Issue: The aftermath of the much publicized hijacking of a 747 airplane near London by two members of the Popular Front for Liberation of Palestine was the insured carrier’s attempt to recover its loss under the All-Risk Aviation insurance policy. The hijackers ordered the plane flown to Cairo, after a stopover in Beirut to pick up a demolitions expert and explosives. After the passengers were evacuated, the hijackers destroyed the aircraft. The only question to be decided by the court was whether the loss was covered by the policy, or whether it was excluded under the policy provisions.

Judgment: The policy provided it did not cover loss or damage due to, or resulting from "capture, seizure…by any Government or governmental authority or agent (whether secret or otherwise)…" In addition, the insurer contended that the loss was excluded under the provision that the policy did not cover riot and civil commotion.

At the trial, the insurance company introduced evidence as to the political tension in the Middle East and in Jordan; that the hijacking was caused by "military…or usurped power" which was excluded by the policy.

The district court found that the insurance company had failed to prove that the loss was not covered by the policy, and entered judgment in favor of the insured on the ground that the exclusions were ambiguous.

On appeal, the higher court pointed out that the insurance company knew before the policies were issued that their exclusions were ambiguous in the event of political hijacking, but had issued the policy without amending them to use terms in use by other insurance companies which would have clarified the ambiguity.

The higher court found that the loss of the airplane was the result of acts of two men who, by force of arms, diverted the aircraft from its intended destination.

The court found that the terms used in the policy exclusions did not describe a hijacking committed by two men far from the site of any large scale violence. The court noted: "…The all-risk insurers sought to show that the hijacking was part of PFLP schemes for waging war or insurrection, thus linking the acts of the hijackers to the larger Middle East situation. However, the crucial element of this effort was the intent of the PFLP, and the all-risk insurers had the burden of proving that the PFLP intended the two hijackers’ acts to be part of a war in the Middle East or an insurrection in Jordan."

Since there was little evidence as to the intent of the PFLP, the companies failed to discharge their burden of proof.

The judgment entered in the lower court in favor of the insured was affirmed.