Kansas City Fire & Marine Insurance Company v. Clark

• Decision Date: 14 May 1963
• Docket Number: Civ. No. 344.
• Citation: 217 F. Supp. 231
• Court: U.S. District Court — District of Montana
• Parties: KANSAS CITY FIRE & MARINE INSURANCE COMPANY, a corporation, Plaintiff, v. Wayne A. CLARK, the Montana Power Company, a corporation, Lew Chevrolet Company, a corporation, and Clarence G. Madsen, Defendants.

217 F. Supp. 231

KANSAS CITY FIRE & MARINE INSURANCE COMPANY, a corporation, Plaintiff, v. Wayne A. CLARK, the Montana Power Company, a corporation, Lew Chevrolet Company, a corporation, and Clarence G. Madsen, Defendants.

Civ. No. 344.

United States District Court D. Montana, Billings Division.

May 14, 1963.

Cooke, Moulton, Bellingham & Longo, Billings, Mont., for plaintiff.

Crowley, Kilbourne, Haughey & Hanson; Anderson, Symmes, Forbes, Peete & Brown; Jones & Olsen and Harlow Pease, Billings, Mont., and J. H. McAlear, Red Lodge, Mont., for defendants.

JAMESON, District Judge.

In this diversity case plaintiff insurer seeks a declaratory judgment under 28 U.S.C.A. § 2201 limiting coverage under a combination aircraft policy to the named insured, Al Forhart Flying Service. Al Forhart, doing business as Al Forhart Flying Service, was engaged in an aviation business which offered charter and air taxi service and student pilot instruction, including the instruction of private pilots to qualify them for commercial licenses.

Forhart purchased a Cessna aircraft from Lynch Flying Service. In connection with the sale and financing, Charles Lynch, an officer of Lynch Flying Service and also a licensed agent for plaintiff, solicited a policy of insurance covering the aircraft. Following oral negotiations between Forhart and Lynch and telegraphic communications between Lynch and plaintiff's general agent, a written application was signed by Forhart. The policy in question was then issued, insuring the aircraft against loss or damage and against liability for claims on account of bodily injuries and property damage arising out of the operation of the aircraft.

The present controversy arose as the result of a crash of the insured aircraft in Red Lodge, Montana, on July 29, 1960, while the plane was piloted by defendant Wayne A. Clark. The defendant Clarence G. Madsen was riding as a passenger, together with A. M. Sheffield and his son, Darrell, who are not parties to this action.

Clark held a private pilot's license and was taking instruction from Forhart for the purpose of upgrading this license to a commercial license. In order to qualify for a commercial license it was necessary to have a certain amount of "dual" instruction as well as to fly a number of "solo" hours. A private pilot may carry passengers as long as he does not do so for hire, and it is important, in order to obtain a commercial license, that the pilot experience flying with a plane-load of passengers so that he may establish ability in that respect.

Clark was sales manager for defendant Lew Chevrolet Company. On the day of the accident, he received a call from a dealer in Red Lodge inquiring as to Lew's stock of cars. Sheffield had wrecked his automobile and was interested in purchasing another, but the stock of the Red Lodge dealer was insufficient. Clark decided at first to drive to Red Lodge, but later decided to wait until the close of the working day so that he could get in some flying time. He called Forhart and determined that the plane was available. Madsen, a fellow employee, was invited to accompany Clark.

At the airport Clark "checked out" with Forhart, who gave him routine instructions and advised him to watch the temperature and its effect upon the air density. Forhart told Clark about the Red Lodge airport and gave him general information and instructions before he took off.

In Red Lodge Clark met with Sheffield, who, with his son, decided to accompany Clark back to Billings to view the stock of Lew Chevrolet Company. On the takeoff at the Red Lodge airport, the plane struck wires of the defendant Montana Power Company and crashed, injuring all persons in the plane and wrecking the aircraft. Claims have been asserted by Sheffield against Forhart and the defendants Clark, Lew Chevrolet Company and Montana Power Company, as well as others. Madsen has asserted a claim against Clark. Plaintiff has admitted coverage for Forhart but has denied coverage for Clark.

Pertinent provisions of the insurance policy, upon which the parties rely, are contained respectively in the so-called Declarations, Insuring Agreements, Exclusions and Conditions.

