Aero Intern., Inc. v. U.S. Fire Ins. Co.

• Citation: 713 F.2d 1106
• Decision Date: 06 September 1983
• Docket Number: No. 82-4245,82-4245
• Parties: AERO INTERNATIONAL, INC., a Mississippi corporation, Plaintiff, v. UNITED STATES FIRE INSURANCE COMPANY, a New York corporation, Defendant. GULF NATIONAL BANK, Plaintiff-Appellee, v. UNITED STATES FIRE INSURANCE COMPANY, a New York corporation, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 1106

713 F.2d 1106

AERO INTERNATIONAL, INC., a Mississippi corporation, Plaintiff, v. UNITED STATES FIRE INSURANCE COMPANY, a New York

corporation, Defendant.

GULF NATIONAL BANK, Plaintiff-Appellee, v. UNITED STATES FIRE INSURANCE COMPANY, a New York

corporation, Defendant-Appellant.

No. 82-4245.

United States Court of Appeals, Fifth Circuit.

Sept. 6, 1983.

Satterfield & Allred, Michael S. Allred, Thomas L. Kirkland, Jr., Jackson, Miss., for defendant-appellant.

Mize, Thompson & Blass, W. Joel Blass, Alan E. Michel, Gulfport, Miss., for Gulf Nat.

Appeal from the United States District Court for the Southern District of Mississippi.

Before THORNBERRY, GEE and WILLIAMS, Circuit Judges.

GEE, Circuit Judge:

In August of 1981, one Jose Van Oostrum, a Swedish national of unsavory reputation, disappeared without a trace somewhere in the Caribbean. Vanished with him was the Cessna single engine high wing aircraft he piloted. ¹ Such occurrences are not without precedent in that corner of the world. Stories are told of those who travelled there never to be heard of again--stories of intrigue, perhaps even of the supernatural. Ours, alas, is not one of those. Insurance, not intrigue, is our subject here.

Facts

In August 1980, United States Fire Insurance Company ("U.S. Fire") issued an insurance policy to cover a fleet of eight airplanes owned by Aero International, Inc. ("Aero"). Aero was in the business of renting these aircraft to the public from its base in Gulfport, Mississippi. The policy provided liability coverage as well as "all risks" coverage for moving and non-moving loss or damage to the aircraft. Pursuant to a lienholder's endorsement, insurance coverage was extended to Gulf National Bank ("Gulf"), the mortgagee of the aircraft. Over time, Aero disposed of all the airplanes but one, which remained subject to Gulf's mortgage and U.S. Fire's insurance policy. The loss of that airplane is the subject of this lawsuit.

In early 1980, Aero had delivered its remaining airplane to Van Oostrum pursuant to a so-called lease/purchase contract with an organization called International Petroleum Research, S.A., that Van Oostrum purported to represent. Although the jury's verdict did not require findings on these issues, the evidence at trial tended to show that International Petroleum did not exist and that Van Oostrum was reputed to be a smuggler of illegal aliens from South America to the United States.

In August 1980, Van Oostrum filed a flight plan and took off in Aero's Cessna from his home base of Freeport, in the Bahamas. He flew to Nassau and then to Port-au-Prince, Haiti. In Haiti, Van Oostrum filed another flight plan showing Aruba in the Netherlands Antilles as his destination. Since his takeoff from Haiti, neither Van Oostrum nor the airplane has been seen again.

Relying upon certain exclusions in its policy, U.S. Fire contended that this loss was not covered and refused the demands of Aero and Gulf for payment. Aero and Gulf sued to recover under the policy. After trial, the jury returned a verdict for both plaintiffs and the district court denied U.S. Fire's motions for judgment non obstante veredicto and a new trial. A partial remittitur was granted.

U.S. Fire perfected an appeal from the judgments in favor of each plaintiff and Aero cross-appealed. Subsequently, Aero ceased to exist as a corporate entity and entered into a stipulation dismissing its cross appeal, vacating judgment in its favor, and entering judgment in favor of U.S. Fire. Therefore, the only issue before us is the propriety of the verdict and judgment in favor of Gulf.

U.S. Fire's first contention on appeal is that the district court erred in denying its motions for a directed verdict or judgment n.o.v. We have reviewed the record and for reasons to be stated conclude that the evidence did not entitle U.S. Fire to have the case taken from the jury. However, we agree with U.S. Fire that the district court's jury instructions were both erroneous as a matter of law and so internally inconsistent that a rational verdict cannot be envisioned. U.S. Fire is entitled to a new trial.

I.

