This post is a follow up to a post entitled “How to Read  Insurance Policies: One Phrase 200 Years,” also published this day.

******

Some intentionally caused fires are not covered in property policies. This has always been true for fires intentionally caused by the insured property owner. There has also almost always been an exclusion for a set of fire-causing events that are associated with war and events like that. 

Drinkwater v. London Assurance


In the early part of the Eighteenth-Century, 1720 to be more exact, the London Assurance Company devised a provision in its Proposal which ended up in the policy that stated as follows: “No loss or damage by fire, happening by any invasion, foreign enemy, or any military or usurped power whatsoever, will be made good by this company.” This phraseology remained the exclusion in the London Assurance policy for many, many years. 


However, there was a mob disorder that caused the destruction of a building–a “malting office”–which was insured.  The insurer denied coverage and refused to pay on the basis of the phrase “usurped power.” London Assurance took the view that the mob had usurped power and caused the fire. The case was litigated, and it was eventually decided by three members of a panel with one judge dissenting. 


The court held that usurpation requires a foreign invasion, and so the insured prevailed. The dissenting judge rejected the idea that usurpation must be of foreign origin and indicated that it might be a domestic matter but that it must be or be like a civil war, rebellion, or something of the sort. The actions of a disorderly mob do not constitute usurpation and so the exclusion does not apply. 


The actual style of the case seems to be Drinkwater v. The Corporation of the London Assurance, 95 Eng Rep. (C.P. 1767). I cannot restrain myself from observing the if “usurp” means grabbing the power of an “official other,” e.g., a government or an army unit; consequentially, if there is no power to grab or being grabbed, then there can be no usurpation. This fact follows from the definition of the term “usurp.” Now, if a community is living in peace and tranquility but is subjected to mob disorder, it is not the case there was power prevailing which the mob usurped. Rather, there was no power prevailing, so there could be no usurpation, although, to be sure the spirit of the mob filled a power vacuum. 


Sun Fire Office


Although London Assurance did not change its proviso, while Sun Fire Office adopted it, but also added the phrase “civil commotion” in its 1727 Proposal/Policy. Fifty years passed. In the summer of 1780, there were terrible riots of a political nature. Those involved claimed to be protesting an act of parliament granting Roman Catholics some relief from then-current oppression.  


Their conduct burned down the sizable distillery of one Mr.  Langdale, a Catholic.  His building and stock of liquor were destroyed. He brought an action, Langdale v. Mason et al. (1780)In it, he sought coverage from Sun Fire Office. 


Jury Charge of Lord Mansfield in Langdale

 

The Chief Justice tried the case and his “address” to the jury was significant and perhaps a paradigm judicial reasoning as to contract language.  It is appropriate to remember that Lord Mansfield is famous not only for the Somerset case outlawing slavery but also for his reform and construction of English commercial law.  See Norman S. Poser, LORD MANSFIELD: JUSTICE IN THE AGE OF REASON (2013).


Said he, “Most undoubtedly every man’s leaning must be to the side of the plaintiff [Langdale], in order to divide the loss in so great a calamity. But that inclination must be governed by the rules of law and justice; and the only question to be determined arises singly upon the construction of the two words in the policy.”


At this point, the judge discussed the history of the use of the words “military or usurped power” and described them as ambiguous and already have been interpreted in an earlier suit, the Drinkwater case. The words refer to rebellion and events like that. 


The judge points out that the words do not imply high treason, felony, or mere misdemeanor; the policy does not even associate “civil commotion” with a riot. “It may be a question in point of law, whether an assembly or multitude be a riot. But the single question here is whether this has been a civil commotion. If there be a case to which these words be applicable, it is to a case of this sort. I cannot see any other words, to which it can be applied.”


The judge rejects the idea that the events might be insurrections, rebellions, usurpations, or anything of the sort. So, “what is a civil commotion?” It is something else.


“The present [set of events] was an insurrection of the people resisting all law, setting the authority of the government at nought; and depriving of its protection whoever was obnoxious to them. What was the object and end of this violent insurrection? It took place in many parts of the town [London] at the same time, and the very same night; the mob were [in four or five different locations,] and at the plaintiff’s. What is their object? General destruction, general confusion. It certainly was meant to aim at the very vitals of the constitution. It was not a private matter, under a cry of No popery only, to destroy all papists.”


