National Union Fire Ins. Co. of Pittsburgh, Pa. v. Hudson Energy Co., Inc.

• Decision Date: 19 September 1989
• Docket Number: No. 9655,9655
• Citation: 780 S.W.2d 417
• Parties: NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PENNSYLVANIA, Appellant, v. HUDSON ENERGY COMPANY, INC., Appellee.
• Court: Texas Court of Appeals

Page 417

780 S.W.2d 417

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH PENNSYLVANIA, Appellant, v. HUDSON ENERGY COMPANY, INC., Appellee.

No. 9655.

Court of Appeals of Texas Texarkana.

Sept. 19, 1989.

Rehearing Denied Aug. 15, 1989.

Second Rehearing Overruled Sept. 19, 1989.

Rehearing Overruled Nov. 17, 1989.

Charles H. Smith, John W. Moore, Maloney & Smith, Dallas, for appellant.

Jack N. Price, Austin, Lynn S. Patton, Patton, Nix & Young, Longview, for appellee.

GRANT, Justice.

National Union Fire Insurance Company of Pittsburgh, Pennsylvania, ("National Union") appeals from an adverse judgment of the trial court based upon a jury verdict. ¹ The judgment awarded Hudson Energy Company, Inc. ("Hudson Energy") actual damages of $111,440, exemplary damages of $75,000, and attorney's fees of $40,000.

Hudson Energy is a company that services drilling rigs. Adam Hudson ("Hudson"), president of Hudson Energy, purchased for the company a Cessna P-210 aircraft from Johnny Walker's Eastex Aviation. Hudson discussed his qualifications as a pilot with Walker, entered into a flight instruction program with him, and asked for help in finding insurance coverage for the aircraft. Walker contacted James E. Ragsdale of Cooper Aviation Insurance Agency ("Cooper"), and he told Ragsdale that Hudson had reported having a private pilot's certificate but that Hudson could not locate it. Hudson submitted an original application for insurance to Cooper. The application indicated that Hudson was a student pilot. Cooper returned the application to Hudson stating that the company had been told that Hudson was a private pilot and needed an application showing the corrected information.

On the subsequent insurance application that was submitted to Cooper and placed with National Union, Hudson indicated that he had a total of 236 logged flying hours and that he was a private pilot. An insurance policy was issued to Hudson on June 17, 1980, with a policy period of May 23, 1980 to May 23, 1981. Item 5 of the Declarations in the policy contained a "pilot clause" or "pilot endorsement": ²

IT IS AGREED THAT Item 5 of the Declarations--When in flight the aircraft will be piloted only by--is completed to read as follows:

Adam R. Hudson provided he is a private pilot properly certificated by the FAA having a minimum of 213 logged flying hours, and receives 15 hours of dual instruction from a properly certificated flight instructor prior to solo; or

Any private or commercial pilot with an instrument rating properly certificated by the FAA having a minimum of 750 logged flying hours, 150 of which are in retractable gear aircraft, including 15 hours in the make and model aircraft.

The policy exclusions provided in part that the policy does not apply:

To any insured while the aircraft is in flight

(a) if piloted by other than the pilot or pilots designated in the Declarations;

(b) if piloted by a pilot not properly certificated, qualified and rated under the current applicable Federal Air Regulations for the operation involved, whether or not said pilot is designated in the Declarations.

The aircraft departed from the Gregg County Airport at approximately 9:00 a.m. on July 13, 1980, with Hudson in the left front seat, Rodney Bishop in the right front seat, and a passenger in a middle row of seats behind Bishop. Bishop, a flight instructor, was giving flight instruction to Hudson and had access to the flight controls. Hudson flew the aircraft to New Orleans and brought the plane into the landing pattern and downwind leg in preparation to land on runway 31 at Lakefront Airport. Bishop got on the controls momentarily in order to avoid a helicopter that was leaving the airport. Hudson then continued his descent, and the tower controller changed the landing runway, necessitating a tighter, steeper, and more rapid turn. Hudson landed on all three wheels, causing the plane to bounce back up into the air. Bishop got on the controls with Hudson, raised the nose of the plane to get the main wheels on the runway, and then lowered the nose wheel back down on the runway. The aircraft veered to the left off the runway, and Bishop hit the right brake so as to decrease the veer. The nose wheel sheared off, and the plane flipped upside down. Bishop testified that he was on the controls from the time the plane started to veer until it flipped over and that Hudson might also have been on the controls during that time.

