## Facts

- Pan American World Airways, Inc. insured a Boeing 747 under a coordinated program including aviation all-risk coverage (subject to exclusions) and separate war-risk coverage (including excess coverage by the United States).
- On September 6, 1970, Pan Am Flight 083 (Brussels–New York via Amsterdam) was hijacked over London by two men acting for the Popular Front for the Liberation of Palestine (PFLP).
- The hijackers forced the crew to fly to Beirut, where a demolitions expert and explosives were placed on board, then to Cairo.
- After passengers were evacuated in Cairo, the aircraft was totally destroyed.
- The all-risk policies covered physical loss or damage to the aircraft but excluded certain war-related and politically violent perils, including “capture, seizure . . . or any taking by any military . . . or usurped power,” “war . . . civil war, revolution, rebellion, insurrection or warlike operations,” and “riots [or] civil commotion.”
- The war-risk insurers and the United States contended the event did not fall within war-risk coverage and should remain an all-risk loss; the United States also argued, alternatively, that barratry by the insured’s personnel caused the loss.
- The destruction of the aircraft, the amount of loss (about $24.3 million), and the relevant policy language were not disputed.

## Issues

1. Whether the hijacking and destruction were proximately caused by an excluded peril under the all-risk policies (e.g., “war,” “warlike operations,” “insurrection,” “civil commotion,” or “usurped power”), shifting liability away from the all-risk insurers.
2. Whether the loss instead fell within war-risk coverage, obligating the war-risk insurers and/or the United States as excess war-risk carrier.
3. Whether the United States could avoid war-risk liability by characterizing the loss as caused by barratry.

## Decision

- The Second Circuit affirmed the district court’s judgment for Pan Am against the all-risk insurers.
- The court held the hijacking and destruction were not proximately caused by any war-related or political-violence exclusions in the all-risk policies.
- The loss therefore remained covered under the all-risk policies, making the all-risk insurers liable for the full loss.
- Because war-risk coverage was not triggered on the court’s interpretation, the United States’ barratry theory was not outcome-determinative.

## Legal Principles

- Allocation between all-risk and war-risk insurance turns on proximate cause and whether the operative peril fits the policy’s war-risk terms or exclusions.
- Exclusionary terms such as “war,” “warlike operations,” “insurrection,” “rebellion,” “riot,” “civil commotion,” and “usurped power” are construed according to their ordinary insurance meaning and are not extended to isolated terrorist acts absent clear language.
- A temporary takeover of a single aircraft by a small group does not, without more, constitute “usurped power” or an insurrectionary or riotous public disturbance within standard war-risk exclusions.
- Ambiguous exclusionary language in an all-risk policy is construed narrowly against the insurer and in favor of coverage (contra proferentem).

## Conclusion

The Second Circuit treated the politically motivated hijacking and destruction of Pan Am’s aircraft as an all-risk loss rather than a war-risk exclusion, holding that the incident was not “war,” “warlike,” “insurrection,” “civil commotion,” or “usurped power” within the policies and requiring the all-risk aviation insurers to pay the claim.


Pan Am. World Airways, Inc. v. Aetna Cas. & Sur. Co., 505 F.2d 989 (2d Cir. 1974)