Ideal Mut. Ins. Co. v. Last Days Evangelical Ass'n, Inc.

• Decision Date: 03 March 1986
• Docket Number: No. 84-1569,84-1569
• Citation: 783 F.2d 1234
• Parties: IDEAL MUTUAL INSURANCE CO., Plaintiff-Appellee, Cross-Appellant, v. LAST DAYS EVANGELICAL ASSOCIATION, INC. and Junk Air, Inc. and William David Jenkins d/b/a Junk Air Co., Defendants-Appellants, Cross-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1234

783 F.2d 1234

IDEAL MUTUAL INSURANCE CO., Plaintiff-Appellee, Cross-Appellant, v. LAST DAYS EVANGELICAL ASSOCIATION, INC. and Junk Air, Inc. and William David Jenkins d/b/a Junk Air Co. Defendants-Appellants, Cross-Appellee.

No. 84-1569.

United States Court of Appeals Fifth Circuit.

March 3, 1986.

Bonnie Beavers, Stephen A. Coke, Larry R. Boyd, Darrell Panethiere, Dallas, Tex., for Last Days Evangelical Ass'n, Inc.

C. Steven Bradford, Jenkens & Gilchrist, Don C. Bush, Dallas, Tex., for Junk Air, Inc. et al.

Charles H. Smith, Shank, Irwin, Conant & Williamson, J. Michael Colpoys, Dallas, Tex., Lord, Bissell & Brook, Wallace E. Maloney, Chicago, Ill., for Ideal Mut. Ins. Co.

Appeals from the United States District Court for the Northern District of Texas.

Before GOLDBERG, JOLLY and HIGGINBOTHAM, Circuit Judges.

GOLDBERG, Circuit Judge:

The evidence in the record does not disclose whether any augurers counselled otherwise when Last Days Evangelical Association decided to lease a Cessna 414 from William Jenkins' Junk Air. ¹ Nor does the record disclose whether the Fates chuckled vindictively when Ideal Mutual Insurance Company insured the airplane. Be that as it may, the relationship between Junk Air and Last Days ended tragically on the afternoon of July 28, 1982, when the airplane crashed in the vicinity of Lindale, Texas Last Days promptly filed a claim under the insurance policy. Soon thereafter, Ideal filed a declaratory judgment action against Last Days, Junk Air, and William Jenkins, and pleaded that several exclusionary clauses in the policy precluded coverage. Ideal alleged that coverage did not exist under the policy for the following reasons: (1) the aircraft was overloaded at the time of the crash and was operated in a manner requiring Federal Aviation Administration authorization by special permit or waiver; and (2) Burmeister did not meet the requirements of the pilot clause endorsement, in that he did not have 1,045 logged hours and had not attended the manufacturer's flight training school. Pursuant to the policy's Lienholder's Interest Endorsement, Ideal also sought to recover from Jenkins the balance of principal and interest due on a promissory note and reasonable attorneys' fees incurred in bringing suit on the note.

killing the pilot, Don Burmeister, and his eleven passengers.

Rejecting all but one of Ideal's arguments, the district court found that coverage did not exist because appellants failed to prove that Burmeister had the 1,045 "total logged hours" required by the policy. The district court also held Jenkins liable on the note, found that Jenkins was Last Days' agent for the purpose of procuring insurance, and awarded Ideal $5,000 in attorneys' fees against Jenkins.

Since the Texas Supreme Court's decision in Puckett v. United States Fire Insurance Co., 678 S.W.2d 936 (1984), which was handed down shortly after the district court's decision, a finding of no coverage must be accompanied by a finding that the breach of the policy contributed to the loss. Although we find no error in the district court's finding that appellants breached the policy, we must nonetheless reverse the judgment below and remand to allow appellants an opportunity to prove that the breach of the policy did not contribute to the loss.

FACTUAL BACKGROUND

Ideal is a New York corporation with its principal place of business in the State of New York. Last Days is a California corporation with its principal place of business in the State of Texas. Junk Air is a California corporation with its principal place of business in the State of California. William David Jenkins is an individual resident of the State of California; Jenkins does business as Junk Air.

Jenkins leased the ill-fated Cessna 414 to Last Days in February, 1982. Under the terms of the lease, Jenkins agreed to provide hull and liability insurance on the plane with both Jenkins and Last Days named as insureds. ² Jenkins contacted Aviation Assurance Agency by Dickens ("Assurance"), an insurance broker. On February 22, 1982, Assurance issued to Jenkins and Last Days an insurance binder on the plane through Global Aviation Insurance Managers, Inc. with an effective period of one year, beginning on February 24, 1982. On March 23, 1982, Ideal issued its own binder through Global Aviation. At the time of the crash, all premiums had been fully paid. This insurance policy contains the conditions and terms of coverage at issue in this suit.

