Commercial Ins. Co., of Newark, N. J. v. Gonzalez.

• Decision Date: 11 March 1975
• Docket Number: No. 74-1132,74-1132
• Citation: 512 F.2d 1307
• Parties: COMMERCIAL INSURANCE COMPANY OF NEWARK, NEW JERSEY, Plaintiff-Appellant, v. Hector GONZALEZ et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — First Circuit

Page 1307

512 F.2d 1307

COMMERCIAL INSURANCE COMPANY OF NEWARK, NEW JERSEY Plaintiff-Appellant, v. Hector GONZALEZ et al., Defendants-Appellees.

No. 74-1132.

United States Court of Appeals, First Circuit.

Argued Feb. 3, 1975.

Decided March 11, 1975.

John A. Perkins, Boston, Mass., with whom Jeffrey Swope and Palmer & Dodge, Boston, Mass., were on brief, for plaintiff-appellant.

Harvey B. Nachman, San Juan, P. R., and James E. Beasley, Philadelphia, Pa., with whom Beasley Hewson, Casey, Kraft & Colleran, Philadelphia, Pa., Nachman, Feldstein & Gelpi, Antonio M. Bird, Jr., and Bird & Bird, San Juan, P. R., were on brief, for defendants-counterclaimants-appellees, and S. Polanco-Abreu, San Juan, P. R., with whom George L. Weasler, San Juan, P. R., was on brief, for Hector Gonzalez and Conquest Airways, Inc., appellees.

Before COFFIN, Chief Judge, ALDRICH and CAMPBELL, Circuit Judges.

ALDRICH, Senior Circuit Judge.

On December 6, 1968, a Twin Beech aircraft, carrying ten passengers and a pilot, took off from the St. Thomas, Virgin Islands, airport at 6:19 PM, but failed to clear a hill beyond the runway and crashed in a residential area. Seven persons, including Mars, the pilot, were killed, and twelve were injured. The plane was owned by Conquest Airways, Inc., a Puerto Rico corporation, of which one Gonzalez was president, and was insured for hull and liability by Commercial Insurance Company of Newark, New Jersey. Commercial promptly brought this action in the Puerto Rico district court for a declaration of non-liability. Counterclaims on behalf of Conquest, Gonzalez and all persons killed or injured were duly filed seeking recovery under Puerto Rico's direct action statute. Commercial appeals from judgments based upon a jury determination of liability, four jury verdicts assessing claimants' damages in excess of two million dollars, and court awards of attorneys fees for "obstinacy."

Liability.

Simply put, although substantively complex, Commercial disclaimed on the grounds that Mars did not have the experience required to meet the policy's specifications, and because there should have been a co-pilot in any event. Again, speaking broadly, the district court held, inter alia, that the provisions of the policy upon which Commercial relied to deny recovery were ambiguous and should be construed by the jury in claimants' favor; e. g., that a "command pilot" was different from a "pilot in command," and that a flight, although exclusively during the night as defined by Federal Aviation Administration (FAA) regulations, was not a "night flight."

Pilot Qualifications.

As originally written, the policy covered a single plane, a Dornier, and certain named pilots. There was a provision under which other planes could be added by agreement, by which the Twin Beech was subsequently included. Under an Open Pilot Clause, Endorsement 2, certificated pilots could be added at will, provided they had a certain accumulated experience and Commercial was notified. Mars was hired three days before the accident. ¹ To qualify under the Open Pilot Clause he was required to have "logged ² a minimum flying time of 2,500 hours as command pilot (to include not less than) 1000 hours on multi-engine aircraft ... and 100 hours total time ³ during the last 12 months." (Emphasis suppl.) Mars had not logged the requisite hours if "command pilot" means "pilot in command," a term defined in the FAA regulations as applying, in the case of a multi-engine plane, only to the first pilot. ⁴ However, although at first blush the terms might look the same, we agree with claimants that "command pilot" may have a broader meaning by virtue of the regulations. 14 C.F.R. § 61.39(c) provides with respect to a pilot's qualifying for a certificate,

"(c) Pilot in command time. A private or commercial pilot may log as pilot in command only the flight time during which he is the only manipulator of the controls of an aircraft for which he is rated or the flight time during which he is the only occupant of the aircraft."

