AMERICAN NAT. FIRE INS. v. Rose Acre Farms

• Decision Date: 07 March 1994
• Docket Number: No. IP 93-0085-C.,IP 93-0085-C.
• Citation: 846 F. Supp. 731
• Parties: AMERICAN NATIONAL FIRE INSURANCE CO., Plaintiff, v. ROSE ACRE FARMS, INC., Cynthia L. Wilson, as Personal Representative of the Estate of Jeffrey L. Wilson, and Robert Garland, Defendants.
• Court: U.S. District Court — Southern District of Indiana

846 F. Supp. 731

AMERICAN NATIONAL FIRE INSURANCE CO., Plaintiff, v. ROSE ACRE FARMS, INC., Cynthia L. Wilson, as Personal Representative of the Estate of Jeffrey L. Wilson, and Robert Garland, Defendants.

No. IP 93-0085-C.

United States District Court, S.D. Indiana, Indianapolis Division.

March 7, 1994.

Richard R. McDowell, Donald D. Levenhagen, Hill Fulwider McDowell Funk & Matthews, P.C., Indianapolis, IN, for plaintiff.

Brian K. Burke, J. Joseph Tanner, Baker & Daniels, Michael R. Conner, Janet B. Norton, Barnes & Thornburg, Indianapolis, IN, for defendants.

BARKER, Chief Judge.

ENTRY

This case requires the Court to interpret language from an insurance contract that Plaintiff American National Fire Insurance Co. ("ANFIC") issued to Defendant Rose Acre Farms, Inc. ("Rose Acre"). ANFIC and Rose Acre present the Court with their respective motions for summary judgment. For the reasons explained below, ANFIC's motion is denied and Rose Acre's motion is granted.

I. BACKGROUND

On December 10, 1991, Rose Acre's Beechcraft airplane crashed shortly after takeoff from the Jasper County, Indiana, airport. Passengers Jeffrey L. Wilson and Robert Garland were injured, and Wilson later died. Wilson's estate brought a wrongful death action against Rose Acre, prompting Rose Acre to request liability coverage from ANFIC. Based on the terms of its umbrella liability policy (the "Policy") with Rose Acre, ANFIC denied the request. This lawsuit ensued.

The parties are unable to agree on what the terms of the Policy mean. It provides the following coverage:

I. A. Insuring Agreement

1. We ANFIC will pay those sums in excess of "underlying insurance" or the retained limit that the "insured" becomes legally obligated to pay as damages because of "injury" caused by an "occurrence" to which this policy applies.¹

Policy, at 1.

The Policy also contains various exclusion provisions:

I. B. Exclusions

....

5. This policy does not apply, except to the extent that coverage is available to the "insured" in the "underlying insurance," to:

a. Any employee of the "insured" with respect to "injury" to another employee in the course of employment.

b. "Injury" arising out of the ownership, maintenance, operation, use, loading or unloading of any watercraft over 50 feet in length, if such watercraft is owned or chartered without crew by or on behalf of any "Insured." But this exclusion shall not apply to watercraft while ashore on any premises owned by, rented to, or controlled by you.

c. "Injury" arising out of the ownership, maintenance, operation, use, loading or unloading of an aircraft, if such aircraft is owned or hired without pilot or crew by or on behalf of the "Insured."

Policy, at 3. ANFIC argues that Rose Acre is not entitled to coverage because no aircraft liability policy was listed in the Schedule of Underlying Insurance.

The preface to the Umbrella's owned aircraft exclusion at issue states "this policy does not apply, except to the extent that coverage is available to the `Insured' in the `underlying insurance'...." Since `underlying insurance' is specifically defined as `liability insurance coverage provided under policies shown in the Schedule of Underlying Insurance,' umbrella aircraft liability coverage exists only if the Schedule of Underlying Insurance includes a policy providing aircraft liability coverage.

ANFIC's Brief in Support of Summary Judgment, at 6. Although Rose Acre procured an American Eagle Insurance Co. aircraft insurance policy through Wenk Aviation Insurance Agencies, that policy, according to ANFIC, was not eligible for listing on the Schedule of Underlying Insurance because the liability limit for each passenger, $100,000, was too low. Id. at 7-8. Four months before the crash, M-J Insurance, which acted as an intermediary between Rose Acre and ANFIC, advised Rose Acre that:

ANFIC would be able to add Aircraft coverage to the Umbrella policy when you get the passenger limit on the Aircraft policy increased from $100,000 per seat to $1,000,000 per seat. As I understand it from the quotation that you received from Wenk Aviation Insurance that you should be able to get that passenger limit increased once your pilot gets his instrument rating. Please advise when that is done.

Fish Depo., Plaintiff's Exhibit 14. According to ANFIC, Rose Acre did not get the passenger limit raised to $1,000,000 and did not dispute ANFIC's position that the Policy did not cover aircraft liability. See ANFIC's Brief in Support of Motion for Summary Judgment, at 10.