Exclusion No. 2 of the policy provides as follows:

This Policy does not apply:

* * *

* * *

2. to any occurrence or to any loss or damage occurring while the aircraft is operated in flight by other than the pilot or pilots set forth under Item 7 of the Declaration [which provides]:

PILOT CLAUSE. Only the following pilot or pilots holding valid and effective pilot and medical certificates with ratings as required by the Federal Aviation Administration SEE ENDORSEMENT # 1 [which provides:]

for the flight involved will operate the aircraft in flight:

IT IS HEREBY UNDERSTOOD AND AGREED THAT ITEM 7 OF THE POLICY DECLARATIONS SHALL BE COMPLETED TO READ AS FOLLOWS:

TOM KRAUS HAVING A COMMERCIAL PILOT CERTIFICATE WITH A MULTI ENGINE LAND AND INSTRUMENT RATING AND HAVING A MINIMUM OF 950 TOTAL LOGGED FLYING HOURS OF WHICH NOT LESS THAN 10 HOURS SHALL HAVE BEEN IN MULTI ENGINE AIRCRAFT INCLUDING NOT LESS THAN 10 HOURS IN THE SAME MAKE AND MODEL AIRCRAFT INSURED BY THIS POLICY.

DON BURMESER [SIC] HAVING A COMMERCIAL PILOT CERTIFICATE WITH A MULTI ENGINE LAND AND INSTRUMENT RATING AND HAVING A MINIMUM OF 1045 TOTAL LOGGED FLYING HOURS OF WHICH NOT LESS THAN 50 HOURS SHALL HAVE BEEN IN MULTI ENGINE AIRCRAFT INCLUDING NOT LESS THAN 15 HOURS IN THE SAME MAKE AND MODEL AIRCRAFT INSURED BY THIS POLICY.

PILOTS TOM KRAUS AND DON BURMESER [SIC] MUST ATTEND THE MANUFACTURER'S GROUND AND FLIGHT SCHOOL.

ANY PERSON HAVING A PRIVATE PILOT CERTIFICATE WITH A MULTI ENGINE LAND AND INSTRUMENT RATING AND HAVING A MINIMUM OF 1500 TOTAL LOGGED FLYING HOURS OF WHICH NOT LESS THAN 500 HOURS SHALL HAVE BEEN IN MULTI ENGINE AIRCRAFT INCLUDING NOT LESS THAN 25 HOURS IN THE SAME MAKE AND MODEL AIRCRAFT INSURED BY THIS POLICY. [emphasis added].

The clause "having a minimum of 1,045 total logged flying hours" is now the sole source of controversy ³ and found its way into the policy in the following manner. John Wallace, the underwriter involved at Ideal, asked Sharon Lewalling, the employee at Assurance handling the matter for Jenkins, for each pilots' logged flying hours. The application binder completed by Assurance and sent to Jenkins to be signed required that pilot experience be listed as "Total Logged Hours." In the space provided for the specific numbers, however, "Will fill out pilot forms" was written. Lewalling had sent Burmeister a form that requested "pilot experience."

The form required that Burmeister "[l]ist each aircraft by Make and Model and Hours as Pilot-in-Command in each." It did not, however, specifically request "logged" hours; rather, it simply requested "total hours." ⁴ Burmeister filled out the form and returned it to Assurance. Many of the hours listed had been acquired during Burmeister's military training, and Lewalling assumed that military time was logged time. (Tr. 79). She then forwarded the form along with Assurance's binder to Wallace at Ideal, who incorporated the information provided by Burmeister in Endorsement # 1. (Tr. 32, 54).

The district court found that both Lewalling and Wallace "clearly intended to include a provision in the policy that Burmeister must have 1,045 logged flying hours." Rec. at 683. However, as is clear from the pilot experience form's request for "total hours," Assurance perhaps failed to convey this intent to Burmeister. Thus did Ideal innocently transform Burmeister's statement that he had 1,045 total hours into a statement that he had 1,045 total "logged" hours.

DISCUSSION

Special rules govern the construction of insurance contracts under Texas law. As a general rule, exceptions and limitations found in an insurance policy are construed against the insurer. Ranger Insurance Co. v. Bowie, 574 S.W.2d 540, 542 (Tex.1978). "When the language of a policy is susceptible of more than one reasonable construction, the courts will apply the construction which favors the insured and permits recovery." Ramsay v. Maryland American General Insurance Co., 533 S.W.2d 344, 346 (Tex.1976). "[T]he insurer may not escape liability merely because his or its interpretation should appear to us a more likely reflection of the intent of the parties than the interpretation urged by the insured. The latter has to be no more than one which is not itself unreasonable." Continental Casualty Co. v. Warren, 152 Tex. 164, 254 S.W.2d 762, 763 (1953). Of course, when the language of the policy permits only one reasonable construction and that construction favors the insurance company, recovery is denied. Puckett, supra, at 938. Moreover, we attempt to construe a contract so as to avoid rendering any of its terms meaningless. Blaylock v. American Guarantee Bank Liability Insurance Company, 632 S.W.2d 719, 722 (Tex.1982).

As necessity is the mother of invention, so is ambiguity the father of multiple reasonable constructions, and where lawyers are involved, one never lacks an eager parent of either gender. Ambiguity in a contract is a question of law, Airmark, Inc. v. Advanced Systems, Inc., 715 F.2d 229, 230 n. 1 (5th Cir.1983) (applying Texas law), and a court may look beyond the plain language of the contract for evidence of surrounding circumstances to determine whether a writing is ambiguous. Id. at 230. "When terms of an insurance policy are unambiguous, they are to be given their plain, ordinary and generally accepted meaning unless the instrument itself shows that the terms have been used in a technical or different sense." Ramsay, supra, at 346. Unlike the deconstructionists at the...