The jury found that the difference in market value of the aircraft, before and after the accident, was $111,440. The jury awarded $75,000 exemplary damages based upon their affirmative answers that National Union had breached its duty of good faith and fair dealing and that the company had acted with malice or gross negligence. The jury also awarded $40,000 for attorney's fees.

National Union pled the policy exclusions. This placed the burden upon Hudson Energy to negate the exclusion. See Sherman v. Provident American Insurance Co., 421 S.W.2d 652 (Tex.1967). Thus, Hudson Energy had the burden of proving that the aircraft was not piloted by a person or persons other than those designated in the policy. The judge couched jury question 1 in the terms of the policy:

Do you find from a preponderance of the evidence that, at the time of the loss claimed under the policy of insurance in question, the aircraft was not in flight piloted by other than the pilot or pilots designated in the policy declarations, as follows:

"Adam R. Hudson provided he is a private pilot properly certified by the FAA having a minimum of 213 logged flying hours, and receives 15 hours of dual instruction from a properly certificated flight instructor prior to solo; or

"Any private or commercial pilot with an instrument rating properly certificated by the FAA having a minimum of 750 logged flying hours, 150 of which are in retractable gear aircraft, including 15 hours in the make and model aircraft."

Answer "The aircraft was not in flight ³ piloted by other than a pilot or pilots designated in the declarations," or

"The aircraft was in flight piloted by other than a pilot or piilots (sic) designated in the declarations."

Answer: "The aircraft was not in flight piloted by other than a pilot or pilots designated in the declarations."

National Union complains of the submission of this issue to the jury because there was no fact issue (because Adam Hudson judicially admitted he was piloting the aircraft), it did not present a controlling fact issue, and it presented a question of law to the jury.

We must first address the matter of the ambiguity of the pilot clause as applied to the facts of this case. Generally, a person seeking to establish an ambiguity in a written contract has the burden of pleading the ambiguity by setting out that portion of the contract alleged to be ambiguous and also pleading the meaning or construction urged by the party. Crozier v. Horne Children Maintenance and Educational Trust, 597 S.W.2d 418 (Tex.Civ.App.--San Antonio 1980, writ ref'd n.r.e.). However, when one party takes the position that the contract has one meaning and the other party takes the position that the contract has another meaning, the court is faced with deciding which meaning is correct as a matter of law or in deciding that the contract is ambiguous, thereby allowing parol evidence as to the parties' intent. Also, where the contract set out by one of the parties shows an ambiguity on its face, the court may be faced with the need for an interpretation in order to decide the case. See Quanah, A. & P. Ry. Co. v. Cooper, 236 S.W. 811 (Tex.Civ.App.--Amarillo 1922, writ ref'd).

In the present case, neither party pled that there was an ambiguity, and there is no complaint on appeal urging that the trial court erred in failing to find an ambiguity.

If a contract is not ambiguous, it is the court's duty to interpret it. N.M. Uranium, Inc. v. Moser, 587 S.W.2d 809 (Tex.Civ.App.--Corpus Christi 1979, writ ref'd n.r.e.). In the present case, the trial judge found the contract unambiguous and refused to allow National Union to present evidence as to the meaning of the pilot clause in the contract. The trial judge submitted jury question 1 in the language of the insurance policy to ask the jurors the fact question as to whether the person or persons piloting the aircraft met the requirements of the policy.

A jury may not be called upon to construe the legal effect of an instrument. Knutson v. Ripson, 163 Tex. 312, 354 S.W.2d 575 (1962). Although jury question 1 is not phrased to ask the jury to decide the obligations of the parties under the policy, it is phrased in the language of the policy. Question 1 asked the jury to determine who was piloting the aircraft when the loss occurred. We conclude that the trial judge determined as a matter of law that there was coverage in a situation where a qualified flight instructor and a student were simultaneously piloting the aircraft. We further conclude that the jury found Bishop as a qualified flight instructor and Hudson as a flight student were simultaneously piloting the plane at the time of the occurrence in question. Since the trial judge found that the policy language was not ambiguous, the submission of this jury question in that language was not error.

National Union takes the position that coverage must be denied as a matter of law if an unqualified Hudson and a qualified Bishop were simultaneously piloting the aircraft at the time of the loss. Its authority for this proposition is Master Feeders II, Inc. v. United States Fire Insurance Co., 15 Av. Cas. (CCH) p 18, 420 (D.Kan.1980), aff'd, 17 Av. Cas. (CCH) p 18, 205 (10th Cir.1983). The Kansas court determined that simultaneous piloting by a qualified and an unqualified pilot was not a covered risk. However, the exclusion in the Master Feeders policy provided that the policy did not apply if the plane was operated "by any pilot other than as listed in the...