Macalco, Inc. v. Gulf Ins. Co.

• Decision Date: 11 April 1977
• Docket Number: Nos. 9701,9702,s. 9701
• Citation: 550 S.W.2d 883
• Parties: MACALCO, INC., a corporation, and Mary J. McDowell, Administratrix of the Estate of Orville McDowell, Deceased, Plaintiffs-Respondents, v. GULF INSURANCE COMPANY, a corporation, Defendant-Appellant-Respondent, and The Aetna Casualty and Surety Company, a corporation, Defendant-Appellant.
• Court: Missouri Court of Appeals

Page 883

550 S.W.2d 883

MACALCO, INC., a corporation, and Mary J. McDowell, Administratrix of the Estate of Orville McDowell, Deceased, Plaintiffs-Respondents, v. GULF INSURANCE COMPANY, a corporation, Defendant-Appellant-Respondent, and The Aetna Casualty and Surety Company, a corporation,

Defendant-Appellant.

Nos. 9701, 9702.

Missouri Court of Appeals, Springfield District.

April 11, 1977.

Motions for Rehearing or Transfer Denied April 29, 1977.

Application to Transfer Denied June 14, 1977.

B. H. Clampett, William A. R. Dalton, Daniel, Clampett, Ellis, Rittershouse & Dalton, Springfield, for plaintiffs-respondents.

Glenn A. Burkart, Mann, Walter, Burkart, Weathers & Walter, Springfield, for defendant-appellant-respondent.

Bob J. Keeter, Schroff, Keeter & Glass, Inc., Springfield, for defendant-appellant.

Before STONE, P. J., and HOGAN and TITUS, JJ.

TITUS, Judge.

Macalco, Inc. (Macalco) owned an airplane which crashed in a nighttime flight and was destroyed. At the time of the occurrence, the plane was being piloted by Macalco's president, Orville McDowell (McDowell), and carrying two passengers. All of the occupants perished. When the tragedy happened, Macalco and McDowell were insureds in an aircraft hull and liability policy issued by Gulf Insurance Company (Gulf) and in an excess indemnity (umbrella) policy issued by The Aetna Casualty And Surety Company (Aetna). Gulf denied coverage. Macalco and the administratrix of the estate of the deceased pilot, who had been sued for the wrongful deaths of the passengers, brought this action against Gulf, Aetna and the suing passengers' widows for a declaration of insurance coverages and liabilities. Following a bench trial the court ruled, in specifics to be detailed anon, that the policies afforded coverage for the claims arising from the crash. Gulf and Aetna filed separate appeals which have been consolidated. There is no conflict of consequence in the evidence and much of it is documented.

Gulf's policy provided coverage for (1) bodily injury and property damage liability, (2) medical payments and (3) physical loss of and damage to the airplane. The single limit for bodily injury and property damage liability was stated under "Declarations" to be "$1,000,000 each occurrence See End. # 1". By this endorsement, entitled "Passenger Limits of Liability," it was agreed that $100,000 was Gulf's liability for bodily injury damage sustained by any one passenger per occurrence or $500,000 for all passengers per occurrence.

In the "Exclusions" section of Gulf's policy is stated: "This policy does not apply: . . . 6. Under coverages (provided by the policy) while the aircraft is in flight and . . . (d) operated by a Student Pilot unless such flight or attempted flight is with the specific advance approval of and under the supervision and control of an F.A.A. Certificated Commercial Instructor Pilot."

Known as the "Pilot Clause" and included in "Part Two" of Gulf's policy under the heading of "Declarations," was the following: "7. Pilots: It is a condition hereof that such 'Flight' coverage as is provided by the policy applies only while the aircraft is being operated by the following specified Pilot(s) while holding proper Certificate(s) and Rating(s) as required by the Federal Aviation Agency for the flight involved:

(a) (x) Orville McDowell or Jack D. Cotton

(b) ( ) Any Student Pilot

(c) ( ) Any Private Pilot or ( ) any Commercial Pilot, who has logged Solo or Pilot in Command flight time of at least: ______ total hours during the past ______ years; ______ hours in Multi-engine aircraft during the past ______; . . . ." ¹

Condition 24 of Gulf's policy stated: "Misrepresentation and Fraud. This entire policy shall be void if the insured has concealed or misrepresented any material fact or circumstance, whether under the declarations or otherwise, concerning this insurance or the subject thereof, or in case of any fraud, attempted fraud or false swearing by the insured touching any matter relating to this insurance or the subject thereof, whether before or after the loss."

The appropriate provisions of Aetna's policy will be set forth later when we consider its appeal.