Item 6 of the Declarations reads:

"The aircraft will be used only for the purposes indicated by `X':

"• (a) `Pleasure and Business'. The term `Pleasure and business' is defined as Personal and Pleasure use and use in direct connection with the Insured's business, excluding any operation for which a charge is made and excluding any operation of the aircraft by a student pilot;

"• (b) `Industrial Aid'. The term `Industrial Aid' is defined as including the uses enumerated in the definition of `Pleasure and Business' and also includes transportation of executives, employees, guests and customers, excluding any operation for which a charge is made;

"• (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;

"• (d) `Commercial Ex Instruction'. The term `Commercial Ex Instruction' is defined as including all of the uses under (a) and (b) above and use of the aircraft for the transportation of passengers and/or freight for hire but excluding any use of the aircraft for instruction or rental to others;

"• (e) `Commercial'. The term `Commercial' is defined as including all the uses permitted under (c) and (d) above;

"• (f) `Special Uses'. The term `Special Uses' is defined as STUDENT INSTRUCTION."

The "X" before (d) and (f) and the words "STUDENT INSTRUCTION" are typewritten. The balance of Item 6 is printed.

Item 7 of the Declarations reads:

"SEE ENDORSEMENT NUMBER 3". General Endorsement No. 3 reads:

"IN CONSIDERATION OF THE PREMIUM AT WHICH THE UNDERMENTIONED POLICY IS WRITTEN IT IS HEREBY UNDERSTOOD AND AGREED THAT IN THE SPACE PROVIDED IN ITEM #7 OF THE UNDERMENTIONED POLICY DECLARATIONS THE FOLLOWING SHALL BE INSERTED:

"A. WHILE THE AIRCRAFT IS BEING USED FOR PURPOSES OF STUDENT INSTRUCTION: "STUDENT PILOTS WHILE UNDER THE DIRECT SUPERVISION AND CONTROL OF A PROPERLY CERTIFICATED INSTRUCTOR PILOT.

"B. WHILE THE AIRCRAFT IS BEING USED FOR PURPOSES OF BUSINESS AND PLEASURE AND TRANSPORTATION OF PASSENGERS FOR HIRE:

"AL FORHART"

The foregoing is all typewritten, followed by printing which reads:

"Nothing herein contained shall vary, alter, waive or extend any of the terms, representations, conditions or agreements of the Policy other than as above stated."

Following the typewritten words "See Endorsement Number 3", Item 7 continues in printing, "only will operate the aircraft while `in flight' and while holding proper certificate(s) as required by the Civil Aeronautics Authority".

The Insuring Agreements contain as paragraph III the following:

"III. Definition of `Insured'

"The unqualified word `Insured' wherever used in this Policy with respects to Coverages A, B, C and D, includes not only the Named Insured but also any person while using or riding in the aircraft and any person or organization legally responsible for its use, provided the actual use is with the permission of the Named Insured.

"The provisions of this paragraph do not apply:

* * * * * *

"(d) to any person operating the aircraft under the terms of any rental agreement or training program which provides any remuneration to the Named Insured for the use of said aircraft."

"The Exclusions include the following provisions:

"This Policy does not apply:

* * * * * *

"2. to any occurrence or to any loss or damage occurring while the aircraft is operated, while in flight, by other than the pilot or pilots set forth under Item 7 of the Declarations.

"3. to any Insured:

* * * * * *

"(b) who operates or permits the operation of the aircraft for instructional purposes unless such purposes are stated in the Declarations;

* * * * * *

"(d) who operates or permits the aircraft to be operated for any unlawful purpose or any purpose other than as specified in the Declarations."

Paragraph 5 of Conditions reads: "Severability of Interests — Coverages A, B, C and D — The term `the Insured' is used severally and not collectively, but the inclusion herein of more than one Insured shall not operate to increase the limits of the Company's liability."

Plaintiff contends: (1) the policy is unambiguous and under its plain terms affords coverage for Forhart's interest and operations, but may not be construed to afford coverage for Clark; (2) Clark was flying the aircraft for the purposes of business and pleasure in violation of part B of Endorsement 3; (3) Clark was a student undergoing training for a commercial license and the omnibus clause (Clause III of the Insuring Agreements) accordingly is not applicable by reason of provision (d); (4) assuming that Clark could be held an insured, he was not under the "direct supervision and control" of his instructor while on this flight, as required by Part A of Endorsement 3.

Defendants contend: (1) Clark was a pilot contemplated and authorized by General Endorsement No. 3 and Item 7 of the Declarations and the use he was making of the plane was a use contemplated in Item 6; (2) Clark was an omnibus insured under Insuring Agreement III and was not engaged in a "training program" within the contemplation of subparagraph (d); (3) the policy as written is fairly susceptible to the construction urged by the defendants and the construction favorable to the insured should be adopted; (4) the policy as written is vague, uncertain and ambiguous and if, in order to ascertain the intent of the parties reference is made to the oral negotiations and written documents, including telegrams and the written application for insurance coverage, this evidence discloses an intent to extend coverage to omnibus insureds such as Clark; and (5) if it is necessary to reform the policy to express that intent more clearly or to estop plaintiff from denying that...