operations, insurrection and civil war: the loss would then fall on the war insurers, London syndicates and the US government. In 1973, Judge Frankel ruled against the all risks insurers; the Second Circuit affirmed in 1974. The reasoning still shapes the law. An exclusion is read narrowly against the party that drafted it, and war, in insurance, is waged between states or entities exercising state-like power. An armed group with no territory striking a civilian aircraft far from any theater of combat is not waging war. The ruling was cited against insurers in Universal Cable in 2019 and by Merck in the NotPetya case.
Hypothetical: in 2024, a shipowner sees one of its vessels damaged by a drone fired by a non-state armed group. The hull all risks insurer invokes the war exclusion. The owner's counsel cites Pan Am v. Aetna: the group exercises no recognized sovereign power, so the loss is an all risks one. The insurer replies that the group controls territory and an administration, which brings it close to a quasi-state entity, and the claim settles halfway.
Pan Am v. Aetna, Pan American v. Aetna, Pan Am Flight 93 case
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