Lord Mansfield then describes a number of places and commercial buildings which were destroyed. Prisoners were freed, he observes.  “The houses of a vast number of papists burnt and destroyed.” The military was brought in of necessity. People were killed. “What is this but a civil commotion, if any precise meaning can be affixed to those words. It is said that this is a civil commotion distinct from usurped power and rebellion. It is admitted that this kind of insurrection may amount to high treason: and, to be sure, it may. But the office [insurance company] does not mean to try whether these rioters were guilty of high treason or not. It is not put upon that but on the ground of civil commotion. It is not an occasional riot: That would be another question. I do not give any opinion what that might be. “You will give your opinions, whether the facts of this case bring it within the idea of civil commotion. I think a civil commotion is this: an insurrection of the people for general purposes, though it may not amount to a rebellion, where there is a usurped power. If you think it was such an insurrection of the people for the purposes of a rebellion, but within the exception of [exclusion in] the policy, you will find for the defendants. If not, you will find for the plaintiff. 

The jury delivered a verdict for the defendants.” 


The quotations and the background story are taken from Samuel Marshall, A TREATISE ON THE LAW OF INSURANCE: IN FOUR BOOKS 687-91 (1802).*

According to Marshall, Langdale subsequently recovered from “the Hundred.” As nearly as I can tell a Hundred is something like a division of county government. Upon concluding this discussion, Marshall takes up the matter of subrogation in situations like this one. 


*Samuel Marshall, Serjeant at Law, died in 1823.  (“Sergeant at Law” was a name for several hundred years of a very elite group of English barristers. It is from their dress code, for example, that the name “Order of the Coif” came.) By the Nineteenth Century, alas, this elite group was losing some of its luster. For example, no longer might they alone appear before the Courts of Common Pleas. Still, in the early Nineteenth Century Sergeant Marshall’s position was a distinguished one. 


Now, I turn to the Twentieth Century case in which the phrase “civil commotion” plaid a significant role. There is quite a story, much of which will have to be set aside. 


The Pan Am Terrorist Case


On September 2, 1970–almost exactly a half-century ago–a Pan Am 747 going from Brussels to New York via Amsterdam was hijacked over London by what we would now call “terrorists.” They demanded that the plane be flown to Beirut. There it was loaded with explosives and someone who knew how to detonate them. The grandest and perhaps largest of all commercial jets was flown on to Egypt where the passengers were unloaded safely, and the plane was then blown to bits. 


Pan Am had first-party property coverage through three different distinct types of insurance sources. There was never really a question as to whether Pan Am would recover; the question was from which: the all-risk carriers, the war-risk carriers, and/or the U.S. government under an air-travel statute.  Pan American World Airways, Inc. v. Aetna Casualty and Surety Co., 595 F.2d 989 (2d Cir. 1974). 


None of the insurers wanted to pay anything, of course.  Therefore, everyone else, including Pan Am, wanted the all-risk carriers to pay the whole tab. Aetna was one of the all-risk carriers.  Because its policy was an all-risk policy, every sort of physical loss or damage was covered unless it was subject to an exclusion. Naturally, the relevant highly sophisticated “manuscripted” policy had a slew of exclusions, several of which were in the general area of the manner of the loss. 


It was imperative for the all-risk carriers to get at least one of the many exclusions to apply. Sound arguments could be given to support some of them. Events that are part of a war, for example, were excluded, but there clearly was no war going on, so that exclusion would not work. 


Among other terms, the all-risk carriers invoked to shield themselves from coverage were “usurp” and “civil commotion.” The Second Circuit panel rejected both arguments, and it cited both Drinkwater and Langdale.


Basically, the view of the Court was quite simple. There could not be a usurpation, even if the hijacking happened over British territory because the two terrorists were not acting on behalf of any government. and were not trying to grab the Crown’s power.  The terrorists were agents of the Popular Front for the Liberation of Palestine and were not a government or military force or a government seeking to take over or interrupt British rule. Thus, even if the hijacking was somehow connected with an insurrection in Jordan, it was not due to and it did not result from it and was not proximately caused by it. 


The plane’s destruction was “not due to” and did “not result from” said the court using the then long-established understanding of the nature of causation as understood in legal discourse and the phrase “proximate causation.” To count Event#1 as the proximate cause of Event#2, Event#1 must be “close-in” or “immediately surrounding” the loss. Whatever political events were taking place in Jordan at the time, they did not meet the criteria for proximate causation or–indeed–causation simpliciter, at least as the idea is understood in law. 


The Second Circuit Court cited a case that is now approximately 100 years old. “As Justice Holmes stated in Queen Insurance Co. v. Globe & Rutgers Fire Insurance Co., 263 U.S. 487, 492 (1924). “The common understanding is that in construing these [insurance] policies we are not to take broad views but generally are to stop our inquiries with the cause nearest to the loss. This is a settled rule of construction, and if it is understood does not deserve much criticism, since theoretically at least the parties can shape their contract as they like.” (Emphasis added.)


