Ranger Ins. Co. v. Phillips

• Citation: 544 P.2d 250,25 Ariz.App. 426
• Decision Date: 08 January 1976
• Docket Number: CA-CIV,No. 1,1
• Parties: RANGER INSURANCE COMPANY, a New York Corporation, Appellant, v. Robert W. PHILLIPS et al., Appellees. 2707.
• Court: Court of Appeals of Arizona

Page 250

544 P.2d 250

25 Ariz.App. 426

RANGER INSURANCE COMPANY, a New York Corporation, Appellant, v. Robert W. PHILLIPS et al., Appellees.

No. 1 CA-CIV 2707.

Court of Appeals of Arizona, Division 1, Department A.

Jan. 8, 1976.

As Amended on Denial of Rehearing Feb. 24, 1976.

Review Denied March 16, 1976.

Lewis & Roca by John P. Frank, D. W. Grainger, Phoenix, for appellant

Skousen, McLaws & Skousen, P.C., Mesa, for appellees Phillips.

Charles M. Brewer, Ltd., and Burch, Cracchiolo, Levie, Guyer & Weyl by Daniel Cracchiolo, Phoenix, for appellee Boyle.

OPINION

FROEB, Judge.

This suit was filed by appellant Ranger Insurance Company (Ranger) to obtain a judicial declaration of the extent of its duties and obligations under a contract of aircraft insurance. After a non-injury trial, the trial court found the company had a duty to defend appellees Robert W. Phillips (Phillips) and Ivadelle Bruner, administratrix of the estate of Marvin L. Bruner, deceased, againt a claim asserted by Inez Boyle, individually and as executrix of the estate of Gayle Boyle, deceased, and to indemnify them against any judgment not exceeding $100,000.

Gayle Boyle was a passenger in a small two-seat aircraft (known as a Lark 95) when he died in a crash near Willcox, Arizona, on April 20, 1967. The plane was piloted by Marvin L. Bruner (Bruner), student pilot, whose total experience and flight time consisted of approximately 70 hours. Phillips, the owner of the plane, conducted a flight service business at Falcon Field in Mesa, Arizona, from which the fatal flight originated. As this case involves only the question of insurance coverage, we are not here concerned with the cause of the crash.

Ranger issued a liability policy covering the aircraft (referred to as Lark 9502) in which the two men were killed. Both Phillips and Ivadelle Bruner claim liability coverage for the wrongful death claim arising out of the crash. Neither Phillips nor Ivadelle Bruner draw any distinction between each other concerning coverage, and they therefore stand or fall together.

The basic questions are (1) whether the insurance contract covered a 'student pilot' and, if so, (2) whether certain violations of the Federal Air Regulations by Bruner excluded coverage.

STUDENT PILOT COVERAGE

There was considerable dispute in the trial court whether the contract of insurance between Phillips and Ranger included liability coverage for flight by a student pilot. The formal written contract as finally issued by Ranger did not include it. However, Phillips contended that he requested the coverage when he ordered the policy and was told it had been provided. He never saw the written policy until after the accident. The trial court found that the contract of insurance was intended to provide student coverage and held that Bruner and Phillips were covered. We hold there is sufficient evidence to support the finding.

Some background may be helpful as to the nature of coverage in aviation liability insurance before reviewing the evidence. In all such policies there is what is known as the 'pilot clause' containing limitations as to who is qualified to fly the insured aircraft. Typically the policy provides that only certain pilots, either expressly named or described generally as persons possessing certain aeronautical ratings and experience, will operate the aircraft. In conjunction with this, the policy provides that loss caused while the aircraft is operated by someone other than a pilot listed in the pilot clause is excluded from coverage. Under these circumstances, there is no coverage. Pacific Indemnity Co. v. Kohlhase, 9 Ariz.App. 595, 455 P.2d 277 (1969). See also, Chapman v. Ranger Ins. Co., 15 Ariz.App. 51, 485 P.2d 1168 (1971).

The written policy issued by Ranger in this case used the following language:

This policy does not apply:

* * *

* * *

2. to any occurrence or to any loss or damage occurring while the aircraft is operated in flight by other than the pilot or pilots set forth under Item 7 of the Declarations;

The applicable portion of Item 7 provides:

7. PILOT CLAUSE: Only the following pilot(s) will pilot the aircraft while 'in flight' and while holding proper pilot certificate(s) with appropriate ratings as required by the Federal Aviation Agency: See Endorsement No. 1.