If under this section a pilot in command cannot count as command time the hours he surrenders the controls to the second pilot, there would seem at least a permissible inference that the second pilot is, pro tanto, accumulating his own "command time," even though not as "pilot in command." This inference may be thought reinforced by section 61.39(d). ⁵

Commercial could have contradicted any unfavorable inference by using the regulations' word of art, pilot in command. We may agree that the 2d-pilot's "command time" is not the full equivalent of pilot in command, since he does not have full responsibility for the aircraft. However, when parties contract with reference to an industry whose terms are defined by an active supervising agency like the FAA, it is to be assumed in the absence of evidence to the contrary, that they have that terminology in mind. Cf. Superior Business Assistance Corp. v. United States, 10 Cir., 1972, 461 F.2d 1036, 1039; Arc & Gas Welder Associates, Inc. v. Green Fuel Economizer Co., 4 Cir., 1960, 285 F.2d 863, 868, cert. denied, 366 U.S. 919, 81 S.Ct. 1095, 6 L.Ed.2d 241; Petro v. Ohio Cas. Ins. Co., S.D.Cal., 1950, 95 F.Supp. 59, 62. When Commercial failed to use the regulation-defined phrase, the jury was warranted in finding it intended not what otherwise might be thought an ellipsis, but a lesser meaning; particularly so if the regulation itself suggested that lesser meaning.

We observe, further, that the notification form supplied by Commercial for pilots claiming to qualify under the Open Pilot Clause did nothing to lessen this inference, and if anything, reinforced it. Instead of providing space for listing "pilot in command" hours, it supplied three columns, headed "1st Pilot," "co-Pilot" and "Total." ⁶ If "command time" in the Open Pilot Clause meant only pilot in command time, the form could easily have been more specific. Failing this, we cannot say the jury was required to interpret the policy as Commercial contends. ⁷ Gonzalez testified that he gave Mars the form, telling him it was to record his "command time." Inter alia, Mars wrote 3400 hours as Co-Pilot of multi-engine planes, and opposite it, as "Total," 1700 hours. Although the question may be close, and was made perhaps closer by other evidence suggesting that the 3400 hours figure itself was a considerable exaggeration, we cannot say that the jury could not conclude that Mars had satisfied the Open Pilot Clause's requirements.

Next, Commercial points to a provision in the Open Pilot Clause which required pilots to be checked out "in type by Dornier Factory or Professional Pilot Checkout Organization." Gonzalez explained that this was because the Dornier plane had some peculiarities, and that he subsequently asked that this restriction be lifted. Quite possibly in response to this, Endorsement 7, under which the Twin Beech was added, incorporated "Endorsements 1, 2 (without requisite to be checked out by Dornier Factory)." Commercial claims it was still necessary to be checked out by a professional pilot organization. However, it was meaningless simply to omit checking by Dornier Factory as a "requisite." Checking by Dornier never was a requisite; there was always the alternative. We cannot quite say, when Commercial used this phrase in the endorsement following Gonzalez' request, that it was not open to the jury to find that it meant to remove the entire checkout requirement, so that the fact that no organizational checkout was made is of not consequence. ⁸

The Absence of a Co-Pilot.

We mention briefly Commercial's disclaimer based on the presence of a tenth passenger seat, a violation of a recent FAA regulation unless there were two pilots, which, concededly, there were not. Mars had been instructed by Conquest's chief pilot to remove the tenth passenger seat, but he did not do so. The policy provided that it did not apply,

"(4) while (the aircraft is) being operated under circumstances requiring a special permit or waiver from the Civil Aeronautics Authority (even though granted)."

If violation of this regulation fell within this exclusion clause, that is the end of the case. Arnold v. Globe Indem. Co., 6 Cir., 1969, 416 F.2d 119, 122; Underwriters at Lloyd's of London v. Cordova Airlines, Inc., 9 Cir., 1960, 283 F.2d 659, 665; Bruce v. Lumbermen's Mut. Cas. Co., 4 Cir., 1955, 222 F.2d 642, 645. Exclusion clauses, however, are to be strictly construed. We agree with the court in Roach v. Churchman, 8 Cir., 1970, 431 F.2d 849, that if every violation of a regulation exempted the insurer, it is likely that almost any accident would be excluded, and that such an interpretation is to be avoided if reasonably possible. It may be that a fair meaning of this clause would be to confine it to those FAA regulations in which there are express provisions for waiver or amendment. Cf. Cordova Airlines, Inc., ante. We need not decide this point, however, because of Conquest's breach of the two-pilot requirement contained in the policy itself.

Night Flight.

In the negotiations for the policy Gonzalez was told that the company would require two pilots for night flights. The policy, when issued, provided in Endorsement 1,

"Warranted co-pilot to be carried on all instrument flight rules or night flights."

The court charged the jury, without exception by defendants, that this provision "in which the insured warrants that a co-pilot will be carried on night flights is valid and binding upon the insured, provided it is not ambiguous, and (if) there is a breach of warranty there is no coverage and no recovery permitted under the policy." This was correct. Coffey v. Indiana Lumberman's Mut. Ins. Co., 6 Cir., 1967, 372 F.2d 646, 648; Fidelity-Phenix Fire Ins. Co. v. Pilot Freight Carriers, Inc., 4 Cir., 1952, 193 F.2d 812, 815-16, 817-18; Henjes v. Aetna Ins. Co., 2 Cir., 1943, 132 F.2d 715, 718-19, cert. denied, 319 U.S. 760, 63 S.Ct. 1316, 87...