This court also cites the opinion of Cardozo, J. in Bird v. St. Paul Fire & Marine Insurance Co., 224 NY. 47, 120 N.E. 86, 87 (N.Y. 1918). “In Bird, the insured vessel was damaged by a concussion caused by an explosion in a freight yard about a thousand yards from the vessel. The explosion came about when a fire set off a stock of explosives. The insured sued on an insurance policy covering losses caused by ‘fire.’ The [New York] Court of Appeals [–that state’s highest court–] held that the loss was not caused by fire. It ascertained that the scope of causation relevant to the insurance nature of a loss is largely a question of fact depending on the reasonable expectations of the businessmen: The question is not what men ought to think of as a cause. The question is what they do think of as a cause.  We must put ourselves in the place of the average owner whose boat or building is damaged by the concussion of a distant explosion, let us say a mile away. Some glassware in his pantry is thrown down and broken. It would probably never occur to him that within the meaning of his policy of insurance, he had suffered loss by fire. A philosopher or lawyer might persuade him that he had, but he would not believe it until they told him. He would expect indemnity, very likely, if the fire was near at hand, if his boat or building was within the danger zone of ordinary experience, if damage of some sort, whether from the ignition or from the indirect consequences of fire, might fairly be said to be within the range of normal apprehension.” (Emphasis added.)


Interestingly, the Second Circuit court states that “New York courts give especially limited scope to the causation inquiry.” (I wonder if that or any other state would hold the same view today. I myself even wonder if the great Cardozo got this one right at that time. It seems to me that the ideas of the philosopher and the lawyer should get more credit than he gives them.)


The court’s discussion of usurpation as a cause to be excluded relies upon Drinkwater and Langdale together. The matter of “civil commotion” is different. In the case of usurpation, the court uses the 200-year-old argument as to the nature of usurpation plus an argument as to coverage for “distant” causation. But the idea of “civil commotion” has another element. Not only is Jordan a long way away from London, so that the Holmes-Cardozo analysis of causation applies, the phrase “civil commotion’ could not apply, as a necessary truth, given the meaning of the phrase itself.  


As the Circuit Court pointed out, the terms that go with “civil commotion,” as well as that phrase itself, have the meaning “domestic disturbance.” “There is no authority,” it said, “for the proposition that riots or civil commotion are other than local, domestic disturbances[,]” said the court.  The phrase “civil commotion” means, by its very semantic nature, that such an event must be nearby. One does not need the Holmes-Cardozo theory of interpreting contracts of insurance to determine that a relevant civil commotion must be “right here in the neighborhood.” 


Given this fact, one wonders if there could be. semantically speaking, a civil commotion near an airplane flying above, say, 30,000 feet. Then again, I guess there could possibly be a civil commotion on a large airplane, though the idea doesn’t sound linguistically plausible.


The district court had made the Cardozo point in almost exactly these kinds of words. The district court held that “‘civil commotion’ is essential ‘a kind of domestic disturbance,” referring to disorder ‘such as occur among fellow-citizen within the limits of one community.’ It found that ‘it is not easily imaginable that any ordinary man, business or other, would have supposed a hijacking over London of an airplane that never went or was intended to go to Jordan would be deemed the result of ‘civil commotion’ in Jordan.” (368 F. Supp at 1139)


Citing Langdale, and several other cases, the appellate court said this: “The district court clearly applied the correct rule of law: [‘]civil commotion[‘] does not comprehend a loss occurring in the skies over two continents.” And it went on to say, “[w]e hold that the present loss was not caused by civil commotion for essentially the reasons set out in the district court’s opinion.” [Quinn: I wonder if this is the only way to look at what happened. After all, might the passengers on a flight constitute something like a community?]


Thus, the supposed exclusion does not–cannot not–apply and so is not actually an exclusion at all. Consequently, for this and other reasons, the all-risk carriers are not excused from payment for the covered loss of Pan Am’s plane. 


As one might imagine there is a book waiting to be written telling the tale of the adjustment of the claims arising out of this incident. 


Michael Sean Quinn
Quinn & Carmona
Austin, Texas

Michael Sean Quinn, PhD, JD, CPCU, Etc

Michael Sean Quinn, PhD, JD, CPCU, Etc. (530)

One of Texas's leading insurance scholars, Michael Sean Quinn is a past chair of the Insurance Section of the State Bar of Texas and has a broad legal practice.

Hits: 0