Ill. Nat'l Ins. Co. v. Wyndham Worldwide Operations, Inc.

• Decision Date: 28 January 2015
• Docket Number: Civ. No. 2:09–1724 KMSCM.
• Citation: 85 F.Supp.3d 785
• Parties: ILLINOIS NATIONAL INSURANCE COMPANY, Plaintiff, v. WYNDHAM WORLDWIDE OPERATIONS, INC. et al., Defendants.
• Court: U.S. District Court — District of New Jersey

85 F.Supp.3d 785

ILLINOIS NATIONAL INSURANCE COMPANY, Plaintiff

v.WYNDHAM WORLDWIDE OPERATIONS, INC. et al., Defendants.

Civ. No. 2:09–1724 KMSCM.

United States District Court, D. New Jersey.

Signed Jan. 28, 2015.

Andrew T. Houghton, Nicole A. Putnam, Skarzynski Black LLC, New York, NY, for Plaintiff.

Eric Jesse, Michael B. Himmel, Michael David Lichtenstein, Lowestein Sandler, PC, Roseland, NJ, for Defendants.

OPINION

KEVIN McNULTY, District Judge.

The plaintiff, Illinois National Insurance Company (“Illinois National”), seeks a declaratory judgment that its 2008 aircraft fleet insurance policy (“2008 Policy”) does not cover an August 2008 plane crash. (See Complaint, Count 1). Illinois National entered into the policy with Jet Aviation Business Jets, Inc. and related entities (collectively, “Jet”), an aircraft management company. The policy covered third-party clients of Jet under certain circumstances. Among those potentially covered clients were Defendants who are members of the corporate family of Wyndham Worldwide Operations, Inc. (collectively, “Wyndham”). The August 2008 plane crash involved employees of Wyndham who were flying in an airplane not owned by Wyndham; the dispute over coverage concerns that plane's status as a “non-owned” aircraft.

Alternatively, Illinois National asks that the 2008 Policy be reformed to reflect the mutual intent of Illinois National and Jet to exclude coverage with respect to third parties' “non-owned” aircraft unless Jet was involved in the aircraft's operation. (See Complaint, Count 2.). Wyndham counterclaims for a declaratory judgment that the 2008 Policy does provide coverage for the crash of its non-owned plane.

This case, now on remand from the United States Court of Appeals for the Third Circuit, was reassigned to me after the retirement of Chief Judge Garrett E. Brown, Jr. The mandate of the Court of Appeals instructs the district court to analyze on remand (1) whether, in drafting the 2008 Policy, Illinois National and Jet made a mutual mistake that warrants reformation; (2) whether negligence is a bar to reformation in this case; and (3) whether reformation is barred because it was not sought until after the Accident.

Now before the court are the parties' cross-motions for summary judgment as well as Illinois National's motion to strike portions of Wyndham's L. Civ. R. 56.1 Statement and Illinois National's motion in limine to exclude the expert report of Fred. G. Marziano. For the reasons set forth below, Illinois National's motion to strike and motion in limine are denied as moot. Summary judgment is granted in favor of Illinois National on Count 2 of the Complaint. The motions are otherwise denied.

I. BACKGROUND

A. Facts¹

1. The Aircraft Insurance Policies

Jet Aviation International, Inc., along with its subsidiaries (collectively “Jet”), provides aircraft management services to aircraft owners and operators. (PS 201 ¶ 1). On or about December 19, 2001, Wyndham's predecessor, Cendant Operations, Inc. (“Cendant”), entered into an Aircraft Management Services Agreement (“Agreement”) with Jet. (Id. ¶ 3). Under the Agreement, Jet would manage and operate Wyndham's aircraft; the services provided by Jet were to include flight planning, crew staffing, and maintenance. (Id. ¶ 4). If Wyndham's own corporate aircraft were not available for a particular flight, Jet was to provide a substitute aircraft from its own fleet or from that of another company. (Id. ¶ 5).

The Agreement obligated Jet, as part of its service, to obtain insurance for Wyndham's aircraft. (See id. ¶ 7). Accordingly, in 2004, Jet purchased a one-year aircraft fleet insurance policy from National Union Fire Insurance Company of Pittsburgh, Pennsylvania. (Id. ¶ 17). Each year from 2005 through 2009, Jet purchased a one-year insurance policy from Illinois National. (Id. ) Each Policy included a Managed Aircraft Endorsement (“Endorsement”) that extended coverage to the aircraft of named third parties who had entered into Aircraft Management Agreements with Jet. (Id. ¶ 18). One of those named clients whose aircraft were covered under the Endorsement was Wyndham.

It is undisputed that the 2004–2008 Policies extended blanket coverage for all aircraft operated by or used at the direction of Jet. It is likewise undisputed that the 2004–08 Policies, via the Endorsement, covered all aircraft owned by Wyndham. (Id. ¶¶ 8, 18). It is also undisputed that, from 2004 through 2007, the Endorsement excluded from coverage “non-owned aircraft,” that is, aircraft not owned by Wyndham (unless they were operated by or used at the direction of Jet, bringing them under the blanket coverage described above). (Id. ¶ 8). At issue here is whether that exclusion, effective in 2004–07, carried over to the 2008 Policy that was in effect when one of Wyndham's non-owned aircraft crashed in August 2008.

