American Continental Ins. Co. v. C & Z Timber Co.

• Decision Date: 19 October 1987
• Docket Number: No. A036894,A036894
• Court: California Court of Appeals Court of Appeals
• Parties: AMERICAN CONTINENTAL INSURANCE COMPANY, Plaintiff and Respondent, v. C & Z TIMBER CO., INC. et al., Defendants and Appellants.

Page 466

241 Cal.Rptr. 466

195 Cal.App.3d 1271

AMERICAN CONTINENTAL INSURANCE COMPANY, Plaintiff and Respondent, v. C & Z TIMBER CO., INC. et al., Defendants and Appellants.

No. A036894.

Court of Appeal, First District, Division 2, California.

Oct. 19, 1987.

William F. Barnum, Dun, Barnum & Arkley, Eureka, for defendants and appellants.

Michelle M. Campbell, Benton, Orr, Duval & Buckingham, Ventura, for plaintiff and respondent.

BENSON, Associate Justice.

Appellant C & Z Timber Co., Inc., appeals from a judgment entered after the granting of summary judgment in favor of respondent American Continental Insurance Company. The trial court granted summary judgment on the first cause of action of respondent's complaint for declaratory relief. The trial court ruled as a matter of law that respondent was entitled to the benefit of an exclusionary clause contained in an insurance policy issued by it, allowing it to escape indemnifying appellant, its insured. For the reasons stated below, we affirm the judgment.

Respondent filed this declaratory relief action on August 13, 1985, seeking to establish that it was not obligated under its policy to cover the property damage loss to an aircraft which crashed on January 30, 1985.

Respondent's complaint set forth eight causes of action for declaratory relief each asserting a separate policy exclusion as a reason for denial of coverage. Respondent's first cause of action sought relief on the grounds that the policy excluded coverage for flights for which a charge was made and that the plane had been carrying a paying passenger at the time of the crash. Appellant's answer to the complaint contains a general denial and raises five affirmative defenses based on a theory of estoppel. ¹

The aircraft involved in this action was a Helio Courier 295. This type of aircraft is commonly known as a "tail dragger," capable of flying at low altitudes at relatively low speeds, and capable of short landings and takeoffs. The airplane was piloted at the time of the crash by Dean Merrick, a defendant below. Merrick is not a party to this appeal. The airplane was owned by appellant C & Z Timber Company, Inc. C & Z is owned by Zachary Peltier. At the time of the crash, Peltier was an officer and 50 percent shareholder of C & Z.

Peltier had obtained insurance coverage for the airplane from respondent American Continental Insurance Company ("ACI") through Pik*West Insurance Agency of Simi Valley, California. The insurance policy contained a pilot clause endorsement detailing certain qualifications to be held by those persons piloting the plane requisite to coverage under the policy. The pilot clause endorsement also named those persons to be covered under the policy while piloting the plane. ²

Toward the end of 1984, Peltier decided to sell the airplane. Appellant asserted that it was Peltier's intention to turn it over to a third party who would take possession of it and sell it on a commission basis. Appellant alleged that Peltier had discussed such an arrangement with Merrick, and that, in reliance on Pik*West's assurance that Merrick would be covered under the existing policy, Peltier eventually turned the plane over to him. According to appellant, the arrangement was that Merrick would take possession of the plane and fly it as a demonstration model while attempting to find a buyer. Upon the sale of the plane, Merrick was to receive a commission.

The subject crash occurred on takeoff from Pearce Field, Lower Lake, Lake County. At the time of the crash, the plane was carrying persons in aaddition to Merrick, the pilot. Yolanda Theresa was on board, apparently acting as co-pilot, along with Jan B. Willis, who was a paying passenger. There were no fatalities or personal injuries.

Willis had chartered the airplane for a business trip from Clearlake, Lake County, to Sacramento. Willis agreed to pay Merrick $90.00 for the service. Willis' employer, American Line Builders, Inc., was to pay the bill. Willis had previously chartered other flights with Merrick as the pilot. Each time, American Line Builders paid for the service.

The policy contained the following exclusion: "PURPOSE(S) OF USE: The aircraft will be used for the purpose(s) indicated by "X"

"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."

Respondent's motion for summary judgment addressed only the first cause of action in its complaint, reasoning that a successful summary judgment in that cause of action would render the remaining seven causes of action moot. The first cause of action is directed to the "Purposes of Use" exclusion. Respondent argued in its Motion for Summary Judgment that because Merrick had a paying passenger on board at the time of the crash, coverage under the policy was properly excluded and thus respondent had no liability regarding the payment of damages.

