Lineas Aereas Colombianas Exp. v. Travelers Fire I. Co., 16857.

• Decision Date: 30 July 1958
• Docket Number: No. 16857.,16857.
• Citation: 257 F.2d 150
• Parties: LINEAS AFREAS COLOMBIANAS EXPRESAS, Appellant, v. The TRAVELERS FIRE INSURANCE COMPANY, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

257 F.2d 150 (1958)

LINEAS AFREAS COLOMBIANAS EXPRESAS, Appellant, v. The TRAVELERS FIRE INSURANCE COMPANY, Appellee.

No. 16857.

United States Court of Appeals Fifth Circuit.

June 30, 1958.

Rehearing Denied July 30, 1958.

Claude Pepper, Walter A. Apfelbaum, Miami, Fla., Clarence Brown, Miami, Fla., Pallot, Cassel & Marks, Miami, Fla., for appellant.

David W. Dyer, Miami, Fla., David L. Corbin, New York City, Smathers, Thompson & Dyer, Miami, Fla., Haight, Gardner, Poor & Havens, New York City, of counsel, for appellee.

Before CAMERON, JONES and BROWN, Circuit Judges.

JOHN R. BROWN, Circuit Judge.

The question here is whether the District Court, after discharging the deadlocked jury, erred in entering j.n.o.v. on the Insurer's motion, Fed.Rules Civ.Proc. rule 50(b), 28 U.S.C.A., and thus determining as a matter of law that the total loss of a C-46 airplane at Leon, Mexico, June 18, 1955, was not covered under the Insurer's All Risk Hull Policy. Lace,¹ the owner and Assured, seeks reversal and rendition on its counter motion for instructed verdict, and at all events a new trial.

The plane crashed during an attempted take-off at Leon, Mexico, while being flown by two Mexican pilots. For our purposes, as conflicts would be a jury matter, we must assume, as does the Insurer in its argument, that this particular flight was contrary to Lace's instructions since its representative, Captain Kiss, was not then aboard as required and had indeed categorically told the Mexican pilots that they must not again fly the ship in his absence. Despite this assumption, the Insurer insists that there was no liability for three principal reasons under the policy. The first was that the policy provided² affirmatively that it should apply only while the plane was being flown by pilots in the regular employ of the Assured approved by the Aviation Managers and who held requisite United States CAB certificates or comparable licenses issued by Colombian air authorities, and neither the Mexican pilot nor co-pilot qualified on either score. Second, that liability was excluded³ for operations with the knowledge and consent of Assured which were unlawful and violated federal civil Air Regulations and this had occurred here as carriage of passengers for hire and flight on this route was contrary to the certificate originally issued by the Colombian authorities. And third, that if, as Lace claimed, it was a conversion or an unauthorized taking, then it was excluded⁴ under the usual provision relating to unlawful conversions by "mortgagee, vendee, lessee, or other person in lawful possession" of the plane, since it was in the possession of the Employer of the Mexican pilots.

To this Lace makes a comprehensive answer: if the flight was contrary to its instructions, the use of uncertified, unapproved pilots and the making of an unauthorized passenger flight on an unauthorized route was not with its knowledge and consent, and such action was at least conversion by persons other than those described in VIII(d), note 4, supra.

Lace was the owner of this plane which was registered under Colombian law⁵ as HK-808. It was, of course, a plane owned and registered under the laws of Colombia and operated in accordance with its laws and regulations that was the subject of this insurance. There is not the slightest suggestion that the Insurer meant to take on the risks to a plane of any other nationality or leave it to the Assured to determine whether operational risks or hazards from flight under any other flag or control were altered whether favorably or unfavorably.

With this as a point of departure the facts will, we believe, establish conclusively that Lace by its own acts put the plane in operation wholly beyond the scope of the policy so that it was effectively suspended.

In May 1955 Lace was approached by LTV⁶ to whom it had previously sold a C-46 which was then temporarily out of service for repairs, seeking a lease of this plane. An oral agreement, perhaps outlined in a unilateral letter to Captain Kiss, the original of which was supposedly burned in the plane's destruction and copies of which were never located, was entered into. Under it, the plane was to be made available to LTV for thirty days' use in the carriage of laborers on intra-Mexican flights. It was nothing less than a joint operating venture as LTV, the party having the basic transportation contracts covering the laborers, was to supply the business, collect all revenues, pay all expenses, and then divide the profits on a 50/50 basis with Lace for the use of its plane. And in this analysis, we can assume that an essential ingredient of the arrangement was that Captain Kiss was to be in charge of the plane and aboard at all times while it was in flight.

