Morrison v. Excess Ins. Co., Ltd.
| Decision Date | 30 August 1990 |
| Docket Number | 87-3858,Nos. 87-3857,s. 87-3857 |
| Citation | 912 F.2d 469 |
| Parties | Unpublished Disposition NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel. Ronald MORRISON, Nancy Morrison, Plaintiffs-Appellants, v. EXCESS INSURANCE COMPANY, LTD., Phoenix Assurance Co., Ltd., Phoenix Assurance Company, (Compagni D'Assurances Maritimes Aerienes & Terrestres Societe Anonyme per Westminister Aviation Insurance Group, British Aviation Insurance Company, Ltd., Threadneedle Insurance Company, Ltd., Trident Insurance Company, Ltd., Scottish Lion Insurance Co., Ltd., Mentor Insurance Company, Ltd., Per Mentor Underwriting Agents (UK), Ltd., London & Hull Maritime Insurance Company, Ltd., Bishopgate Insurance Company, Ltd., River Thames Insurance Company, Ltd., Road Transport & General Insurance Co., Ltd., Ulter Marine Insurance Company, Ltd., Andrew Weir Insurance Co., Ltd., Provintial Insurance Company, Ltd., British Law Insurance Co., Ltd., New Zealand Insurance Company, Ltd., Plaintiffs-Appellees, v. ALLSTATE INSURANCE COMPANY, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Before FLETCHER and BRUNETTI, * Circuit Judges, and LLOYD D. GEORGE, ** District Judge.
Ronald and Nancy Morrison's home was totally destroyed by a plane crash. The plane was owned by Avi-Truck, Inc., leased by Trans-Northern Aleutian, Inc. (TNA), which operated the plane, and insured by Excess Insurance Company. The district court granted summary judgment in favor of Excess, holding the insurance policy did not cover damages for the destruction of the Morrison home. The Morrisons appeal this ruling.
Allstate Insurance Company provided homeowner's coverage to the Morrisons and paid certain claims as a result of losses sustained by the Morrisons. In a consolidated action, Allstate appeals from a separate declaratory judgment in favor of Excess declaring that there was no coverage by Excess for the loss which gives rise to Allstate's subrogation claim, based upon facts decided in Morrison v. BIA, Civil No. A78-295 (D.C.Alaska, June 18, 1982) (Morrison I ).
We affirm in all respects.
Coverage of the YC-122 aircraft was provided by one policy with a hull provision and a liability provision. The terms of the hull provision were considered by the Alaska Supreme Court in Stewart-Smith Hardinger v. Avi-Truck, Inc., 682 P.2d 1108 (Alaska 1984) (Avi-Truck ). The hull policy contained two exclusions (Exclusions c and d) which provide the policy would not apply to any loss while the aircraft is "in flight unless its airworthiness certificate is in full force and effect," and to any flight while the aircraft "is being operated by any ... person in violation of the terms and limitations of the Civil Aeronautics Administration pilot certificate or medical certificate." Avi-Truck, 642 P.2d at 1114, 1117. At the time of the crash, the aircraft did not have an airworthiness certificate and its pilots were flying in violation of their FAA certificates. Presumably, the two exceptions would nullify coverage. The Alaska Supreme Court, however, found the two exceptions did not apply.
In affirming the superior court's decision the supreme court found the binder, which was in effect at the time of the crash, must be interpreted in accordance with the reasonable expectations of the insured. The court found the insured reasonably expected coverage when the plane was flown by its pilots. The court further held "[t]he binder for the YC-122 implied that the plane was insured when it carried freight for hire in the only legal manner it could reasonably have been expected to do so: as a public use aircraft and without an airworthiness certificate." Id. at 1117. The supreme court found that by subsequently issuing a policy denying liability when the aircraft was flown under those circumstances, the nature of the bargain was impermissibly altered. Id. Accordingly, the order of the superior court striking both exclusions was affirmed.
In the underlying action to this appeal, the Morrisons contended the liability of Excess for damages under the liability policy issued to TNA was established by Avi-Truck. Excess filed for summary judgment, claiming there was no coverage as a matter of law due to two exclusions contained in the standard endorsement to the liability policy. The standard endorsement, which was prepared on CAB Form 262, excluded coverage for flights without an airworthiness certificate and for flights by pilots in violation of their FAA certificates. Excess argued that because the YC-122 crashed when it was flown without an airworthiness certificate and by pilots in violation of their FAA certificates, it was excluded from liability for damages under the policy. The district court, however, held that Excess, as a party appellant, is bound by the facts litigated in Avi-Truck. Consequently, the court precluded litigation on the standard endorsement exclusions and found Excess must provide coverage if the plane was flown as a public use aircraft.
On appeal, Excess argues the district court refused to recognize any legal distinction between the exclusions considered in Avi-Truck, and those in the standard endorsement to the liability policy. Unlike the exclusions on the hull coverage, the exclusions in the standard endorsement are governed by federal law. Excess submits there is nothing in the federal regulations to suggest portions of the standard endorsement may be deleted. Moreover, federal regulations require prior Board approval before any non-authorized exclusions may be included in a liability policy. See 14 C.F.R. 298.44 (1988). Excess contends the legal distinctions between the hull exclusion and the liability exclusions are significant. Since the state superior and supreme courts' interpretation of the hull exclusions in Avi-Truck did not consider the effect the standard endorsement would have on the reasonable expectations of the insured, Excess submits the district court erred in precluding Excess from relying on the standard endorsement exclusions.
We find the district court properly precluded Excess from relitigating coverage exclusion matters decided in Avi-Truck. First, it is undisputed that TNA did not enter into separate negotiations for two separate policies. Rather, TNA bargained for the issuance of a single insurance policy covering the YC-122 for both hull and liability risks. It is also significant that the superior court reached its conclusion that the exclusions dealing with the airworthiness certificate and the pilot qualifications did not reflect the nature of the bargain when the court was considering the policy without regard to the separate coverage parts for hull and liability risks. Because the decision was made before the proceeding was bifurcated, it presumptively applies to the entire policy. Excess is bound to provide coverage according to the terms of the bargain.
Paragraph 3 of CAB Form 262 provides that:
The Insurer further agrees that, within the limits of liability for coverages specified in the policy, no term, condition, limitations, stipulation, or other provision contained in the policy or any endorsement attached thereto or any violation thereof by the Named Insured, except the Exclusions contained in this endorsement, shall relieve the Insurer of liability with respect to such bodily injury or property damage.
Thus, Excess is at risk only up to the limits of liability specified in the policy and for coverages specified in the policy. The standard endorsement will not impose liability for coverage not provided by the policy. Here, coverage exists for operations as a public aircraft. Paragraph 7 of the standard endorsement further provides that "[a]ny exclusions ... of this endorsement that have the effect of restricting or nullifying the coverage granted by this policy in the absence of this endorsement shall not apply." The effect of requiring the YC-122 to have had an airworthiness certificate and FAA certified pilots when flown as a public use aircraft would have the effect of restricting or nullifying coverage. Accordingly, these exclusions do not apply. Thus, the district court correctly determined, that "[t]o the extent that the policy does not afford coverage, patently none is constructed by the standard form endorsement." Because the exclusions of the standard endorsement have no effect upon the policy as interpreted by Avi-Truck, the district court did not err by precluding further litigation on the issue of coverage.
The Morrisons contend that even assuming the Alaska Supreme Court held that the YC-122 was only insured as a public aircraft, this holding should not have been applied against them because they were not a party or in privy with any party to the state court action.
To determine whether a party is in privy to a party of a prior suit, the courts have applied various...
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