Certain Underwriters at Lloyd's London v. Garmin Int'l Inc.

• Decision Date: 15 July 2013
• Docket Number: Case No. 11-cv-2426-EFM
• Parties: CERTAIN UNDERWRITERS AT LLOYD'S LONDON, et al. Plaintiffs, v. GARMIN INTERNATIONAL INC., et al., Defendants.
• Court: U.S. District Court — District of Kansas

CERTAIN UNDERWRITERS AT LLOYD'S LONDON, et al. Plaintiffs,

v.GARMIN INTERNATIONAL INC., et al., Defendants.

Case No. 11-cv-2426-EFM

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS

Dated: July 15, 2013

MEMORANDUM AND ORDER

This is a declaratory judgment action by certain foreign and domestic insurers ("Plaintiffs") seeking a declaration that they do not have a duty to defend or indemnify Defendant Henry Bartle for claims asserted in a lawsuit pending in California state court arising out of the crash of Defendant Bartle's airplane. Bartle claims that he is entitled to coverage under an Aviation Products and Grounding Liability Insurance Policy (the "Policy") issued to Garmin International, Inc., because he formed some type of business entity with Garmin when his friend, a Garmin AT, Inc., employee, helped him build the aircraft at Bartle's hangar in Oregon. Before the Court is Plaintiffs' Motion for Summary Judgment (Doc. 26), Plaintiffs' Second Motion for Summary Judgment (Doc. 71), and Bartle's Motion for Summary Judgment (Doc. 67). For the reasons set forth below, the Court finds that Defendant Bartle is not entitledto coverage under the Policy. The Court grants Plaintiffs' Second Motion for Summary Judgment (Doc. 71) and denies the remaining motions before the Court.

I. Factual and Procedural Background

A. The Insurance Policy Issued to Garmin

Plaintiffs issued an Aviation Products and Grounding Liability Insurance Policy AB0700442 (the "Policy") to Garmin International, Inc. ("Garmin") that was in effect from November 30, 2007, to November 30, 2008.

The Schedule page of the Policy lists the "Insured" as follows:

GARMIN INTERNATIONAL, INC., GARMIN USA, INC., GARMIN LTD, GARMIN CORPORATION, GARMIN EUROPE LIMITED, PRONAV CORPORATION, PRONAV INTERNATIONAL, INC., GARMIN AT, INC., GARMIN B.V., GARMIN N.V., MOTIONBASED and any subsidiary corporation or subsidiary thereof now existing or hereinafter created. Subsidiary corporation shall mean any entity that is under the ownership or management control of Garmin International, Inc., Garmin Corporation, Garmin Europe Limited, Pronav Corporation and Pronav International, Inc. and/or subsidiary companies and/or affiliated companies and/or associated companies for their respective rights and interests.¹

The term "Insured" is further defined in the Policy at Definition (G) and amended per the "ADDITIONAL CONDITIONS," to read:

The word "Insured" shall mean the Insureds named above and all subsidiaries, affiliated, associated, or allied companies, corporation, foundations, firms, joint ventures, partnerships, or any entities entered into, acquired, or formed, now existing, which may have existed, or hereafter be constituted after the effective date of this policy by any such Insured and over which such Insured has any ownership interest, or exerts financial control, or has assumed or exercised management control, or for which the Insured has obligation to provide insurance.²

The Schedule contains the following provision regarding the address of the "Insured":

1200 East [sic] 151st Street Olathe, Kansas 66062, United States of America. The Insured is: Corporation³

And, the Information page in the Policy states the following:

The Insured owns a corporate hangar located at New Century Airport in Overland Park, Kansas, which is used mainly to hangar Garmin Owned aircraft. This facility is occasionally used for temporary (overnight) storage of customers aircraft who visit their facility. . . .⁴

The Aircraft Builders Products Liability Insurance Wording section of the Policy provides, through "Coverage A- PERSONAL INJURY AND PROPERTY DAMAGE LIABILITY," that Plaintiffs agree:

To pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of personal injury, sickness or disease, including death at any time resulting therefrom sustained by any person (herein referred to as "Personal Injury") and because of injury to or destruction of property including the loss of use thereof (herein referred to as "Property Damage"), caused by an Occurrence arising out of the Products Hazard.⁵

That section also provides, through "DEFENCE- OTHER PAYMENTS," that Plaintiffs agree:

To defend any claim or suit against the insured alleging such Personal Injury, Property Damage, or Grounding of completed aircraft occurring after delivery to and acceptance by a purchaser or operator of such aircraft for flight operations, and seeking damages on account thereof, even if such claim or suit is groundless, false or fraudulent . . . .⁶