The principal legal question in this case is the scope of Gulf's coverage under the lienholder's endorsement to U.S. Fire's policy covering Aero's aircraft. Gulf argues that the endorsement is a separate contract between the insurance company and the mortgagee and that its coverage thereunder is limited only by the exclusions and limitations contained in the endorsement itself. The district court agreed, instructing the jury that the coverage exclusions contained in U.S. Fire's main policy limited Aero's coverage under the policy, but not Gulf's coverage under the endorsement. This view is erroneous. It is at odds with the plain language of the lienholder's endorsement and, contrary to Gulf's arguments, it is not required by Mississippi law.

The lienholder's endorsement was attached to the main insurance policy and provides in relevant part:

In consideration of an additional premium of $ INCLUDED, it is understood and agreed that 1. The insurance afforded by this Policy shall not be invalidated as respects the interest of the Lienholder by any act or neglect of the Insured; except that any change in title of ownership of the aircraft, conversion, embezzlement, or secretion by the Insured, or any person or persons in possession of the aircraft are not covered hereunder; provided however, that:

* * *

(b) the Lienholder shall notify the Company of any increase of hazard which comes to the Lienholder's attention, and if not permitted by the Policy, it shall be endorsed thereon, the Lienholder agreeing to pay any additional required premium, if the Insured shall fail to do so on demand of the Company. It is, however, further understood and agreed by the parties concerned that the protection afforded to the Lienholder by the terms of this Endorsement is limited to the perils covered under this Policy for which a specific premium charge has been made.

* * *

Nothing herein contained shall be held to vary, waive, alter or extend any of the terms, conditions, agreements or warranties of the policy, other than as above stated.

(emphasis added).

These provisions unambiguously establish that the lienholder's endorsement operated to extend to the mortgagee whatever coverage was afforded by the main policy. The endorsement did not by its terms create a separate contract insuring different risks; it simply added a party to the original insurance contract. See Lakewood Bank & Trust Co. v. Security Ins. Co. of Hartford, No. CA3-80-1537-F (N.D.Tex. Dec. 1, 1981) (unreported district court decision construing substantially identical policy), aff'd, 690 F.2d 903 (5th Cir.1982).

The cases cited by Gulf do not require a different interpretation. Each is based upon a Mississippi statute requiring that "[e]ach fire insurance policy on buildings" contain a clause commonly known as a "union standard" mortgage clause. Miss.Code Ann. § 83-13-9 (1972); Hartford Fire Ins. Co. v. Associates Capital Corp., 313 So.2d 404, 407-08 (Miss.1975). ² Under such a clause, the insurer's defenses against the insured are not available against the lienholder. Hartford Fire Ins., 313 So.2d at 407.

Section 83-13-9 is applicable only to fire insurance policies on buildings and their fixtures. Scottish Union & Nat'l Ins. Co. v. Warren Gee Lumber Co., 118 Miss. 740, 80 So. 9 (1918). Contrary to Gulf's suggestion, the recent Mississippi cases do no more than apply the statute in that context. See note 2, supra. They do not announce a general public policy that lienholder's endorsements in other types of policies should be construed as separate contracts, unlimited by any exclusion in the main policy. Mississippi courts have long recognized that insurance contracts are like all other contracts; where clear and unambiguous, they are to be enforced according to their terms as written. Aetna Casualty & Surety Co. v. Head, 240 So.2d 280, 282 (Miss.1970); Gotcher Eng'g & Mfg. Co. v. United States Fidelity & Guar. Co., 193 So.2d 115 (Miss.1966). Without an affirmative expression of an overriding public policy by the Mississippi courts or legislature, we are constrained to enforce the parties' agreement according to its plain meaning. As explained, the lienholder's endorsement extends the coverage of the main policy to Gulf, subject to the exclusions and limitations stated in the main policy.

II.

U.S. Fire argues that it was entitled to a directed verdict or judgment n.o.v. based upon any one of three policy conditions or exclusions. To prevail, it must meet the familiar test of Boeing Co. v. Shipman, 411 F.2d 365, 374-75 (5th Cir.1969) (en banc) (footnote omitted):

On motions for directed verdict and for judgment notwithstanding the verdict the Court should consider all of the evidence--not just that evidence which supports the non-mover's case--but in the light and with all reasonable inferences most favorable to the party opposed to the motion. If the facts and inferences point so strongly and overwhelmingly in favor of one party that the Court believes that reasonable men could not arrive at a contrary verdict, granting of the motions is proper. On the other hand, if there is substantial evidence opposed to the motions, that is, evidence of such quality and weight that reasonable and fair-minded men in the exercise of impartial judgment might reach different conclusions, the motions should be denied, and the case submitted to the jury. A mere scintilla of evidence is insufficient to present a question for the jury. The motions for directed verdict and judgment n.o.v. should not be decided by which side has the better of the case, nor should they be granted only when there is a complete absence of probative facts to support a jury verdict. There must be a conflict in substantial evidence to create a jury question. However, it is the function of the jury as the traditional finder of...