Monarch Ins. Co. of Ohio v. POLYTECH INDUSTRIES

• Decision Date: 06 March 1987
• Docket Number: Civ. A. No. 84-115-ATH.
• Citation: 655 F. Supp. 1058
• Parties: The MONARCH INSURANCE COMPANY OF OHIO, and United States Fire Insurance Company of Pittsburg Pennsylvania, Plaintiffs, v. POLYTECH INDUSTRIES, INC., Gerald S. Cook, Leonard D. Pace, Mrs. Leonard D. Pace, Malvin R. Wade, Pamela Wade, and T. Dean Rabitsch, Defendants.
• Court: U.S. District Court — Middle District of Georgia

655 F. Supp. 1058

The MONARCH INSURANCE COMPANY OF OHIO, and United States Fire Insurance Company of Pittsburg Pennsylvania, Plaintiffs, v. POLYTECH INDUSTRIES, INC., Gerald S. Cook, Leonard D. Pace, Mrs. Leonard D. Pace, Malvin R. Wade, Pamela Wade, and T. Dean Rabitsch, Defendants.

Civ. A. No. 84-115-ATH.

United States District Court, M.D. Georgia, Athens Division.

March 6, 1987.

Thomas J. Strueber and Michael J. Athans, Lord, Bissel & Brook, E. Speer Mabry & Lawrence J. Hogan, Henning, Chambers & Mabry, Atlanta, Ga., for plaintiffs.

A. Sidney Parker, J. Lynn Rainey, Awtrey & Parker, P.C., Marietta, Ga., Hubert C. Lovein, Jr., Jones, Cork & Miller, Macon, Ga., for defendants.

FITZPATRICK, District Judge.

Plaintiff Monarch Insurance Company filed suit in this court seeking a declaratory judgment to determine its liability under an aviation insurance policy. Pending before the court are cross motions for summary judgment. The first motion was filed by Plaintiff Monarch Insurance Company, joined by Plaintiff-intervenor United States Fire Insurance Company.¹ Defendant Polytech Industries, Inc., the policyholder, filed a cross motion for summary judgment jointly with defendants Gerald S. Cook and T. Dean Rabitsch. Defendants Leonard D. Pace, Mrs. Leonard D. Pace, Malvin R. Wade, and Pamela Wade joined in filing a separate cross motion for summary judgment. Also pending is Plaintiff's motion to strike certain portions of the affidavit of Gerald S. Cook. The court has concluded that no genuine issues of material fact exist, and that this action is appropriate for disposition by summary judgment. Fed.R. Civ.P. 56.

I. MATERIAL AND UNDISPUTED FACTS

On July 27, 1983, a Cessna 177B Cardinal Aircraft, FAA Registration Number N3493T, crashed shortly after takeoff from the Greene County Airport. At the time of the crash, Malvin Wade, Gerald Cook, Pamela Wade and Leonard Pace were on board the aircraft. The aircraft is a single engine, four seat, fixed gear aircraft owned by Polytech Industries, Inc. The purpose of the flight was a sales demonstration for Malvin Wade, a prospective purchaser of the plane. Gerald Cook was, at the time of the crash, the Executive Vice-President of, and a shareholder of, Polytech. Cook, a named insured under the policy insuring the plane, was on board to demonstrate the plane for purposes of sale. In the Factual Report of the accident, prepared by the National Transportation Safety Board, Cook stated that the aircraft "had not been flown for the past several months preceding the accident but had been run up occasionally to keep the battery charged and oil distributed to the upper engine parts." Exhibit "A", Responsive Brief of Plaintiff, Feb. 6, 1986, at 0016. T. Dean Rabitsch was, at the time of the crash, the President and only other shareholder of Polytech. Rabitsch was the other named insured under the policy in question.² He is currently the sole shareholder of Polytech Industries, but he was not on board at the time of the crash. Malvin Wade was employed as a Delta pilot at the time of the crash, and was not an officer or employee of, or under contract with, Polytech Industries.

Immediately prior to the accident, Malvin Wade occupied the left front seat of the aircraft. He manipulated the aircraft controls at all times during the brief period prior to the accident. Gerald Cook was occupying the right front seat of the aircraft when the crash occurred. Cook did not manipulate the aircraft controls during the flight, but he did provide Wade with verbal advice about certain aspects of the aircraft's operation. The official report of the accident, prepared by the National Transportation Safety Board, indicated that Gerald Cook was the "pilot in command." See Exhibit "A", Brief of Plaintiff, Feb. 6, 1986 at 006-008. See also Depo. of Cook at 32-33; Depo. of Wade at 26, 27. As a result of the crash, the four occupants of the aircraft were injured in varying degrees and the aircraft was destroyed.

The craft was insured under Policy No. CC169057 issued by Monarch Insurance. The pertinent provisions of the policy for the purposes of these summary judgment motions are as follows:

(a) On the declarations page of said policy, under Item No. 4, DESCRIPTION OF AIRCRAFT, the policy provides that "The insured represents that each of the aircraft described in this policy is licensed under a `Standard Airworthiness Certificate'..."

