American Eagle Ins. Co. v. Thompson

• Decision Date: 28 May 1996
• Docket Number: No. 95-2672,95-2672
• Citation: 85 F.3d 327
• Parties: 44 Fed. R. Evid. Serv. 792 AMERICAN EAGLE INSURANCE COMPANY, Plaintiff-Appellant, v. John H. THOMPSON, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 327

85 F.3d 327

44 Fed. R. Evid. Serv. 792

AMERICAN EAGLE INSURANCE COMPANY, Plaintiff-Appellant, v. John H. THOMPSON, Defendant-Appellee.

No. 95-2672.

United States Court of Appeals Eighth Circuit.

Submitted Jan. 8, 1996.

Decided May 28, 1996.

Cynthia Hollingsworth, Dallas, Texas, argued (Stephen Ward, on the brief), for Plaintiff-Appellant.

Bill Wayne Bristow, Jonesboro, Arkansas (argued), for Defendant-Appellee.

Before WOLLMAN, CAMPBELL, ^* and MURPHY, Circuit Judges.

LEVIN H. CAMPBELL, Senior Circuit Judge.

Plaintiff-appellant American Eagle Insurance Company ("American Eagle") filed this diversity action in the Eastern District of Arkansas seeking a declaration that John H. Thompson was not covered under an aviation insurance policy issued by it to Arkansas Aircraft Inc. ("Arkansas Air"). American Eagle sought a determination that it had no duty to defend or indemnify Thompson in two underlying state tort actions in Georgia. After a jury concluded by special verdict that Thompson was an employee of Arkansas Air, the district court ruled as a matter of law that Thompson was covered by the policy. The court denied American Eagle's motion for judgment as a matter of law or in the alternative for a new trial. American Eagle appeals from the final judgment entered in favor of Thompson. We reverse and remand.

I.

Arkansas Air is the fixed-base operator----the company that fuels, services and hangars airplanes----at the Jonesboro, Arkansas airport. The company also runs an air charter business and buys and sells used airplanes. Mark Haggenmacher and Larry Grisham, the owners of Arkansas Air, occasionally hired John Thompson to fly their planes. Thompson worked full-time in the real estate business, but sometimes accepted piloting jobs from various companies in order to keep up his pilot licenses. Thompson charged an hourly rate for his services; he had no formal employment relationship with Arkansas Air or with any other company for which he piloted.

In April 1993, the owners of Arkansas Air loaned an airplane to one of their friends, Nelson Henry. ¹ Henry, not being a pilot, asked if Arkansas Air could arrange for Thompson to fly him to and from Hilton Head, South Carolina, on April 27. Haggenmacher called Thompson, relayed the departure and return times for the flight, and Thompson agreed to pilot. The flight from Jonesboro to Hilton Head took place as scheduled. On the return trip, as Thompson was landing for an interim stop at Statesboro, Georgia, his plane collided in mid-air with another airplane. Henry and the student pilot of the other aircraft died as a result of the accident.

Separate lawsuits arising from the crash were filed on behalf of the deceased student pilot in Georgia state court against Thompson and Arkansas Air. Arkansas Air's insurance policy then in effect provided in relevant part:

[Y]our bodily injury and property damage liability coverage protects you and any of your employees while in the scope of his or her employment whom you permit to fly your aircraft, and any person or organization using your aircraft while it is operated by you or your employee.

American Eagle Aircraft Insurance Policy No. AFN0061519 (emphasis supplied). Thompson asserted that he was an employee of Arkansas Air at the time of the crash and therefore was within the policy coverage. American Eagle filed this action in the district court pursuant to the federal Declaratory Judgement Act, 28 U.S.C. §§ 2201 et seq., seeking a declaration of noncoverage under Arkansas Air's insurance policy.

The action was tried to a jury which was instructed to answer a single factual question--whether Thompson was an employee of Arkansas Air at the time of the accident. The district court indicated to counsel that a jury verdict finding that Thompson was an employee of Arkansas Air would result in a ruling that Thompson was covered under the policy, but that a jury verdict finding that Thompson was not an employee would leave the question of coverage for the court to determine after interpreting the insurance contract. The jury concluded that Thompson was an Arkansas Air employee, and the court therefore ruled that he was covered by the insurance policy. Thompson was granted attorney's fees pursuant to Ark.Code Ann. § 23-79-209 (Michie 1992).

II.

A. Sufficiency of the Evidence

American Eagle asserts on appeal that the district court erred in not granting its motion for judgment as a matter of law pursuant to Fed.R.Civ.P. 50. When reviewing the district court's refusal to grant judgment as a matter of law, we resolve factual conflicts and make all reasonable inferences in favor of the prevailing party. See Yannacopoulos v. General Dynamics Corp., 75 F.3d 1298, 1302 (8th Cir.1996). We affirm the judgment of the district court if the evidence allows reasonable jurors to differ as to the conclusions. Grand Laboratories, Inc. v. Midcon Labs of Iowa, 32 F.3d 1277, 1280 (8th Cir.1994).

