Marston v. American Employers Insurance Co., No. 7617

CourtUnited States Courts of Appeals. United States Court of Appeals (1st Circuit)
Writing for the CourtALDRICH, , and McENTEE and COFFIN, Circuit
Citation439 F.2d 1035
PartiesJohn C. MARSTON, etc., Plaintiff, Appellee, v. AMERICAN EMPLOYERS INSURANCE CO., Defendant, Appellant. Rita J. WALLACE, Administratrix, et al., Plaintiffs, Appellees, v. AMERICAN EMPLOYERS INSURANCE CO., Defendant, Appellant.
Decision Date22 March 1971
Docket NumberNo. 7617,7618.

439 F.2d 1035 (1971)

John C. MARSTON, etc., Plaintiff, Appellee,
v.
AMERICAN EMPLOYERS INSURANCE CO., Defendant, Appellant.

Rita J. WALLACE, Administratrix, et al., Plaintiffs, Appellees,
v.
AMERICAN EMPLOYERS INSURANCE CO., Defendant, Appellant.

Nos. 7617, 7618.

United States Court of Appeals, First Circuit.

March 22, 1971.


439 F.2d 1036

Douglas B. Bowring, New York City, with whom Vicente M. Ydrach and Hartzell, Fernandez, Novas & Ydrach, Hato Rey, P. R., were on brief, for appellants.

Harvey B. Nachman, San Juan, P. R., with whom Gonzalez & Rodriguez and Nachman, Feldstein, Gelpi, Antonetti & Smith, San Juan, P. R., were on brief, for appellees.

Before ALDRICH, Chief Judge, and McENTEE and COFFIN, Circuit Judges.

COFFIN, Circuit Judge.

On October 28, 1967 an airplane crashed on the Island of Culebra. The plane was owned by Charles Pennock but operated by Inter-Island Airways, Inc. under a special leasing arrangement. Pennock would pilot the plane whenever he chose, but for the remainder of the time the plane was leased to Inter-Island which used it in its air taxi service and provided maintenance, inspection, and

439 F.2d 1037
storage. Inter-Island had originally owned the plane and before selling the plane to Pennock, it carried an insurance policy to cover its liability for negligent operation. At the time of the sale, Pennock's plane was removed from Inter-Island's policy and was insured under a separate policy issued by American Employers Insurance Company, the appellant, to Pennock

When the plane crashed in 1967, there were on board three passengers for hire. One, John C. Marston, survived the crash; the other two, George M. Wallace and Hans Nagler, were killed. This diversity action was brought in the District of Puerto Rico by the appellees Marston and the wives of Wallace and Nagler as administratrices of the respective estates. Included among the original defendants were Pennock, Inter-Island, and American Employers Insurance Company.1 Pennock and American instituted motions for summary judgment. Pennock successfully demonstrated that he was not liable for the crash, and the court granted his motion. American claimed that it had no obligation to defend anyone but Pennock, the named insured on the policy, but the court declined to grant American's motion for summary judgment. It found that Inter-Island's negligence was also covered by Pennock's policy with American. In the same opinion, the district court granted the plaintiffs' motion for summary judgment against Inter-Island on the issue of liability, ruling that the crash was caused by the negligence of Inter-Island's pilot.

The case was tried to a jury on the issue of damages. At the close of plaintiffs' case, Wallace's administratrix sought to amend the complaint to conform with the evidence. Missing from the complaint were any allegations concerning damages to two of the decedent Wallace's children by an earlier marriage even though evidence as to those damages had been given. American opposed the motion and cross-moved to dismiss the complaint of the Wallace and Nagler estates. American claimed that Mrs. Wallace and Mrs. Nagler had brought suit only in their representative capacities as administratrices and that under Puerto Rican law, the heirs of an estate must sue as individuals. The court granted the Wallace motion but denied American's.

After the jury determined damages, plaintiffs moved for attorneys' fees under 32 L.P.R.A. § 1461(6) and P.R.R. Civ.P. 44.4(e), which permit a court to impose fees when a party has been obstinate. The district court awarded such fees.

