Petro v. Ohio Cas. Ins. Co.

• Decision Date: 05 December 1950
• Docket Number: Civ. No. 11418-Y.
• Citation: 95 F. Supp. 59
• Parties: PETRO et al. v. OHIO CAS. INS. CO.
• Court: U.S. District Court — Southern District of California

95 F. Supp. 59

PETRO et al. v. OHIO CAS. INS. CO.

Civ. No. 11418-Y.

United States District Court S. D. California, C. D.

December 5, 1950.

Lasher B. Gallagher, and Bertrand Rhine, Los Angeles, Cal., for plaintiffs.

Parker, Stanbury, Reese & McGee, by White McGee, Jr., Los Angeles, Cal., for defendant.

YANKWICH, District Judge.

The question confronting the court is one of interpretation of the words in a contract of insurance. The facts are without dispute.

We start with the fact that a judgment was recovered by the plaintiffs here, as the heirs at law of the deceased, Walter John Petro, for death caused in an accident, which the judgment of the Superior Court found was brought about by the negligence of Phillip Ray Brown. The judgment was for $50,235.70 and has not been paid.

Phillip Ray Brown had a private pilot's license and was receiving additional instructions under the GI Bill of Rights (38 U.S. C.A. secs. 693 et seq.) in a school operated by the Phipps Flying Service. Phipps Flying Service had a contract for education and training with the Veterans' Administration, under which the Veterans' Administration, as an instrumentality of the Government, agreed to pay for instruction of students. The rate was fixed on an hourly basis. Dual flight instruction was at the rate of $10.86, and solo flight at the rate of $7.86 per hour.

The defendant had entered into a contract of insurance with Harry Phipps, doing business as "Phipps Flying Service", denominated "aviation liability policy".

The defendant denies liability under it by reason of the provisos denominated (e) and (f) of Clause III of the insuring agreements.

This clause, after defining the word "insured," specifies that it shall not include the following:

"(e) any persons other than officers, executives and employees of the named Insured, or any agent of the named Insured, if the business of the named Insured (insured as such) is that of an aircraft manufacturer, or aircraft engine manufacturer, or aircraft repair or service station, or aircraft sales agency, or hangar keeper, or airport operator;

"(f) or any person who is a student or renter pilot."

Subparagraph (f) is, in reality, the paragraph upon which the defense is based.

I

The Fundamental Principles Governing Insurance.

Two fundamental principles are to be borne in mind. The first is that in construing insurance policies the courts insist that the contract shall be construed liberally, in accordance with the usual rules in such cases.

In Boulter v. Commercial Standard Insurance Co., 1949, 9 Cir., 175 F.2d 763, the court said: "Not only must the policy be liberally construed in favor of the insured, in accordance with the usual rule in such cases, Aschenbrenner v. U. S. Fidelity & Guaranty Co., 292 U.S. 80, 54 S.Ct. 590, 78 L.Ed. 1137, but the language of the Commissioner's rider must be construed to accomplish the purposes of the Highway Carriers' Act. We think that the legislative requirement was intended to secure the general public in respect to accidents caused by such trucks when operating on the public highways, whether loaded, or merely cruising in search of loads." 175 F.2d at page 767.

The opinion of the Court of Appeals emphasizes the point, that in considering a contract of insurance of the character involved in this case, it must be construed most favorably in favor of the insured. In so doing we are not limited to the particular wording of any part of the contract. The contract must be considered as a whole, and, if necessary, we must take into consideration riders attached, that might throw light upon the subject. Such riders are to be read into the insurance policy for the purpose.

In that particular case, the court resorted to a rider required by the California Highway Carriers' Act to sustain its contention that, although the evidence showed clearly that at the time of the accident no goods for hire were being carried, and that the insured was not on a return trip, nevertheless, — because he testified that on this return trip he had thought of soliciting hauling, and although he did not get around to it, — this was sufficient to bring the case within the rule of the "return trip".

There is one other principle before us, which is stated very lucidly in Greenberg v. Continental Casualty Company, 1938, 24 Cal.App.2d 506, 75 P.2d 644: "The law applicable to the disputed questions is solely the law of contracts, and in that connection it is elementary that parties to a contract are entitled to have the agreement enforced according to its terms. When, of course, a contract is uncertain and ambiguous it becomes the duty of the court to determine, if possible, what is intended, but in the absence of such ambiguity and uncertainty, and when the contract is in all respects valid, the power of the court is limited to enforcing such contract according to its terms. In that connection it might be appropriately observed that: `It is competent for the parties to make whatever contracts they may please, so long as there is no fraud or deception or infringement of law. Hence the fact that the bargain is a hard one will not deprive it of validity.' Herbert v. Lankershim, 9 Cal.2d 409, 71 P.2d 220, 253." 24 Cal.App.2d at page 513, 75 P.2d at page 648.