Here, while the jury could doubtless have found to the contrary, there is sufficient evidence to support the jury's verdict that Thompson was an employee of Arkansas Air. The policy covered "employees," but did not define that term. We believe that the jury could read it to include casual employees as well as full-time employees with offices, salaries, health and retirement packages, and other such benefits. The evidence at trial showed that the owners of Arkansas Air "hired" Thompson on multiple occasions to fly their planes. In these situations, Arkansas Air employees would direct Thompson as to the date of the flight, the departure time, the aircraft to be flown, the number of passengers on board the aircraft, the destinations, and the return times. Thompson himself testified that he was an employee of Arkansas Air and that Arkansas Air had the right to direct his action. See Blankenship v. Overholt, 301 Ark. 476, 478-79, 786 S.W.2d 814, 815 (1990) ("In drawing the line between independent contractor and servant, we look at the totality of the circumstances[, and] the extent of control [that the employer exercises over the work] is the principal factor in determining the relationship."); accord Dickens v. Farm Bureau Mutual Ins. Co. of Ark., 315 Ark. 514, 516-17, 868 S.W.2d 476, 477-78 (1994). Although Thompson also piloted for several other companies, he was not setup formally in business as a contract pilot with the associated title, advertising, and records. We find no error in the district court's denial of American Eagle's motion for judgment as a matter of law.

B. The Burden of Proof

The district court placed the burden of proving that Thompson was not an employee of Arkansas Air upon American Eagle, after refusing a proposed instruction that would have assigned to Thompson the burden of proving that he was an employee. ² American Eagle argues that a new trial is warranted because the court's assignment of the burden of proof departed from Arkansas law and prejudiced "substantial rights." It asserts that the district court placed the burden of proof upon American Eagle simply because, seeking a declaratory judgment, it was in the procedural posture of plaintiff. American Eagle now asks this court to hold that the parties' reversal of positions for purposes of this declaratory judgment action did not alter the fact that Thompson, the person seeking coverage, was required to carry the burden.

The burden of proof in a diversity action is typically a matter of state law. See Palmer v. Hoffman, 318 U.S. 109, 117, 63 S.Ct. 477, 482, 87 L.Ed. 645 (1943); Sprynczynatyk v. General Motors Corp., 771 F.2d 1112, 1122 (8th Cir.1985), cert. denied, 475 U.S. 1046, 106 S.Ct. 1263, 89 L.Ed.2d 572 (1986); Lynch v. Travelers Indemnity Co., 452 F.2d 1065, 1068 n. 2 (8th Cir.1972). Under Arkansas law, a party who files suit seeking to benefit from insurance coverage generally bears the burden of proving coverage. See Peoples Protective Life Ins. Co. v. Smith, 257 Ark. 76, 82, 514 S.W.2d 400, 404 (1974); Hunt v. Pyramid Life Ins. Co., 21 Ark.App. 261, 266, 732 S.W.2d 167, 169 (1987) (en banc); Snow v. Travelers Ins. Co., 12 Ark.App. 240, 241-42 674 S.W.2d 943, 944 (1984). Once the person seeking insurance coverage has met his burden, the burden shifts to the defendant insurance company to prove any applicable exclusion to coverage. See National Investors Life and Cas. Ins. Co. v. Arrowood, 270 Ark. 617, 621, 606 S.W.2d 97, 100 (Ark.Ct.App.1980).

In this action brought under the federal Declaratory Judgment Act, 28 U.S.C. § 2201 et seq., the assignment of the burden of proof is complicated by the fact that the usual plaintiff and defendant are reversed. Unlike the typical insurance coverage case where the person seeking indemnification sues the insurance company, the insurance company brought this action as plaintiff. American Eagle argues that the burden placed traditionally on the party seeking coverage should not be shifted to the insurer merely because the insurer is the nominal plaintiff. See Preferred Acc. Ins. Co. v. Grasso, 186 F.2d 987, 991 (2nd Cir.1951); Reliance Life Ins. Co. v. Burgess, 112 F.2d 234, 237-38 (8th Cir.), cert. denied, 311 U.S. 699, 61 S.Ct. 137, 85 L.Ed. 453 (1940). Supporting the contrary view is the argument that the burden of proof should not be placed on an unsuspecting defendant who has been hailed into court.

In deciding who bears the burden of proof in this case, we are guided by our earlier decision in Reliance, 112 F.2d at 237-38. ³ There, an insurance company brought suit seeking a declaration of noncoverage under Missouri law. In assigning the burden of proof to the insurance company, this court reasoned:

The question as to whether the burden of proof in its primary sense rests upon the plaintiff or defendant is ordinarily to be determined by ascertaining from the pleadings which of the parties without evidence would be compelled to submit to an adverse judgment before the introduction of any evidence. It...