Foremost Ins. Co. v. Sheppard

• Decision Date: 14 December 1979
• Docket Number: No. 79-1233,79-1233
• Citation: 610 F.2d 551
• Parties: FOREMOST INSURANCE COMPANY, Appellee, v. Chris J. SHEPPARD d/b/a Anthony Island Sea Plane Base and Kenneth Dale Landreth. Loretta June Jones, Executrix of the Estate of Garnett Jones, Deceased, Intervenor-Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 551

610 F.2d 551

FOREMOST INSURANCE COMPANY, Appellee, v. Chris J. SHEPPARD d/b/a Anthony Island Sea Plane Base and Kenneth Dale Landreth Loretta June Jones, Executrix of the Estate of Garnett Jones, Deceased, Intervenor-Appellant.

No. 79-1233.

United States Court of Appeals Eighth Circuit.

Submitted Oct. 9, 1979.

Decided Dec. 14, 1979.

Irene Barnes, McMath, Leatherman & Woods, Little Rock, Ark., argued, Henry Woods, Little Rock, Ark., and David Q. Reed, Kodas, Reed & Gingrich, Kansas City, Mo., on brief, for appellant.

Chester C. Lowe, Jr., Little Rock, Ark., argued, Lowe & Hamlin, Little Rock, Ark., on brief, for appellee.

Before ROSS and STEPHENSON, Circuit Judges, and McMANUS, ^* Chief District Court Judge.

STEPHENSON, Circuit Judge.

In this diversity action, defendants Chris J. Sheppard d/b/a Anthony Island Sea Plane Base, Kenneth Dale Landreth and defendant-intervenor Loretta June Jones appeal from the district court's ¹ order granting summary judgment in favor of plaintiff Foremost Insurance Company (Foremost). Foremost petitioned the district court for a declaratory judgment that an aircraft insurance policy it issued to defendant Chris J. Sheppard d/b/a Anthony Island Sea Plane Base did not provide coverage for a sea plane accident which occurred on February 17, 1974. The district court held that this aircraft policy did not provide coverage for the accident. We reverse.

Some time prior to February 17, 1974, Garnett Jones made arrangements with Anthony Island Sea Plane Base to receive instruction in the operation of a sea plane. Jones was a licensed commercial pilot for Braniff Airlines but desired to qualify for a sea plane rating on his pilot's license. Anthony Island Sea Plane Base furnished Kenneth Dale Landreth, a qualified pilot instructor, to give sea plane flying instruction to Jones. A sea plane owned by Sheppard d/b/a Anthony Island Sea Plane Base and insured by Foremost was used for this instruction.

On February 14, 1974, Landreth gave Jones two hours of sea plane dual flight instruction which included supervision of: take-offs; landings; sailings; docking; slow and fast taxi on both pontoon floats; emergency landings and procedures; and cross-wind landings and take-offs.

On February 17, 1974, Landreth continued flying instruction for about forty minutes. During this period, Landreth demonstrated two landings, fast taxi procedure, and take-offs on a single pontoon float, one on each float. Jones then made four landings, fast taxi and take-offs on the left pontoon float, and two on the right pontoon float. During the third landing on the right pontoon float and while fast taxiing, the front portion of the pontoon float dug into the water. The aircraft flipped over on its back and sank. Garnett Jones was drowned.

On March 10, 1976, Loretta June Jones, as executrix of Garnett Jones, filed a wrongful death action in the United States District Court for the Western District of Arkansas. Named defendants in that action were Chris J. Sheppard d/b/a Anthony Island Sea Plane Base and Kenneth Dale Landreth.

On March 16, 1976, Foremost was notified that this wrongful death action had been filed and a demand for defense was asserted at that time. Foremost filed answers for the defendants but notified them that it intended to undertake defense of the suit with a full reservation of all rights to disclaim coverage for the occurrence and to withdraw from defense of the suit.

On May 24, 1976, Foremost filed this separate action for a declaratory judgment against Sheppard d/b/a Anthony Island Sea Plane Base and Landreth, claiming that Jones, as a student pilot, fell within a clause excluding coverage for pilots or crewmen and therefore the aircraft policy afforded no coverage for the February 17, 1974 accident. In an unpublished opinion, the district court granted Foremost's motion for summary judgment, holding that the aircraft policy did not provide coverage for the accident.

Before reviewing the district court's decision, we will first examine relevant portions of the Foremost aircraft insurance policy.

The first page of the policy specifies the types of coverage provided and the purposes for which the aircraft may be used. The coverages at issue here are those labeled "A" and "B".