Endorsement No. 1 reads:

This Policy applies when the aircraft is in flight only while being operated by the pilot(s) named or by a pilot, solo or as pilot in command, who has a valid and effective pilot certificate, with appropriate ratings, of not less than indicated in the following schedule:

1. Private or commercial pilots having a minimum of 200 total logged hours.

2. Private or commercial pilots having a minimum of 200 total logged hours, including at least 25 in retractable gear aircraft.

3. Private or commercial pilots having a minimum of 5,000 total logged hours, including at least 500 in multi-engine aircraft and a valid multiengine rating.

As written, the policy does not cover a student pilot. 'Student pilot' is a separate category of pilot under Federal Air Regulations, and flight conducted by a 'student pilot' is authorized only after the issuance of a student pilot 'certificate.' See 14 Code of Federal Regulations (C.F.R.) § 61.5. Thus, a 'student pilot' is neither a 'private pilot' nor a 'commercial pilot' under the regulations. A 'student pilot,' unlike a private or commercial pilot, is not authorized to obtain any of the various 'ratings' available to pilots, such as aircraft class and category, or instrument ratings. See 14 C.F.R. § 61.5. Flight operations conducted by student pilots are limited by reason of a separate subpart of the Federal Air Regulations beginning at 14 C.F.R. § 61.81.

The trial court could reasonably have found that there was an oral contract between Phillips and Ranger (through its agents) by which a student pilot was insured. The general rule is that a parol contract of insurance is valid and enforceable. 12 Appleman, Insurance Law and Practice, § 7191 at 254. This is true where there is a showing that the parties have agreed on all the essential terms of the contract, including the subject matter, the risk insured against, the time of commencement and duration of the risk, the amount of insurance and the amount of the premium. See 43 Am.Jr.2d, Insurance, § 202 at 258. As a corollary to this rule, it was been held that where a written policy has not been issued and the standard provisions of a policy have not been expressly agreed upon, it will be presumed that the parties contemplated such terms, conditions and limitations as are usual in policies normally issued to cover like risks. Alabama Farm Bureau Mutual Casualty Ins. Co. v. Adams, 289 Ala. 304, 267 So.2d 151 (1972); Fisher v. Underwriters at Lloyd's London, 115 F.2d 641 (7th Cir. 1940); 12 Appleman, Insurance Law and Practice, § 7196 at 277; Couch on Insurance, 2d Ed., § 14:16.

Turning now to the evidence in the case, Phillips testified that student instruction was one of the services he provided and that he would not have considered insurance without such coverage. Initially he contacted his own insurance agent, Sabatelli Insurance Agency. Not being familiar with aircraft insurance, Sabatelli contacted John 'Sandy' Sanderson who was employed by American Underwriters Agencies, Inc. (American). American had in effect at the time an agency agreement with Aviation Office of America (Aviation), which in turn was an authorized agent of Ranger. The agency agreement authorized the issuance of policies such as the one at issue here. Testimony at the trial revealed that Phillips spoke directly with Sanderson and told him the coverage he wanted, which included student pilots. Accordingly, Sanderson assured him he was covered by Ranger. Sanderson then communicated with William Alderman, an employee of Aviation, both in writing and by telephone, to follow through with the policy. The product of these communications was a written 'set-up' sheet in Alderman's handwriting, whereby coverage was arranged for 'student, private or commercial pilots' on five aircraft, including Lark 9502, the one which crashed. The words 'student, private or commercial pilots' were thereafter crossed out on the 'set-up' sheet by Alderman without Phillips' knowledge or consent. The written policy, absent an endorsement for student pilot coverage, was thereafter issued on February 27, 1967, but, as has been pointed out, the policy was not delivered to Phillips until after April 20, 1967, the date of the accident, nor was Phillips informed that the written policy did not provide student pilot coverage. We find that this evidence was sufficient for the trial court to find that student pilot coverage had been sought by Phillips and contracted for by Ranger through its agents.

Appellant argues that Phillips was neither charged nor did he pay a premium for student pilot coverage. This is not, however, controlling as to the issue of whether coverage was provided by Ranger. If by not charging the higher premium Ranger intended not to cover student pilots, contrary to the mutual understanding of the parties, that fact was never communicated to Phillips. No policy had ever been delivered which would have indicated to Phillips the extent of coverage provided and a breakdown of premiums charged. The fact that Ranger did not charge a premium for student coverage is thus not evidence of assent by Phillips to the lesser coverage. The trial court dealt with this issue by finding that Phillips 'paid the necessary premiums.' Although Ranger is correct that there is no evidence to support a specific premium for student coverage, the finding can be interpreted to mean Phillips paid the premium which was, in fact, charged. In any event, it is immaterial whether the court's finding on this point is factually correct, since it is not determinative of the outcome.

In conclusion, the true contract of insurance in this case...