(b) Item 6 on the declarations page, under the heading PILOTS, provides that "The coverage afforded by this policy shall not apply unless the aircraft is operated in flight by the following pilots warranted they hold valid and effective pilot and medical certificates with ratings as required by the Federal Aviation Administration for the flight involved: See Endorsement No. 1." Endorsement No. 1 is an Approved Pilot's Endorsement, and the portion of said endorsement pertaining to the Cessna Cardinal aircraft provides that "It is hereby understood and agreed that the coverage afforded by this policy shall not apply while the aircraft is operated in flight by other than the following pilots: (I) For single engine, fixed gear aircraft: warranted they hold valid and effective pilot and medical certificates with ratings as required by the Federal Aviation Administration for the flight involved: Gerry Cook, T. Dean Rabitsch, and any private or commercial pilot with a minimum of 300 total logged flying hours, of which not less than 10 hours shall have been in the same make and model aircraft as insured."

(c) Under Part I of Monarch's policy, Exclusion (h) provides that the policy does not apply "to the liability of any person acting as a pilot of the aircraft except the Named Insured or any officer or employee of the Named Insured while acting within the scope of his duties as such or any pilot under contract to serve the Named Insured, as a pilot, while in the course of such service."

(d) Also under Part I, Exclusion (i) provides that the policy does not apply "to the liability of any insured who operates or permits the operation of the aircraft: (i) in violation of its Federal Aviation Administration Airworthiness certificate ..."

(e) Under Part I, Exclusion (1) provides that: This policy does not apply "under coverages A, B, C and D bodily injury and property damage: (a) For any claim or that portion of any award or judgment for punitive damages ..."

(f) Under Part I of Monarch's policy, Exclusion (c) provides that the policy does not apply "to bodily injury sustained by any Insured or by the crew or pilot."

(g) Under Part III of Monarch's policy, Exclusion (f) provides that the policy does not apply "to loss occurring while the aircraft is: (i) operated in flight in violation of the terms of its Federal Aviation Administration Airworthiness Certificate".

At the time of the crash, the aircraft had not been through the annual inspection required by the Federal Aviation Administration for the maintenance of a valid Airworthiness Certificate. Furthermore, at the time of the crash, Gerald Cook had not undergone a biennial flight review and medical examination as required by the Federal Aviation Administration for the maintenance of a valid pilot certificate. Malvin Wade had a valid pilot certificate, but had not logged ten hours as first in command in a Cessna 177. Although Monarch Insurance has not proven a causal connection between these three factors and the crash, neither have the defendants proven that there was no causal connection. A determination of the cause of the crash is not necessary for the court's ruling.

II. CONCLUSIONS OF LAW

A. Airworthiness Certificate

The Federal Aviation Administration Regulations provide that "no person may operate an aircraft unless, within the preceding 12 calendar months it has had—(1) an annual inspection in accordance with Part 43 of this chapter and has been approved for return to service by a person authorized by § 43.7 of this chapter; or (2) an inspection for the issuance of an airworthiness certificate. 14 C.F.R. § 91.169(a) (1986). The Federal Aviation Regulations also provide that airworthiness certificates are effective only "as long as the maintenance, preventive maintenance, and alterations are performed in accordance with Parts 43 and 91 of this chapter ..." 14 C.F.R. § 21.181(a)(1) (1986) (emphasis added). On the date of the crash, the aircraft in question had not been inspected within the preceding 12 months in accordance with these regulations. Depo. of Cook at 6-7. Depo. of Rabitsch at 15-17. Thus, the requisite "maintenance" under 14 C.F.R. § 21.181 had not been performed.

The "Exclusions" section from the policy in question unambiguously provides that "This policy does not apply under Part I (Liability): (i) to the liability of any Insured who operates or who permits the operation of the aircraft: (i) in violation of its Federal Aviation Administration Airworthiness Certificate or Operational Record...." See Exhibit "A", Plaintiff's Petition for Declaratory Judgment. The "Exclusions" section of Part III contains virtually identical language in Subsection (f) pertaining to physical loss or damage to the aircraft. It is the opinion of the court that the Insured's failure to perform an annual inspection pursuant to the Federal Aviation Regulations constituted a "violation" of the Airworthiness Certificate, thus suspending coverage under the insurance policy.

The court must apply the law of Georgia in this diversity case. There are no Georgia cases directly on point, although Georgia law contains many cases holding that an insurance company may rightfully suspend coverage under an aviation insurance policy in light of the insured's violation of a specific policy exclusion. See, i.e., Grigsby v. Houston Fire and Casualty Insurance Co., 113 Ga.App. 572, 148 S.E.2d 925 (1966); Farmers and Merchants Bank v. Ranger Insurance Co., 125 Ga.App. 166, 186 S.E.2d 579 (1971). The court's ruling on this issue is in...