On appeal, American claims that the court erred in not granting its motion for summary judgment, in not dismissing the complaints of the Wallace and Nagler administratrices, and in awarding fees for obstinacy. In addition to opposing these claims, plaintiffs seek attorneys' fees plus costs for this appeal, claiming that American's claims are frivolous.

I. AMERICAN'S OBLIGATIONS UNDER THE INSURANCE CONTRACT.

The insurance contract between Pennock and American consists of three pages. The first page is entitled "Declarations", and provides the only spaces for specific entries reflecting the particular transaction. The other pages are solely devoted to standard provisions, all in fine print with no blanks for alterations or additions. The "Declarations" page requires the parties to fill in the identification, in singular, of the insured and his business, the policy period, the monetary limits of liability and the amount of premiums, a description of the aircraft covered, a specification of the purposes for which the plane will be used, and a designation of the pilots authorized to operate the plane. In short, the only provisions of the contract provided

439 F.2d 1038
by both parties are the provisions setting forth the minimum amount of information necessary to establish that the insurance applies to this particular insured

The provision on the first page labeled "Purposes" reads, in relevant part, as follows, the italicized words being typewritten:

"Item 7. Purposes. This policy applies only while the aircraft is (are) used for the purposes classified as Pleasure and Business and Special Uses.
(a) the term `Pleasure and Business\' is defined as personal, pleasure, family and business uses excluding any use of the aircraft for which a charge is made; * * *
(f) the term `Special Uses\' is defined as rental of the aircraft to Miguel Valle d/b/a Inter Island Air Service for Passenger Carrying for Hire."

Appellees claim that this clause means that Inter-Island is covered for its negligence when using the plane under the rental agreement with Pennock. They read the passage as saying that the policy "applies" to Inter-Island when it is using the plane just as fully as it "applies" to Pennock when he is using it.

American offers a counter interpretation. It says that the "Purposes" provision merely makes clear that Pennock's coverage for his negligence as a lessor out of control is not forfeited by Inter-Island's use. American draws comfort from a printed "Definition of Insured" — sometimes referred to as the ominibus clause — on another page which first includes "any person or organization legally responsible for the use of the aircraft", provided such use is with the named insured's permission, and then states that the insurance

"does not apply:
(a) to any person or organization * * * engaged in the manufacture of aircraft, aircraft engines or aircraft accessories, or operating an aircraft repair shop, airport, hangar, aircraft sales agency, commercial flying service or flying school * * *."

American relies on the reference to "commercial flying service" in the quoted clause which specifies exceptions to the blanket inclusion of organizations operating with the permission of the named insured.

These are most, not all, of the relevant "policy facts". Before we can consider any external "intent facts", we must, absent exceptional circumstances, satisfy ourselves that there is ambiguity. 3 Corbin on Contracts § 579 (1960). Before we make that effort, we deem it desirable to set forth the standard by which we test for ambiguity. That standard is influenced by the fact that the insurance policy in this case is, like many, a contract of adhesion.

In such contracts, the consensual element is sharply circumscribed. The insured is virtually without bargaining power and is generally faced with a take-it-or-leave-it purchase situation. One party, the insurer, drafts the terms of the insurance contract on standard forms. As a result, many of the provisions of the contract are one-sided; the purchaser of insurance agrees only to the price, the monetary limits of the coverage, and to the general risks covered. The remainder is unilaterally set by the insurer. Slawson, Standard Form Contracts and Democratic Control of Lawmaking Power, 84 Harv.L.Rev. 529, 533 (1971). In most instances, the insured receives the complete policy only after he has purchased the insurance. Often he cannot reasonably be expected to...