The courts of California, in interpreting the words of a contract of insurance, have applied the general rule set forth in the California Civil Code, § 1644, which reads: "The words of a contract are to be understood in their ordinary and popular sense".

In Massachusetts Mutual Life Insurance Company v. Pistolesi, 9 Cir., 1947, 160 F.2d 668, Judge Denman adopted the principle as a criterion to follow. He wrote: "In California, insurance policies are so construed", 160 F.2d at page 669, that is, according to ordinary and popular sense.

II

The Meaning of Words.

But there is one other principle which is to be borne in mind, and that is, where parties to a contract, especially an insurance contract, are dealing with the words of an art, the presumption is that they are used by them in the sense in which they are used in that art. When we speak of "art," we mean the sense in which the word is used in the particular branch of human activity with which the contract deals. So, when that is the case and the word, as used in the art, has a definite meaning, ordinary dictionary definitions do not help us. 12 Am.Jur., Contracts, § 237; Restatement, Contracts, § 235(b). The California Civil Code, § 1645 bids us to interpret technical words "as usually understood by persons in the profession or business to which they relate." See, Moran v. Prather, 1875, 23 Wall. 492, 499, 23 L.Ed. 121; Ermolieff v. R. K. O. Pictures, 1942, 19 Cal.2d 543, 550, 122 P.2d 3.

Coming to the contract, we find that in the "Declaration, Item 7," it contains the following statement: "The aircraft will be used only for the following purposes: Private business and pleasure, passenger carrying for hire or reward, rental to others and student instruction."

And, further: "The aircraft will be operated only by the following pilots: Any private or commercial certificated and qualified pilot, also any student pilot while under the supervision of a commercial certificated pilot having a pilot instructors rating issued by the C.A.A."

The "Insuring Agreements," in defining the insured, excluded the persons referred to under clauses (e) and (f).

The defendant seeks to draw the distinction between Item 7 of the "Declarations" and clause (f) of III of the "Insuring Agreements," as though the first one were merely a limitation of scope of the use of the airplanes, and the second a condition. I believe the two go together and must be so construed.

If there is a conflict between the typed portion added to the contract and the printed portion, which is paragraph (f) of Section III, then a rule of construction applies which considers the typed portion as a special condition which modifies the printed portion. Restatement, Contracts, § 236(e); 12 Am.Jur., Contracts, § 253; Thomas v. Taggart, 1908, 209 U.S. 385, 389, 28 S.Ct. 519, 52 L.Ed. 845; The Idefjord, 2 Cir., 1940, 114 F.2d 262, 266; California recognizes this principle. Cal.Civil Code, § 1651; Burns v. Peters, 1936; 5 Cal.2d 619, 623, 55 P.2d 1182.

We also have the additional rule that our construction should be reasonable and that we should not adopt a construction that would result in absurdity. Restatement, Contracts, § 236(a), (d); 12 Am.Jur., Contracts, § 250; Cohn v. Cohn, 1942, 20 Cal.2d 65, 70, 123 P.2d 833.

The typed portion of this contract shows that the words used were words of art, that the parties were using the words in the sense used by the regulations. We have a direct reference to the ratings issued by the C.A.A. So it is quite evident they were writing this contract with reference to them and were not using Webster's Unabridged Dictionary. They were using words which had definite meanings in the regulations.

And when they referred to the fact that the aircraft covered was to be operated only by private or commercial certificated and qualified pilots, and also any student pilot while under the supervision of a commercial certificated pilot, they used those three phrases in the sense in which they are used in the regulations.

The record in this case shows that Mr. Brown had a private certificated license. He was not a student pilot. He was a person who had satisfied the requirements for a certificate. As he wished to change to a commercial certification, he needed additional instruction. This he proceeded to secure.

While so doing, he was still a private certificated pilot. And not until he had satisfied the authorities that he was entitled to the broader license did he lose his standing as a private certificated pilot. If he had secured the higher rating, this certification would have been taken away and he would have ceased to be a private certificated pilot.

I am of the view, therefore, that,...