ANFIC also points to a letter dated July 22, 1991, where M-J advised Rose Acre that:

Once the pilot does complete that instrument reading course, then you should contact the insurance company to get higher limits of coverage. Your Umbrella policy does not go over the aircraft policy. I am checking with the Umbrella carrier to see what primary limits they require in order for their Umbrella to go over that policy and as to date they have not yet provided me with that information.

Fish Depo., Exhibit 4 (emphasis added). Rose Acre did not protest ANFIC's conclusion in this letter that no coverage was then available. See Reply in Support of ANFIC's Brief in Support of Summary Judgment, at 4.

In the alternative, ANFIC argues that the Owned Aircraft exclusion, subpart 5(c), relieves it of any duty to provide liability coverage to Rose Acre. It reads the clause in that subsection, "if such aircraft is owned or hired without pilot or crew", so that "owned" is not modified by "without pilot or crew." In this way, airplane ownership excludes coverage under the Policy. ANFIC contends that the heightened risk associated with the operation of an airplane makes its interpretation reasonable and that "to speak of an aircraft as owned `with or without pilot' is illogical since no plane can fly without a pilot." Id. at 12.

In support of its motion for summary judgment, Rose Acre argues that grammatical analysis of the exclusion plainly reveals that it is not ambiguous and does not bar coverage because Rose Acre owned and operated its plane with its own pilot. Rose Acre believes that "without pilot or crew" in subpart 5(c) modifies both "owned" and "hired". If this reading were accepted, Section 1(A) would then require ANFIC to provide coverage since the damages in this matter far exceed the "retained limit". In the alternative, Rose Acre contends that the exclusion is ambiguous and that ANFIC is obligated to provide coverage since ambiguous insurance exclusions, under Indiana law, must be read in favor of the insured. An exclusion in an insurance policy will be enforced only when the insurer demonstrates that the policy unmistakably excludes coverage for the claim. See Asbury v. Indiana Union Mutual Ins. Co., 441 N.E.2d 232, 242 (Ind.App. 1 Dist. 1982). Rose Acre also urges the Court not to rely on M-J's or ANFIC's correspondence with Rose Acre which, in its view, contains nothing more than self-serving interpretations of the Policy. Lastly, Rose Acre argues that there is no requirement that the policy holder have "underlying insurance" since:

the "underlying insurance is referenced in the exclusion to provide coverage when the exclusion otherwise precludes coverage. If the exclusion does not apply, then coverage is provided whether or not there is underlying insurance. If underlying insurance exists, the Policy pays coverage above the underling sic insurance. If there is no underlying insurance, the Policy pays claims over the retained limit of $10,000. See Policy §§ I(A) and III(C). The existence or nonexistence of underlying insurance does not (and cannot) determine whether there is coverage under the Policy.

Response of Rose Acre to Plaintiff's Motion for Summary Judgment, at 7; Brief in Support of Summary Judgment, at 16-17.²

II. ANALYSIS

A. Summary Judgment Standards

Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is appropriate when the movant shows by pleadings, discovery, and affidavits that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Renovitch v. Kaufman, 905 F.2d 1040, 1044 (7th Cir.1990). "Summary judgment is designed to head off a trial if the opposing party does not have a reasonable prospect of prevailing before a reasonable jury — that is, a jury that will base its decision on facts and the law, rather than on sympathy or antipathy or private notions of justice." Karazanos v. Navistar International Transp. Corp., 948 F.2d 332, 338 (7th Cir.1991). It is especially appropriate where the issues in dispute are purely legal, see, e.g., American Jewish Congress v. City of Chicago, 827 F.2d 120, 123 (7th Cir.1987), as often occurs in cases involving contract interpretation. In these circumstances, the need for trial is avoided because there are no genuine issues of material fact that must be resolved.

B. Rules of Insurance Contract Construction

The court's goal when analyzing contractual language is to ascertain and enforce the parties' intent as manifested in the insurance contract. See American Family Mutual v. National Insurance, 577 N.E.2d 969, 971 (Ind.App. 2 Dist.1991). Typically, intent is easy to discern because the contractual language is clear and unambiguous. When it is not, the court must rely on established rules of contract interpretation to discover the parties' intent. "Generally, in Indiana, contracts for insurance are subject to the same rules of interpretation as are other contracts." Eli Lilly & Co. v. Home Insurance Co., 482 N.E.2d 467, 470 (Ind. 1985); Meridian Mutual Insurance Co. v. Cox, 541 N.E.2d 959, 961 (Ind.App. 2 Dist. 1989). "The language of the policy must be reasonably construed by the court which may not find coverage unless the language of the policy admits liability." Red Ball Leasing v. Hartford Accident and Indemnity Co., 915 F.2d 306, 308-309 (7th Cir.1990), citing, Stockberger v. Meridian Mutual Insurance...