Jadair Int'l, Inc. v. Am. Nat'l Prop. & Cas. Co.

• Docket Number: Case No. 21-CV-1103-JPS
• Decision Date: 18 October 2022
• Citation: 635 F.Supp.3d 667
• Parties: JADAIR INTERNATIONAL, INC., Plaintiff, v. AMERICAN NATIONAL PROPERTY AND CASUALTY COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of Wisconsin

635 F.Supp.3d 667

JADAIR INTERNATIONAL, INC., Plaintiff, v. AMERICAN NATIONAL PROPERTY AND CASUALTY COMPANY, Defendant.

Case No. 21-CV-1103-JPS

United States District Court, E.D. Wisconsin

Signed October 18, 2022

Doug P. DesJardins, The Pangia Law Group, Washington, DC, Kevin M. Fetherston, James T. Murray, Jr., Von Briesen & Roper, SC, Milwaukee, WI, for Plaintiff.

Corey J. Swinick, Russell A. Klingaman, Hinshaw & Culbertson LLP, Milwaukee, WI, for Defendant.

ORDER

J.P. Stadtmueller, United States District Judge

1. INTRODUCTION

On September 21, 2021, Plaintiff Jadair International, Inc. ("Jadair") filed this action, alleging claims for (1) declaratory judgment and (2) bad faith denial of benefits against Defendant American National Property and Casualty Company ("ANPAC"). ECF No. 1. On October 26, 2021, ANPAC answered Jadair's complaint, and also asserted a counterclaim for declaratory judgment against Jadair. ECF No. 5. The action presently comes before the Court on the parties' cross-motions for summary judgment. ANPAC moves for summary judgment on both of Jadair's claims, as well as for entry of declaratory judgment in its favor on its counterclaim. ECF No. 17. Jadair purports to do the same, moving for summary judgment in its favor "on all claims." ECF No. 23; see also ECF No. 22. For the reasons stated herein, the Court will grant ANPAC's motion for summary judgment on both of Jadair's claims and will grant ANPAC's motion for declaratory judgment and enter declaratory judgment in ANPAC's favor on its counterclaim. ECF No. 17. The Court will deny Jadair's motion for summary judgment and declaratory judgment. ECF No. 22.

2. LEGAL STANDARD

Under Federal Rule of Civil Procedure 56, the "court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56; Boss v. Castro, 816 F.3d 910, 916 (7th Cir. 2016). A "genuine" dispute of material fact exists when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The Court construes all facts and reasonable inferences in a light most favorable to the nonmovant. Bridge v. New Holland Logansport, Inc., 815 F.3d 356, 360 (7th Cir. 2016). In assessing the parties' proposed facts, the Court must not weigh the evidence or determine witness credibility; the Seventh Circuit instructs that "we leave those tasks to factfinders." Berry v. Chi. Transit Auth., 618 F.3d 688, 691 (7th Cir. 2010).

Under Federal Rule of Civil Procedure 57 and the Declaratory Judgment Act, 28 U.S.C. § 2201, the court has "discretionary power to issue declarations regarding the rights and other legal relations of any interested party seeking such declaration," so long as it is presented with an "actual controversy between the parties." Murillo v. Kohl's Corp., 197 F. Supp. 3d 1119, 1136 (E.D. Wis. 2016) (citations omitted). An "actual controversy" is one that is "definite and concrete, touching the legal relations of parties having adverse legal interests"; it is not "an opinion advising what the law would be upon a hypothetical state of facts." Id. (citations omitted). The Court has no doubt that this case presents an actual controversy. Once it is established that the court is presented with an actual controversy, the Seventh Circuit teaches that "the standards generally to be applied in exercising discretion to hear a declaratory judgment action are whether a declaratory judgment will settle the particular controversy and clarify the legal relations in issue." NUCOR Corp. v. Aceros Y Maquilas de Occidente, S.A. de C.V., 28 F.3d 572, 579 (7th Cir. 1994) (citations omitted). Factors relevant to these considerations are:

(1) whether the judgment would settle the controversy;

(2) whether the declaratory judgment action would serve a useful purpose in clarifying the legal relations at issue;

(3) whether the declaratory remedy is being used merely for the purpose of "procedural fencing" or "to provide an arena for a race for res judicata";

(4) whether the use of a declaratory action would increase friction between our federal and state courts and improperly encroach on state jurisdiction; and

(5) whether there is an alternative remedy that is better or more effective.

Id.