Gulf's policy and Aetna's policy were written through the insurance agency of Handley-Adams, Inc. Gulf's policy covering the time of the involved crash was the successor to a similar policy Gulf had previously issued to Macalco through the agency. Both Gulf policies were issued on the written applications of Macalco. Mr. Handley of the agency testified he had known McDowell (president of Macalco) for "about a year and a half" before the crash and had served on Macalco's board of directors "for about a year and a half or two years." Handley "handled most of the insurance contracts for" Macalco and "was authorized to sign (the application) by (McDowell) for him." The first application for Gulf's previous policy was signed "Macalco, Inc. By Orville McDowell Pres." Handley said he affixed the signature per McDowell's authorization. The second application was not signed. In both forms the applicant warranted that the information and particulars contained therein were true and complete. Each of the applications represented that McDowell had been certificated or rated as a Private Pilot.

Regulations and rules promulgated by government agencies pursuant to delegation of authority from Congress have the force and effect of law and Missouri courts will judicially notice the rules and regulations adopted by such agencies, including those made by the Federal Aviation Agency (FAA). Fredrick v. Bensen Aircraft Corporation, 436 S.W.2d 765, 769-770(3, 4) (Mo.App.1968) and authorities there cited. Federal Air Regulations (14 C.F.R.) provide: " § 61.89(a) A student pilot may not act as pilot in command of an aircraft (1) That is carrying a passenger; . . . ." Under § 1, "Pilot in Command" is defined as the "pilot responsible for the operation and safety of an aircraft during flight time."

After the crash and in the course of investigating it, Gulf learned for the first time that McDowell, the pilot, did not have an FAA certification as a private pilot but held only a student pilot's certificate. By letter dated about one month after the occurrence, Gulf, in part, wrote to Macalco: "The basis for this Coverage Denial was a breach of the Pilot Warranty (Item 7 of the Declarations). In short, Orville McDowell was not properly rated and certificated for the flight involved. He was a student pilot carrying passengers at the time of the loss. In addition to the above grounds for a Coverage Denial, (Gulf) reserve(s) . . . all other grounds for a coverage denial which may now or later appear under (the) Policy . . . ." Gulf's original answer and counterclaim, among other things, asseverated it was additionally not liable on its policy because of Exclusion 6(d) and that the policy was void (Condition 24) because of the misrepresentation made as to the certification of McDowell as a private pilot. Similar averments were repeated in Gulf's amended counterclaim and its answer to plaintiffs' amended petition.

On the day following the date the Coverage Denial letter was written, Gulf sent Macalco a notice of the cancellation of its policy. ² There was no evidence to indicate whether or not Gulf had paid or tendered the unearned premium paid on the policy.

The trial court's findings of fact (excluding many facts found which have heretofore been recounted) were: McDowell, at the time of the crash, had approximately 500 logged hours of flying time in single and multi-engine aircraft, but held a student pilot certificate not a private pilot certificate; neither of the passengers in the crashed craft held an FAA certificate as a commercial instructor pilot and the flight in question was made without the advance approval thereof by, and was not under the supervision or control of, anyone certified by the FAA as a commercial instructor pilot. Nonetheless, the trial court additionally found that "McDowell was properly certificated and rated by the F.A.A. for the flight involved." Also, the court found that no causal connection was shown between McDowell's certification as a student pilot and the crash or between the fact that the flight in question was made without the advance approval thereof by, and was not under the supervision or control of, anyone certificated by the FAA as a commercial instructor pilot and the crash.

In its conclusions of law as to Gulf, the court declared: The coverage provided by Gulf's policy was not avoided, defeated, excluded or impaired by item 7 of the Declarations (the Pilot Clause), or by Exclusion 6(d) or by Condition 24. The court determined that Gulf was liable to Macalco for loss of the aircraft in the sum of $32,750 and to the administratrix of the estate of the deceased pilot in the sum of $2,000 for funeral expenses. It also held Gulf responsible for the defense of the wrongful death actions and for any judgments entered thereon in favor of the suing widows. Likewise, Gulf was held liable to reimburse Macalco and the administratrix for expenses already incurred in defending the wrongful death suits. Finally, the court said: "The defense asserted by defendant Gulf based upon the alleged misrepresentation of the pilot status of Orville McDowell was not established by the proof. In addition, defendant Gulf was (and is) precluded, as a matter of law, from relying thereupon by reason of waiver arising from its sending notice of cancellation. Also, Handley-Adams, Inc., was an agent of Gulf in issuing the renewal policy. The knowledge of an agent is imputed to its principal. Handley knew or could have known of McDowell's certification. Gulf is, therefore, estopped from raising defenses concerning conditions of which it knew or should have known."

The trial court's conclusions of law as to Aetna were to the effect that its policy provided liability coverage for the aircraft crash with an...