Holiday Inns, Inc. v. Aetna Ins. Co.

Holiday Inns, Inc. v. Aetna Ins. Co.

Opinion

 [*1461]  MEMORANDUM OPINION AND ORDER

HAIGHT, District Judge:

Plaintiffs Holiday Inns, Inc. ("HI") and Holiday Inns (Lebanon), Inc. ("HI-L") bring this action against defendant Aetna Insurance Company ("Aetna") to recover under an insurance policy in force when plaintiffs' hotel in Beirut, Lebanon was severely damaged by events occurring during a period from October, 1975 to April 9, 1976. Aetna contends that the damage resulted from excluded causes. This Court's opinion of June 20, 1979 held that Aetna had the burden of proving that proposition. After extensive pre-trial discovery, the issue of coverage under the policy was tried to the Court without a jury. The quantum of plaintiffs' recovery, assuming [**2]  coverage, was reserved. Thus this decision is limited to whether or not the loss is covered by the policy.

The Decision of the Second Circuit in Pan American World Airways, Inc. v. Aetna Casualty & Surety Co.

For reasons that will become apparent, I begin with an incident occurring over the skies of London on September 6, 1970. On that day members of the Popular Front for the Liberation of Palestine ("PFLP") hijacked a Pan American jet aircraft. The aircraft ultimately landed at Cairo where, after all passengers were evacuated, the hijackers destroyed it.

Pan Am instituted suit because none of the several insurers whose policies covered the aircraft accepted coverage. The litigation resolved itself into a struggle between the "all risk" insurers and the "war risk" insurers, the latter's policies being intended to cover causes of loss excluded under the all risk policies. Affirming the judgment of this Court, 368 F. Supp. 1098 (S.D.N.Y. 1973) (Frankel, D.J.), the Second Circuit held the all risk insurers liable because "none of the all risk exclusions, considered in a light most favorable to the insured, fairly describes the cause of the present loss." Pan American  [**3]   World Airways, Inc. v. Aetna Casualty & Surety Co., 505 F.2d 989, 1022 (2d Cir. 1974) (hereinafter "Pan Am").

The Second Circuit decided Pan Am on October 15, 1974. At that time HI was negotiating, through brokers, with present defendant Aetna the all risk policy forming the subject matter of the case at bar. That policy issued under date of March 11, 1975. The "Aetna" involved in Pan Am was a different company. But the Second Circuit, in a scholarly, 33-page opinion by Judge Hays, with encyclopedic citation of authority,  [*1462]  placed the insurance industry on notice when it declared certain principles of insurance law applicable to, and defined terms appearing in, all risk property policies. It often happens that insurers and their insureds, litigating the question of coverage, draw analogies to judgments of prior centuries. The Second Circuit performed that historical analysis in Pan Am, updating the ancient insurance phrases within the general context of this century's tragic Middle East strife; and it did so during the gestation period of the very policy in suit. Pan Am accordingly figures prominently in this Court's judgment. But first I consider [**4]  the origin of the policy, and its dispositive terms.

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