Arizona Property and Cas. Ins. Guar. Fund v. Dailey

• Decision Date: 27 November 1987
• Docket Number: CA-CV,No. 2,2
• Citation: 156 Ariz. 257,751 P.2d 573
• Parties: ARIZONA PROPERTY AND CASUALTY INSURANCE GUARANTY FUND, Plaintiff/Appellant, v. Mary Jo DAILEY, individually and as surviving spouse of Charles L. Dailey, deceased, and as mother of Mariah Danielle Dailey, Charles L. Dailey, Jr. and Richard Dailey; Ruth Anderson, individually and as Personal Representative of the Estate of Johnnie C. Anderson, deceased, Defendants/Appellees. 87-0190.
• Court: Arizona Court of Appeals

Page 573

751 P.2d 573

156 Ariz. 257

ARIZONA PROPERTY AND CASUALTY INSURANCE GUARANTY FUND, Plaintiff/Appellant, v. Mary Jo DAILEY, individually and as surviving spouse of Charles L. Dailey, deceased, and as mother of Mariah Danielle Dailey, Charles L. Dailey, Jr. and Richard Dailey; Ruth Anderson, individually and as Personal Representative of the Estate of Johnnie C. Anderson, deceased, Defendants/Appellees.

No. 2 CA-CV 87-0190.

Court of Appeals of Arizona,

Division 2, Department A.

Nov. 27, 1987.

Review Denied March 30, 1988.

Lesher & Borodkin, P.C. by Marvin Borodkin, Tucson, for petitioner/appellant.

Chandler, Tullar, Udall & Redhair by S. John Trachta and E. Hardy Smith, Tucson, for defendants/appellees.

OPINION

HOWARD, Presiding Judge.

This is an appeal from the granting of a summary judgment in a declaratory judgment action. At issue is the construction of an aviation insurance policy. The trial court decided this case based on a statement of stipulated facts and the sworn statements of John and Mildred Vance. This evidence showed that John Vance owns Mobile Aire Hangars (Mobile Aire) which is in the business of developing, building and renting aircraft hangars. Johnnie C. Anderson was an FAA certified flight instructor qualified in multi-engine aircraft. He owned and operated Anderson Flying Service which was in the business of providing aviation charters, services and flight instruction. Anderson had given lessons to employees of Mobile Aire in the past, including Charles Dailey, Jr. When giving the lessons, Anderson would use an aircraft owned by Mobile Aire or Vance. Anderson would fill the plane with gas at his pumps and, after the lessons, send a bill to Vance for the gas and the lessons.

On December 11, 1983, while Anderson was giving a lesson to Dailey in a Beech Baron multi-engine aircraft registered to Vance, the plane crashed and Anderson and Dailey were killed. The Ideal Mutual Insurance Company (Ideal) provided coverage on the Baron. On January 8, 1985, Mary Jo Dailey filed a complaint for wrongful death against Ruth Anderson, individually, and as personal representative of the Estate of Johnnie C. Anderson, deceased. Anderson made a claim for defense and liability coverage to Ideal. Since Ideal was in a New York state insolvency proceeding, the appellant, Arizona Property and Casualty Insurance Guaranty Fund (The Fund) became obligated, pursuant to A.R.S. § 20-664, as the insurer of the Baron in the place and stead of Ideal.

Ideal's policy contained the following definition of "insured":

"The unqualified word 'Insured' wherever used in this Policy with respect to Coverage 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: (Emphasis supplied.)

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(b) to any person or organization or to any agent or employee thereof (other than any employee of the Named Insured while acting in the course of his employment by the Named Insured) engaged in ... the operating of [a] ... commercial flying service or flying school with respect to any occurrence arising out of such ... operations." (Emphasis added.)

The Fund filed this action, and both appellant and appellees subsequently filed motions for summary judgment. The Fund contended that Ideal provided no coverage for the accident because Johnnie Anderson was not an employee of Vance or Mobile Aire and thus was not an insured because the accident occurred while flying lessons were being given to Dailey. The appellees contended that the word "employee" was ambiguous and can be used in many senses and thus should be construed most strongly against the insurer.

The trial court granted summary judgment to the appellees, finding:

"[T]hat while the policy can be interpreted to exclude coverage for Anderson, and while it was most probably the intent of the insurance company to do so, the word employee, without further definition, is an ambiguous term, the common usage of which could include Mr. Anderson's activities in this case."

We do not agree with the trial court's conclusions and reverse.

"The construction of an insurance contract is a question of law for the court and the court should enforce the insurer's contract as made. The insurer should be required to pay damages only on claims intended to be insured against and to answer only for risks intended to be assumed. It is not the prerogative of the court to create ambiguities where none exist. [Citations omitted.]" National Union Fire Insurance Co. of Pittsburgh, Pennsylvania v. Rick, 134 Ariz. 122, 128, 654 P.2d 56, 62 (1982). "In determining whether ambiguity exists in a policy, language should be examined from the viewpoint of one not trained in the law or the insurance business." Sparks v. Republic National Life Insurance Company, 132 Ariz. 529, 534, 647 P.2d 1127, 1132 (1982), cert. denied, 459 U.S. 1070, 103 S.Ct. 490, 74 L.Ed.2d 632. When the word "employee" appears in a contract of insurance and is not defined in the policy, it must be construed in the manner most likely to correspond to the intention of the parties to the contract. Eagle Star Insurance Company, Ltd. v. Deal, 474 F.2d 1216 (8th Cir.1973). The intention fairly attributable to the insurer and the insured, from an objective standpoint and in the absence of a contrary indication should therefore reflect the ordinary meaning of the word as it is understood by persons generally and should highlight the characteristics which the law most often attributes to employment. "Undefined terms of an insurance policy, such as 'employee,' must be construed in their plain, ordinary and everyday sense and the parameters of the definition should reflect the legal characteristics most frequently attributed to the word. [Citation omitted.]" Id. at 1220. We agree with the New Jersey court in the case of Petronzio v. Brayda, 138 N.J.Super. 70, 73, 350 A.2d 256, 259 (1975):

"We find that the key word 'employee' is clear and unambiguous when considered in its ordinary, plain and popular meaning. The layman assured who purchases a policy would have little difficulty in ascribing to the term 'employee' a certain well-known concept, namely, an individual who works for the assured for compensation and is subject to his direction and control."

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