Appellant's affirmative defenses were based on estoppel or assumption of risk. In essence, appellant argued that respondent was estopped to deny liability under the exclusionary clause. Appellant asserted that it had relied upon Pik*West's inclusion of Merrick as a qualified pilot in the pilot clause endorsement in delivering the plane into his possession.

Appellant claimed that Merrick had represented to Pik*West that he was qualified to fly the plane. Appellant reasoned that had Pik*West investigated Merrick's qualifications as a pilot, it would have discovered that Merrick in fact did not have the requisite qualifications as detailed in the pilot clause endorsement. Had Pik*West investigated Merrick's qualifications, appellant argued, it would not have included Merrick on the policy, and thus Peltier would not have given him possession of the plane. Without possession of the plane, Merrick would not have had the opportunity to crash it during charter operations. Appellant thus argued that the failure to investigate was the proximate cause of the loss.

At this juncture we observe that appellant's memorandum in opposition to the summary judgment motion makes various assertions as to the existence of facts and the occurrence of events. Appellant failed, however, to support any of these assertions by filing declarations or affidavits in support of its opposition. Appellant repeats these assertions in its opening brief in support of its arguments on appeal. Even though these assertions have not been disputed by respondent, they are nevertheless not properly before this court as admissible evidence.

The trial court heard oral argument on respondent's motion on October 6, 1986, and granted summary judgment in its favor by order filed on October 14, 1986. Judgment was entered on the same date. Appellant filed a timely notice of appeal.

Appellant argues on appeal that summary judgment was inappropriately granted in that material, triable issues of fact remain to be adjudicated and that adjudication of all material facts would not, in any event, entitle respondent to summary judgment. In particular, Appellant argues that 1) respondent failed to address or disprove any of its affirmative defenses as raised by its answer; and that 2) summary judgment should not have been granted in this case because it did not have the opportunity to conduct any discovery of its own.

We look first to appellant's assertion that respondent is estopped to deny coverage under the exclusionary clause due to respondent's breach of an alleged duty to investigate Merrick's qualifications as a pilot before including him on the policy.

It is fundamental that "[a] summary judgment motion shall not be granted unless all of the papers submitted show there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law." (George v. Goshgarian (1983) 139 Cal.App.3d 856, 863, 189 Cal.Rptr. 94.) It is also the rule that the existence of an estoppel is generally a question of fact involving the establishment of several factual requirements. (State of California v. Haslett Co. (1975) 45 Cal.App.3d 252, 256, 119 Cal.Rptr. 78; Driscoll v. City of Los Angeles (1967) 67 Cal.2d 297, 305, 61 Cal.Rptr. 661, 431 P.2d 245.) Such a question is appropriate for summary adjudication, however, where no estoppel could exist as a matter of law. (State of California v. Haslett Co., supra, 45 Cal.App.3d at p. 256, 119 Cal.Rptr. 78; Pettitt v. City of Fresno (1973) 34 Cal.App.3d 813, 818-819, 110 Cal.Rptr. 262.)

In the case at hand, estoppel is inapplicable as a matter of law for it is clear that respondent owed no duty to appellant to investigate Merrick's qualifications as a pilot. (Fireman's Fund Ins. Co. v. Superior Court (1977) 75 Cal.App.3d 627, 142 Cal.Rptr. 249.)

Fireman's Fund involved a situation closely analogous to the case before us. Plaintiffs there brought an action against the insurers of a student pilot for personal injuries arising from an airplane crash. The pilot had been in the process of purchasing the plane under a lease-purchase agreement. The agreement gave the seller the right to repossess the plane if insurance was not maintained by the pilot. Coverage under the policy was precluded where the pilot lacked a private pilot's license. The pilot held only a student pilot's certificate. Plaintiffs contended that the defendant insurers were liable on the theory that, had they investigated the pilot's qualifications, they would not have issued the policy and the plane would have been repossessed by the seller. If the plane had been repossessed, plaintiffs reasoned, the crash would not have occurred. The Court of Appeal held that the insurers were under no affirmative duty to investigate the pilot's qualifications absent a showing of participation by the insurer in the conduct resulting in the injury.

In reaching its decision the Fireman's Fund court was...