The term "Products Hazard" is defined to mean the "handling or use of (other than by the Insured) or the existence of any condition in an Aircraft Product (1) when such Aircraft Product is not in the possession of the Insured and (2) when such Aircraft Product is away from premisesowned, rented, or controlled by the Insured."⁷ The term "Occurrence" is defined to mean "an accident . . . which arises out of the Products Hazard and causes, during the Insurance Period, Personal Injury or Property Damage which is neither expected nor intended from the standpoint of the Insured."⁸

The Policy also provides an Excess Liability Extension that provides coverage for "all sums which the Insured shall become legally obligated to pay as damages because of Bodily Injury and/or Property Damage caused by an Occurrence during the period of insurance arising out of the Insured's operations covered by and as more fully set forth in the underlying insurance."⁹ The "underlying insurance" is identified on the Information page of the Policy as an "Aircraft Owned/Non Owned Liability" policy and a "Hangarkeepers and Premises Liability" policy issued by an insurer identified as "GAUM."¹⁰ For coverage under the Excess Liability Extension to attach, the Policy requires:

(d) Attachment of Liability

Liability to pay under this Extension shall not attach unless and until the underlying insurers shall have admitted liability for the underlying limit or unless and until the Insured has by final judgment been adjudged to pay an amount which exceeds such underlying limit and then only after the underlying insurers have paid or have been held liable to pay the full amount of the underlying limit.¹¹

B. Defendant Bartle's Lancair IV Aircraft and Relationship with Garmin

In fall 2006, Garmin was looking to install one of its avionics products, designated the G900X, in home-built, experimental aircraft, including the Lancair IV aircraft. At the same time, Defendant Bartle was building his own Lancair IV at his hangar in Oregon. According to Bartle, he built ninety-five percent of the aircraft himself while the other five percent was built by multiple people, including Bartle's neighbor and best friend Chris Schulte, who designed and installed the electrical system in the airplane.

Schulte was a Garmin AT employee. In late 2006, Schulte approached Bartle about installing the G900X into his aircraft in exchange for Bartle giving him and other Garmin employees access to his aircraft to obtain installation and substantiation data. Bartle agreed, and in late 2006 or early 2007, Schulte purchased the G900X for Bartle from Garmin using his employee discount. Per Garmin policy, Schulte paid for the G900X with a personal check, and then resold the system at the same price to Bartle.

Schulte performed the majority of his work on Bartle's aircraft on the weekends at Bartle's hangar in Oregon. He did not work on the aircraft at Garmin, and he did not view working on the aircraft as a Garmin activity. Rather, he believed he was doing the work as a friend. Schulte had limited help with the installation and set-up of the G900X system from other Garmin employees. One Garmin employee installed part of the wiring in Bartle's aircraft at Bartle's hangar, per Schulte's request. Another Garmin employee went to Bartle's hangar to obtain data from the aircraft, which was used to create technical drawings and portions of the G900X installation manual.

The G900X uses an aircraft-specific bracket to hold one component of the system in place. Because of his background in composite fabrication, Bartle designed this bracket for theinstallation of the G900X system in his aircraft. Garmin used the design of Bartle's bracket in the G900X installation manual and listed Bartle's company, the "Ultimate Group," as the supplier for that bracket in the manual. The Ultimate Group has sold approximately ten brackets for use with the system.

During the installation of the G900X system, Bartle was never employed by Garmin, was never paid a salary, and never received any financing from Garmin. When asked whether Garmin had any commercial interest in installing the G900X in his aircraft, he said that the installation was "more of a favor to allow them to use the airplane to make brackets so that they could make their installation manual and everything to put the 900 into the Lancair aircraft."¹² Bartle never attended any development or weekly planning meetings at Garmin during the installation and did not receive notes from those meetings. Bartle had no written contract with Garmin, did not sign any releases, and Garmin never provided Bartle with any written instruction or parameters for any work on the aircraft.

Bartle received a Certificate of Registration for the aircraft in November 2007 and a Special Airworthiness Certificate for the aircraft in January 2008. The registration lists "Trustees" Henry and Donna Bartle as the registered owners of the aircraft.

C. The California Lawsuit and Bartle's Tender of Defense and Indemnification

On February 26, 2008, Bartle was operating his aircraft in Riverside County, California, on a personal, sight-seeing flight. On board the aircraft were Bartle's step-daughter, her friend, and her friend's minor daughter. All were injured when the aircraft engine lost power during flight and crash landed short of the runway. The passengers and their respective spouses filed...