But even with this provision, the arrangement had several decisive implications and consequences. Lace knew, for example, that under Mexican law the plane would have to be registered as a Mexican plane. It knew also that to be so registered, it would have to be deemed the property of a Mexican national or entity, and that to be eligible for temporary entry and operation, the plane would have to be piloted by Mexican pilots. All such steps were taken, as Lace knew would be the case, by its co-venturer-partner LTV. The Mexican owner was shown to be Henriquez, the moving figure in LTV, the new number⁷ XA-LID was assigned and painted on the plane in lieu of HK-808 and, as Lace expressly knew, LTV represented that the plane would be flown by a Mexican pilot whose name was stated in the various papers as Captain P. A. Alfredo Rivero G. who was, it turned out, the pilot at the time of the crash, June 18.

All of these things inexorably resulted in a violation of basic assumptions of the coverage afforded by this policy. It first altered the nationality of the plane and that action committed it to an operation contrary to Colombian law. For under Colombian law coexistence of two or more registries was forbidden and, worse, transfer of an aircraft to a foreign registry was prohibited unless expressly approved. Next, under its "Certificate of Air Navigability" issued by the Department of Civil Aeronautics of Colombia, the use of HK-808 was expressly limited to "cargo service" and no authorization or permit was granted by the Colombian authorities to use it for the transportation of passengers or to operate it over the route on which it was being flown at the time of the accident or over which it was known it would fly at the time Lace made the arrangement. Finally, the law of Colombia prescribed that all flight personnel on an aircraft of Colombian registry were required to have licenses "issued by the general direction of Civil Aeronautics." Lace knew, of course, that Mexican pilots and copilots would be required during the plane's stay in Mexico, and neither of them held the requisite Colombian license.

In our view, this made the subsequent activities quite immaterial. This included the testimony which the jury could credit that before the plane was flown from Miami to Mexico, Lace specifically prescribed that Captain Kiss should at all times be in charge of and aboard the plane while in flight, and that, after the plane began its intra-Mexican operations, Captain Kiss emphatically renewed this demand at least two times. The last occasion for this, according to him, was just prior to the time he left Mexico about June 15 to go to California to get his immigrant status clarified, and again while in California when, to his amazement, on the night before the crash he learned in a long distance request from Captain Rivero for spare parts, that the plane had made a trip during his absence. Captain Kiss then again demanded of the pilots that the plane not be flown and he emphasized this to Henriquez as well. In doing this, we go the next step and assume that despite this last demand by Captain Kiss, LTV undertook to fly the plane on the flight which turned out to have been its last one resulting in its total destruction and the death of some 18 passengers.

These matters are of no consequence because, in our judgment, this plane for this period of time was no longer covered. What the factors are which insurers consider to be of underwriting importance is not for us to assay. Canal Insurance Co. v. Dougherty, 5 Cir., 247 F.2d 508; Maryland Casualty Co. v. Southern Farm Bureau Casualty Insurance Co., 5 Cir., 235 F.2d 679; C. E. Carnes & Co. v. Employers' Liability Assurance Corp., 5 Cir., 101 F.2d 739. But we have here no hesitancy in saying as a matter of law that all of these actions related to matters which this policy reflected were considered to have, and did have, genuine relevance. The Underwriter insured, so it thought, a Colombian plane, but the owner with its own "knowledge and consent" had voluntarily changed that. It was now a Mexican plane. In the course of doing so, it had violated the underlying assumption of the policy and the laws of its own country and that of the plane's registry. The Insurer underwrote, or so it thought it had, a plane that would be operated by persons qualified under the Colombian law and in accordance with its Colombian Certificate of Air Navigability. The owner, again by voluntary and conscious action, put it into a service in which it knew the plane would be operated, in part at least, by pilots or copilots not holding Colombian licenses and would be engaged in a service having hazards and risks quite different from those of a Colombian air freight carrier.

The result of this was to change altogether the whole character of the risks which were underwritten. With these major changes between the nature of the exposure undertaken and that which the Assured's voluntary conduct precipitated, it will not do for the Assured to say that with respect to this loss these admitted violations or actions were of no consequence. To do so would first amount to allowing Judge or Jury, unaffected by the...