Ill. Nat'l Ins. Co. v. Wyndham Worldwide Operations Inc.
| Decision Date | 03 August 2011 |
| Docket Number | No. 10–3833.,10–3833. |
| Citation | 653 F.3d 225 |
| Parties | ILLINOIS NATIONAL INSURANCE COMPANY, Appellantv.WYNDHAM WORLDWIDE OPERATIONS, INC.; Wyndham Worldwide Corporation; Wyndham Vacation Ownership, Inc.; and Wyndham Resort Development Corporation. |
| Court | U.S. Court of Appeals — Third Circuit |
OPINION TEXT STARTS HERE
Jeffrey W. Dillon, Andrew T. Houghton (Argued), Timothy D. Kevane, Aaron F. Mandel, Sedgwick, New York, NY, Counsel for Appellant.Eric Jesse, Michael D. Lichtenstein (Argued), Lowenstein Sandler, Roseland, NJ, Christopher S. Porrino, Lowenstein Sandler, Roseland, NJ, Counsel for Appellees.Before: FUENTES, FISHER and NYGAARD, Circuit Judges.
Appellant Illinois National Insurance Company (“Illinois National”) and Appellees Wyndham Worldwide Operations, Inc., Wyndham Worldwide Corporation, Wyndham Vacation Ownership Inc., and Wyndham Resort Development Corporation (collectively “Wyndham”) are in a contract dispute over insurance coverage. In resolving this dispute, we must decide whether the doctrine of mutual mistake allows reformation of a contract against a party that did not participate in the negotiations.
Illinois National filed suit seeking a declaratory judgment that a 2008 plane crash did not trigger coverage under an aircraft fleet insurance policy that it issued to Jet Aviation Business Jets, Inc. (“Jet Aviation”). Wyndham filed a counterclaim seeking coverage and filed motions for summary judgment and to dismiss Illinois National's complaint. The United States District Court for the District of New Jersey granted Wyndham's motion to dismiss Illinois National's complaint as well as Wyndham's motion for summary judgment on its counterclaim. On appeal, Illinois National argues that the District Court erred both when it determined that mutual mistake can only serve as a basis for reformation in an action against a bargaining party and when it held that Illinois National had insufficiently pled mutual mistake. We agree and hold that New Jersey law allows reformation on the basis of mutual mistake against a party that did not participate in the negotiation of a contract and that Illinois National sufficiently pled mutual mistake.
For the following reasons, we conclude that the District Court's grant to Wyndham of summary judgment was improper, as was its dismissal of Illinois National's complaint. Accordingly, we will reverse the District Court's grant of summary judgment and dismissal and remand for further proceedings consistent with this opinion.
Illinois National issues insurance products and services. Jet Aviation offers aircraft maintenance, completions and refurbishment, engineering, and fixed base operations, along with aircraft management, charter services, aircraft sales and personnel services. Wyndham is a recognized service leader in the hospitality industry.
Illinois National provided insurance coverage to Jet Aviation and to some of Jet Aviation's clients, so long as Jet Aviation managed the client's aircraft and aircraft usage. Jet Aviation managed an aircraft owned by Wyndham and provided insurance for that aircraft pursuant to the terms of a series of Aircraft Management Services Agreements.
In 2001, Wyndham's predecessor, Cendant Operations, Inc., and Jet Aviation entered into the first of these Aircraft Management Services Agreements. Among other things, the agreements obligated Jet Aviation to provide domestic flight planning and scheduling, flight crew staffing, and management of scheduled and unscheduled maintenance for Wyndham's aircraft. If Wyndham's aircraft was not available when needed, Jet Aviation could arrange for an aircraft for Wyndham's use from another source. Pursuant to the Aircraft Management Services Agreements, Jet Aviation agreed to procure insurance for Wyndham's aircraft while it was managed by Jet Aviation. The agreement also stated that it would provide Wyndham with insurance coverage when Wyndham used non-owned aircraft at the direction of Jet Aviation.
For successive one-year periods beginning in 2004, and through the 2008 policy year, a series of aircraft fleet management insurance policies were purchased by Jet Aviation and issued by Illinois National. Each was negotiated by Illinois National and Jet Aviation, directly and through their agents. The policies contained endorsements that provided coverage for Jet Aviation's clients. These clients were identified on the endorsements as “Insured Owners” and also as “Named Insured.” 1 The 2004–2007 Policies contain the following Managed Aircraft 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....
In the negotiations leading up to the 2008 policy, Jet Aviation proposed new language for the endorsement. The revised endorsement, which was integrated into the 2008 policy, replaced “Jet Aviation” with “Named Insured.” It provided:
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 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. at A1235.)
Jet Aviation and Illinois National claim that the drafting change was designed to make it more clear that entities affiliated with Jet Aviation were covered. Both contracting parties have stated that they believed that it did not expand coverage to entities that were unaffiliated with Jet Aviation, such as Wyndham. However, the modification, as written, appears to provide third parties with coverage when using non-owned aircraft without Jet Aviation's involvement.
Despite being drafted to seemingly provide expanded coverage, Wyndham's premium declined from $61,250 for the 2007 policy to $45,367 for the 2008 policy. Wyndham did not know about the change made to the endorsement for 2008 and continued to obtain non-owned aircraft liability coverage through a policy issued by StarNet Insurance Company (“StarNet”).2
It is undisputed that neither Wyndham nor its brokers was involved in the negotiations or drafting of the revised provisions of the endorsement. It was negotiated between Illinois National and Jet Aviation.
In August 2008, Jason Ketcheson, a Wyndham employee, rented a Cessna 172 from Aviation Adventures to travel to a work-related meeting in Oregon. Jet Aviation had no involvement in this transaction. Ketcheson crashed into a house in Gearhart, Oregon, killing five people. As a result, various claimants have sued Wyndham for damages. The crash may have triggered coverage under the language of the 2008 policy.
Illinois National filed suit against Wyndham seeking a declaratory judgment that the 2008 policy did not cover claims arising out of the August 2008 Cessna crash. It argued that the District Court should find that the 2008 policy, as written, did not provide coverage to Wyndham, or alternatively, that if the contract as written would provide coverage, the District Court should exercise its equitable power of reformation because there had been mutual mistake in the drafting of the contract between Illinois National and Jet Aviation. Wyndham filed a counterclaim seeking coverage under the 2008 policy for the August 2008 Cessna crash, filing a motion to dismiss Illinois National's claim and a motion for summary judgment. Both sides filed statements of material facts not in...
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