Here, a declaratory judgment will resolve the parties' "uncertainty and insecurity concerning [their] legal relationship." Id. It will also "serve the useful purpose of settling the contractual relationship[ ]." Id. Neither party has presented any evidence concerning "procedural fencing" or "a race for res judicata"; nor is there any allegation that deciding this case would upset the balance between federal and state court jurisdiction. Finally, neither party has presented any evidence of an alternative remedy that is better or more effective. Id. (finding "no reason to disturb the district court's decision to adjudicate the claim for declaratory relief" where neither party presented evidence against the court exercising such discretion, including evidence of a better alternative remedy). Indeed, neither party argues at all that the Court should decline to exercise its jurisdiction over their respective declaratory judgment claims. Consequently, the Court will exercise its discretion over the respective declaratory judgment claims and will adjudicate them in accordance with the terms of this Order.

3. RELEVANT FACTS¹

3.1 The Policy

Jadair is a manufacturer of reclaiming and water clarification systems and is located in Port Washington, Wisconsin.² ANPAC issued an Aircraft Insurance Policy, Policy No. AC-01496-03 (the "Policy") to Jadair and its individual executive officers and shareholders with an effective date of June 18, 2019 through June 18, 2020 for a 1978 Cessna P201N Centurion aircraft (FAA Registration No. N1JA) (the "Aircraft").³ Jadair's owner and president, David Lee Schmutzler ("Schmutzler"), was the pilot of the Aircraft from at least 2012 through his death in 2020.

Prior to ANPAC's issuance of the Policy, on or about June 8, 2019, Schmutzler sent ANPAC an application for insurance together with his pilot history form through his aviation insurance agent. The agent forwarded the forms to the underwriter for ANPAC. ANPAC had previously communicated to Jadair during prior coverage years that it required verification of a valid medical certificate to issue a policy. In his pilot history form, Schmutzler disclosed that he had a special issuance, second-class medical certificate that he had received from the Federal Aviation Administration ("FAA")⁴ in August 2018. He further disclosed that he had a waiver on his medical certificate due to an "A-fib Pacemaker 2012." The Policy was bound on June 17, 2019. At the time the Policy was issued, Schmutzler possessed a valid special issuance, second-class medical certificate from the FAA.

Item 9 of the "Coverage Identification Page" of the Policy ("Item 9") reads as follows:

9. REQUIREMENTS FOR THE PILOT FLYING THE AIRCRAFT: The Aircraft must be operated in flight only by a person having the minimum qualifications shown below. The pilot must have a current and valid (1) medical certificate, (2) flight review and (3) pilot certificate with necessary ratings, each as required by the FAA for each flight. THERE IS NO COVERAGE IF THE PILOT DOES NOT MEET THESE REQUIREMENTS.

AS ENDORSED

"Part One" of the Policy, in turn, provides the following provisions:

Part One. GENERAL PROVISIONS AND CONDITIONS

. . .

3. Requirements for the Pilot Flying the Aircraft

You must make certain that the pilot operating the aircraft in flight meets the requirements shown in Item 9 of the Coverage Identification Page. There is no coverage under the policy for any accident or occurrence involving operation of the aircraft in flight if the pilot does not meet these requirements.⁵

The "Requirements for the Pilot Flying the Aircraft" endorsement to Item 9 (the "Endorsement") provides the following:⁶

Image materials not available for display.

Finally, Part Two of the Policy includes the following provision:

Part Two. AIRCRAFT PHYSICAL DAMAGE COVERAGE

. . .

4. What We Will Not Pay

We will not pay for physical loss of or damage to the aircraft:

Pilots and Use

a. Unless the requirements regarding Pilots in Item 9 of the Coverage Identification Page and Use (Item 10) are met . . . .

3.2 The Collision

On May 15, 2020, Schmutzler, as the sole occupant, piloted the Aircraft in Burlington, Wisconsin. Schmutzler crashed the Aircraft into the terrain located near the Burlington Municipal Airport (the "Collision"). Schmutzler died from injuries related to the Collision. The Collision resulted in first-party claims by Jadair for physical damage to the Aircraft and medical expenses.⁷ The instant lawsuit involves these first-party claims; it does not involve any third-party plaintiffs or third-party claims.

3.3 Insurance Claim and Investigation

Schmutzler's last special issuance, second-class medical certificate was the one he obtained in August 2018 and reported to ANPAC in June 2019, when he applied for and was issued the Policy. That medical certificate expired on August 31, 2019.⁸ Schmutzler's efforts thereafter to obtain a new medical certificate were unsuccessful. Consequently, on May 15, 2020, the date of the Collision, Schmutzler did not have a valid medical certificate, as required by the FAA.

After the Collision and Schmutzler's death, Jadair submitted a claim to ANPAC for physical damages to the Aircraft. ANPAC assigned a third-party adjuster to the claim ("Plumley"). In his initial report, Plumley focused on Schmutzler's lack of a valid and current medical certificate at the time of the Collision. Specifically, in his June 1, 2020 report, Plumley noted, "I have located information on the FAA website confirming a Commercial Pilot License, however no medical information was listed." In his last...