2. 2008 Policy & Wording Change

In all of the relevant Policies' Endorsements, Wyndham is referred to as an “Insured Owner.” The coverage issue arises from the 2008 Policy Endorsement's expanded use of another defined term, the “Named Insured.” (Id. ¶¶ 18, 26, 30, 34, 38). To understand the issue, it is necessary to compare the 2004–07 policy language with the 2008 language.

From 2004 through 2006, the Policies' Declarations section listed only “Jet Aviation Holdings, Inc.” as “Named Insured.” In 2007 and 2008, the Declarations listed only “Jet Aviation International, Inc.” as “Named Insured.” (See Tomlinson Decl., Ex. A Pt. 1 at ILNAT002576; Ex. B at ILNAT003294; Ex. D at MARSH000233; Ex. G. Pt. 1 at ILNAT030564; Ex. I Pt. 1 at ILNAT030884).²

From 2004 through 2007, the Policies' Endorsements contained the following language:

1) Jet Aviation Business Jets, Inc. has entered into an Aircraft Management Agreement with the person(s) or organization(s) described below and referred to as “Insured Owner”: [list, including Wyndham]³

2) The definition of Named Insured is extended to include the person(s) or organization(s) described in Item 1 of this endorsement....

4) The insurance afforded by this policy for the interest of the “Insured Owner” described in Item 1. of this endorsement shall not be invalidated by any act or neglect of Jet Aviation Business Jets, Inc. listed in Item 1 of the policy Declarations provided that the “Insured Owner” described in Item 1. of this endorsement did not consent to such act or neglect which would otherwise invalidate the insurance provided by this policy or that the “Insured Owner” described in Item 1. of this endorsement had no knowledge that such act or neglect to which they consented would invalidate the insurance provided by this policy.

The insurance afforded by this policy for the interest of the Jet Aviation Business Jets, Inc. listed in Item 1 of the policy Declarations shall not be invalidated by any act or neglect of the “Insured Owner” described in Item 1. of this endorsement provided that the Named Insured listed in Item 1. of the policy Declarations did not consent to such act or neglect which would otherwise invalidate the insurance provided by this policy.

5) The insurance afforded by this policy for the interest of the “Insured Owner” described in Item 1. of this endorsement or Jet Aviation Business Jets, Inc. (as fully described in Item 1 of the Declarations Page) is extended to other Aircraft insured under this policy but excluding any Non–Owned Aircraft unless such Non–Owned Aircraft is operated by or used at the direction of Jet Aviation Business Jets, Inc. ...

(Id. ¶¶ 26, 30, 34, 38) (emphasis added for reasons explained below).

In 2008, Jet proposed removing the reference to “Jet Aviation Business Jets, Inc.” from paragraphs 4 and 5 of the Endorsement, and substituting the already-defined term, “Named Insured.” (Id. 145). Illinois National agreed to the change. The language of the 2008 Endorsement was therefore revised to read as follows:

1) Jet Aviation Business Jets, Inc. has entered into an Aircraft Management Agreement with the person(s) or organization(s) described below and referred to as “Insured Owner”: [list, including Wyndham]

2) The definition of Named Insured is extended to include the person(s) or organization(s) described in Item 1 of this endorsement....

4) The insurance afforded by this policy for the interest of the “Insured Owner” described in Item 1. of this endorsement shall not be invalidated by any act or neglect of the Named Insured listed in Item 1 of the policy Declarations provided that the “Insured Owner” described in Item 1. of this endorsement did not consent to such act or neglect which would otherwise invalidate the insurance provided by this policy or that the “Insured Owner” described in Item 1. of this endorsement had no knowledge that such act or neglect to which they consented would invalidate the insurance provided by this policy.

The insurance afforded by this policy for the interest of the Named Insured listed in Item 1 of the policy Declarations shall not be invalidated by any act or neglect of the “Insured Owner” described in Item 1. of this endorsement provided that the Named Insured listed in Item 1. of the policy Declarations did not consent to such act or neglect which would otherwise invalidate the insurance provided by this policy.

5) The insurance afforded by this policy for the interest of the “Insured Owner” described in Item 1. of this endorsement or the Named Insured (as fully described in Item 1 of the Declarations Page) is extended to other Aircraft insured under this policy but excluding any Non–Owned Aircraft unless such Non–Owned Aircraft is operated by or used at the direction of the Named Insured. ...

(Id. ¶ 47 (emphasis added to show changed language)).

The “Named Insured” under the policy encompassed, not only Jet Aviation Business Jets, Inc., but also other Jet entities, because those entities, too, might be involved in arranging the use of non-owned aircraft for Insured Owners. (Id. ¶ 46). Paragraphs 4 and 5 of the 2004–07 Endorsement, because they...