Chapman v. Ranger Ins. Co.

• Decision Date: 21 June 1971
• Docket Number: No. 1,CA-CIV,1
• Citation: 15 Ariz.App. 51,485 P.2d 1168
• Parties: William D. CHAPMAN, individually; William D. Chapman and Jane Doe Chapman, his wife, Appellants, v. RANGER INSURANCE COMPANY, a corporation, Appellee. 1512.
• Court: Arizona Court of Appeals

Page 1168

485 P.2d 1168

15 Ariz.App. 51

William D. CHAPMAN, individually; William D. Chapman and Jane Doe Chapman, his wife, Appellants, v. RANGER INSURANCE COMPANY, a corporation, Appellee.

No. 1 CA-CIV 1512.

Court of Appeals of Arizona, Division 1, Department B.

June 21, 1971.

Rehearing Denied July 22, 1971.

George W. Oglesby, Phoenix, for appellants.

Lewis & Roca, by Michael J. LaVelle and John A Miller, Phoenix, for appellee.

JACOBSON, Presiding Judge.

This appeal requires the court to make a determination as to whether an airplane which was crashed in Mexico by a student pilot was covered under a policy of insurance.

The procedural setting of this suit arose out of a third party complaint filed by third party plaintiff-appellant William D. Chapman and his wife against third party defendant-appellee, Ranger Insurance Co. In the original action, the Michigan National Bank, a national banking association, sought a judgment against William D Chapman and William E. McKnight and their wives on a promissory note in the sum of $8,147, this note being secured by a chattel mortgage on a 1964 Cessna 172 airplane. Upon stipulation, judgment was entered in favor of the bank and against William D. Chapman, no service ever having been effected on the defendant McKnight. The matter proceeded to trial before a jury on the third party complaint. Following a verdict in Chapman's favor, the trial court granted Ranger's motion for a new trial. Upon retrial to the court, judgment was entered in favor of Ranger Insurance Company and Chapman has appealed.

In the latter part of 1966, third party plaintiff, William D. Chapman, became interested in forming a flying club to the end that several individuals might participate in the cost and expense of owning an airplane. Pursuant to this interest, he contacted a Chuck Wright, who was the manager of a small airfield located outside Phoenix, Arizona. Mr. Wright put Mr. Chapman in touch with a William McKnight and together they, Chapman and McKnight, agreed to purchase a 1964 Cessna 172 airplane from Mr. Wright. This airplane, together with the installment note and chattel mortgage executed by Chapman and McKnight for the purchase price of the airplane, provides the subject matter of the ensuing litigation.

The chattel mortgage required that the airplane be insured. Therefore, on July 19, 1967, a policy of insurance was obtained from third party defendant, Ranger Insurance Company, covering the subject aircraft.

Following the purchase of the airplane, Chapman and McKnight obtained two additional members for their club, including a Larry Fassler, a student pilot. These new members were duly included as named insureds on Ranger's policy of insurance. However, with the inclusion of Fassler, a student pilot, Ranger attached an additional rider to its policy. This rider provided:

'It is agreed that this policy does not apply and that no coverage is afforded to any insured while any aircraft insured under this policy is being operated by a Student Pilot unless such Student Pilot is under the direction of a qualified FAA Certified Flight Instructor who shall specifically have approved each flight undertaken by the student prior to takeoff.'

In addition the policy contained the following provisions:

'This policy does not apply * * * to any insured * * * (c) who operates or permits the aircraft to be operated for any unlawful purpose. * * *'

A second provision provided:

'This policy does not apply * * * to any insured who operates or permits the aircraft to be operated: (a) in any manner which requires a special permit or waiver from the United States Federal Aviation Agency whether granted or not; * * * (d) in violation of any regulation pertaining to pilot certificates.'

The Code of Federal Regulations (14 C.F.R. § 61.73(a) (1971)), provides that a student pilot may not act as a pilot in command of an aircraft that is carrying a passenger or that is on an international flight.

A fourth provision of the policy provided:

'This policy shall not apply * * * to loss due to * * * confiscation by duly constituted government or civil authority. * * *'

It was stipulated by the parties that the aircraft was flown from the United States to Mexico on or about May 24, 1967 by student pilot Larry Fassler, who had with him a non-licensed pilot-passenger named Jerry Lawrence. It was further stipulated that the plane was crashed in Mexico, that it had aboard contraband consisting of stolen typewriters which were being illegally brought into Mexico, and that the plane had been confiscated by the Mexican government. The plane was never recovered.

Chapman presented evidence that written rules concerning the use of the airplane were adopted by the members of the flying club which provided that exclusive use of the plane was to be vested in one member per week and that at the particular time Fassler took the airplane to Mexico he had no right to do so under these rules. In addition, evidence was...