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46 practice notes
  • Windbourne v. Eastern Air Lines, Inc., No. 76 C 237
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • May 11, 1979
    ...Francisco & Texas Railway Co. v. Seale, 229 U.S. 156, 162, 33 S.Ct. 651, 57 L.Ed. 1129 (1913); Marston v. American Employers Ins. Co., 439 F.2d 1035, 1041 (1st Cir. 1971); Hunt v. Penn Central Transportation Co., 414 F.Supp. 1157, 1160 (W.D.Pa.1976); Weinstein v. Medical Center Hosp. of Ver......
  • Ivy v. Security Barge Lines, Inc., No. 76-4130
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • December 4, 1978
    ...138; Summers v. Interstate Tractor & Equipment Co., 9 Cir. 1972, 466 F.2d 42; Marston v. American Employers Insurance Co., 1 Cir. 1971, 439 F.2d 1035; Young v. Pattridge, N.D.Miss.1966, 40 F.R.D. 376, or by the existence of a possible conflict of interest among the beneficiaries requiring m......
  • Johnson v. SECRETARY OF/AND US DEPT. OF HOUSING, Civ. A. No. 77-3746.
    • United States
    • United States District Courts. 5th Circuit. United States District Court (Eastern District of Louisiana)
    • September 3, 1981
    ...Government has never raised this objection and at this late hour, I find that it has been waived. Marston v. American Employers Ins. Co., 439 F.2d 1035, 1041 (1st Cir. 1971). Both parties knew who the real party in interest was and what its claims were. Accordingly, I will grant the plainti......
  • Upjohn Co. v. New Hampshire Ins. Co., GC-809000
    • United States
    • Supreme Court of Michigan
    • October 17, 1991
    ...172 S.E.2d 518 (1970); English v. Old American Ins. Co., 426 S.W.2d 33 (Mo., 1968). 17 See, e.g., Marston v. American Employers Ins. Co., 439 F.2d 1035 (CA 1, 1971) (Puerto Rican law); Morgan v. Prudential Ins. Co., n. 16 supra; C & H Plumbing & Heating, Inc. v. Employers Mutual Casualty Co......
  • Request a trial to view additional results
46 cases
  • Windbourne v. Eastern Air Lines, Inc., No. 76 C 237
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • May 11, 1979
    ...Francisco & Texas Railway Co. v. Seale, 229 U.S. 156, 162, 33 S.Ct. 651, 57 L.Ed. 1129 (1913); Marston v. American Employers Ins. Co., 439 F.2d 1035, 1041 (1st Cir. 1971); Hunt v. Penn Central Transportation Co., 414 F.Supp. 1157, 1160 (W.D.Pa.1976); Weinstein v. Medical Center Hosp. of Ver......
  • Ivy v. Security Barge Lines, Inc., No. 76-4130
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • December 4, 1978
    ...138; Summers v. Interstate Tractor & Equipment Co., 9 Cir. 1972, 466 F.2d 42; Marston v. American Employers Insurance Co., 1 Cir. 1971, 439 F.2d 1035; Young v. Pattridge, N.D.Miss.1966, 40 F.R.D. 376, or by the existence of a possible conflict of interest among the beneficiaries requiring m......
  • Johnson v. SECRETARY OF/AND US DEPT. OF HOUSING, Civ. A. No. 77-3746.
    • United States
    • United States District Courts. 5th Circuit. United States District Court (Eastern District of Louisiana)
    • September 3, 1981
    ...Government has never raised this objection and at this late hour, I find that it has been waived. Marston v. American Employers Ins. Co., 439 F.2d 1035, 1041 (1st Cir. 1971). Both parties knew who the real party in interest was and what its claims were. Accordingly, I will grant the plainti......
  • Upjohn Co. v. New Hampshire Ins. Co., GC-809000
    • United States
    • Supreme Court of Michigan
    • October 17, 1991
    ...172 S.E.2d 518 (1970); English v. Old American Ins. Co., 426 S.W.2d 33 (Mo., 1968). 17 See, e.g., Marston v. American Employers Ins. Co., 439 F.2d 1035 (CA 1, 1971) (Puerto Rican law); Morgan v. Prudential Ins. Co., n. 16 supra; C & H Plumbing & Heating, Inc. v. Employers Mutual Casualty Co......
  • Request a trial to view additional results

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