Coverage A is entitled "Bodily Injury Liability Excluding Passengers." It states:

To pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person, excluding passengers as defined herein, caused by an occurrence and arising out of the ownership, maintenance or use of the aircraft. ²

Coverage B is entitled "Passenger Bodily Injury Liability." It states:

To pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any passenger as defined herein, caused by an occurrence and arising out of the ownership, maintenance or use of the aircraft. ³

The purposes for which the aircraft may be used are prominently indicated on this first page to be: (a) Pleasure and Business; (b) Industrial Aid; and (c) Limited Commercial. The term "Limited Commercial" is defined as including all the uses permitted in (a) and (b) above and including Student Instruction and Rental to pilots but excluding passenger carrying for hire or reward. Sight-seeing rides are also permitted.

The coverage prominently indicated on the first page is limited and qualified in subsequent pages of the policy. In the "Exclusions" section, paragraph nine (Exclusion Nine) provides that the policy does not apply under coverages A and B "to bodily injury, sickness, disease or death of any person who is a Named Insured or a pilot or crew member."

The policy defines "passenger" as "any person or persons while in, on or entering the aircraft for the purpose of riding or flying therein or alighting therefrom following a flight or attempted flight therein, Excluding crew or pilots." (Emphasis added). "Crew" and "Pilot" are defined as "any person or persons involved in the operation of the aircraft while in flight."

In addition, a "Pilot Warranty," referred to by the parties as the "pilot clause," in the policy permits instructors meeting certain requirements to operate the insured plane.

Finally, "Special Provisions Endorsement" number six states:

This Policy does not apply to any occurrence or to any loss or damage occurring while the aircraft is being operated in flight by a Student Pilot unless each flight is under the direct supervision and specifically approved by a properly qualified Flight Instructor certificated by the Federal Aviation Administration. This exclusion is not applicable to any Student Pilot following issuance of a Private Pilot Certificate.

In summary, the Declaration Section which permits the aircraft to be utilized for "Limited Commercial" purposes, the Pilot Warranty and the Special Provisions Endorsement all expressly authorize the aircraft to be used for student instruction. Coverage A (bodily injury liability excluding passengers) and Coverage B (passenger bodily injury liability) are both limited by Exclusion Nine to preclude coverage for any person who is a named insured, pilot or crew member. Despite the three provisions authorizing student instruction, Foremost contends that the policy's broad definitions of "crew" and "pilot" operate to preclude any coverage for Jones' death.

Therefore, we must decide whether the Foremost aircraft insurance policy, and specifically the provisions detailed above, afford coverage for the February 17, 1974 sea plane accident.

Appellants contend that the three provisions in the policy which refer to student pilots or student instruction ⁴ conflict with the exclusion for pilots and crew members (Exclusion Nine). ⁵ They assert that this conflict creates an ambiguity in the policy which must be resolved against Foremost. Alternatively, appellants assert that even if the policy is not considered ambiguous, the decedent Jones is not included within the exclusion for pilots and crew members (Exclusion Nine) because he was a "student pilot." Appellants maintain that had Foremost intended to exclude "student pilots" from coverage, it should have so specified in Exclusion Nine.

Appellee Foremost counters by asserting that decedent Jones "inescapably" fell within the definition of "pilot" or "crew" and was therefore excluded from coverage pursuant to Exclusion Nine.

Our task in this diversity action is to apply the law of Arkansas to the issues before us and in so doing we give great weight to the district court's view of state law. American Motorists Ins. Co. v. Samson, 596 F.2d 804, 807 (8th Cir. 1979); Gatzemeyer v. Vogel, 544 F.2d 988, 992 (8th Cir. 1976). The district court in its opinion noted that "(t)he parties agree that the law of Arkansas applies to this case, and have pointed out no Arkansas case similar to the case at bar or construing a similar policy of insurance." However, general principles of insurance policy construction are well settled in that state and it is appropriate that they be reviewed.

Arkansas courts must strictly interpret exclusions to insurance coverage and resolve all reasonable doubts in favor of the insured. State Farm Mut. Auto. Ins. Co. v. Traylor, 562 S.W.2d 595, 596 (Ark.1978). See also Life and Casualty Insurance Co. of Tenn. v. Gilkey, 255 Ark. 1060, 505 S.W.2d 200, 202 (1974) (insurance contracts must be interpreted so as to resolve all reasonable doubts in favor of the insured).

The Arkansas Supreme Court stated in Continental Casualty Co. v. Davidson, 250 Ark. 35, 463 S.W.2d 652, 655 (1971):

Different clauses of a contract must be read together and the contract construed so that all of its parts harmonize, if that is at all...