Roberts v. Underwriters at Lloyds London

• Decision Date: 12 June 1961
• Docket Number: No. 3416.,3416.
• Citation: 195 F. Supp. 168
• Parties: W. Lynn ROBERTS, doing business as Roberts Aircraft Company, Plaintiff, v. UNDERWRITERS AT LLOYDS LONDON, an unincorporated association of individuals, and Haidinger-Hayes, Inc., a corporation, Defendants.
• Court: U.S. District Court — District of Idaho

195 F. Supp. 168

W. Lynn ROBERTS, doing business as Roberts Aircraft Company, Plaintiff, v. UNDERWRITERS AT LLOYDS LONDON, an unincorporated association of individuals, and Haidinger-Hayes, Inc., a corporation, Defendants.

No. 3416.

United States District Court D. Idaho, S. D.

June 12, 1961.

J. F. Martin, Boise, Idaho, for plaintiff.

Moffatt & Thomas, Boise, Idaho, for defendant.

FRED M. TAYLOR, District Judge.

By this action plaintiff seeks to recover on a policy of insurance issued by defendant Underwriters at Lloyds London (Lloyds) through defendant Haidinger-Hayes, Inc. Federal jurisdiction is invoked on the basis of diversity of citizenship with the amount in controversy exceeding $10,000. Plaintiff was unable to obtain service on defendant Haidinger-Hayes, Inc. within the jurisdiction of this Court and therefore the action against this defendant was dismissed without prejudice. The remaining parties have submitted this matter for the Court's determination on a stipulation of facts together with certain depositions, exhibits and briefs. They have each moved the Court for a summary judgment.

Plaintiff is a citizen of the State of Idaho and operates a flying service. Prior to the issuance of the insurance policy in question, plaintiff purchased a helicopter from Bell Helicopter Corporation and executed a mortgage to said corporation on the helicopter for the balance of the purchase price. Application was made to Transpacific Insurance Agency in California for insurance to protect plaintiff and the interests of Bell Helicopter Corporation, as mortgagee, against loss or damage to the helicopter. Said agency solicited the plaintiff for coverage on the aircraft upon information received from Bell Helicopter Corporation. The insurance was obtained through Haidinger-Hayes, Inc., a brokerage corporation at Los Angeles, California. According to plaintiff's deposition, the insurers were Lloyds and Arrow Insurance Underwriters.

In January of 1957 this insurance policy was renewed without any material changes in its terms, except that defendant Lloyds became the sole insurer. This policy is the one in controversy. Plaintiff's Exhibit 1. Its terms, in part, provide that:

"This Certificate Does Not Apply:

* * * * * *

"5. (d) While the aircraft is being operated by any person other than the pilot or pilots approved hereunder or by a pilot otherwise approved but whose Certificate has been restricted, revoked or suspended or has expired, except that mechanics and pilots certified by the Civil Aeronautics Administration may when so authorized by the Assured operate the aircraft on the ground or water."

Under "Declarations" the policy provides:

"10. The aircraft will be operated only by the following pilots:

"Richard Case".

The named pilot, Richard Case, was employed for only a few months by the plaintiff. One Lee Baxter, plaintiff and others flew the helicopter, but they were not listed as pilots in said policy. Plaintiff received the certificate of insurance and he was generally aware of the terms of coverage. Upon renewal of the policy, although Case had terminated his employment with plaintiff, plaintiff did not request the defendant or anyone to delete Case's name from the policy or add the name of any other person or persons as pilot or pilots of the helicopter. Plaintiff does not recall receiving a copy of the renewed policy, but he paid the premium thereon when billed. (Plaintiff's Deposition). This was the situation when, on August 8, 1957, the helicopter crashed and burned near Salmon, Idaho, while being piloted by Lee Baxter who was killed in the accident.

Defendant Lloyds assigned an independent adjuster, Frank G. Jones, to adjust the loss. Bids were taken on the salvage of the helicopter which culminated in its retention by plaintiff. Its value was to be deducted from his payment under the policy. No money changed hands with respect to said salvage. Subsequently, Jones recommended to defendant Lloyds that plaintiff's claim be denied because the helicopter was being piloted by Lee Baxter who was not specified to fly said aircraft under the terms of the policy. Thereafter, the defendant invoked the exclusionary clause quoted above and denied coverage. Plaintiff then instituted this action. It is the plaintiff's contention that the clause is ambiguous and should be construed in favor of coverage, or, in the alternative, that defendant Lloyds is estopped from denying coverage.

Answering plaintiff's complaint, defendant Lloyds denied coverage, and, in addition, filed a "cross-complaint". The basis of defendant's action is a "breach of warranty" endorsement in the policy whereby this defendant agreed to pay the Bell Helicopter Corporation, as mortgagee, the balance owing on the aircraft at the time of the loss. The terms of the policy further provide that defendant is subrogated to all the rights of the mortgagee in the event the endorsement is enforced. On January 29, 1958, Bell Helicopter Corporation, pursuant to the provisions of the said endorsement, made a claim against the defendant in the amount of $5,492.96. Defendant paid this amount, and by virtue of its subrogated rights now seeks to recover the same from the plaintiff.

The first issue to be resolved is whether the policy as written covered plaintiff's loss at the time of the accident. Defendant's sole defense is that the exclusionary clause suspended coverage while anyone other than the pilot named and approved in the policy was flying the helicopter. Since Lee Baxter was the pilot at the time of the loss and he was not named as a pilot in the policy, the defendant Lloyds contends the plaintiff cannot recover. The cases involving such clauses in aircraft insurance policies are not numerous, but there are a sufficient number reported which sustain defendant's position on this first issue. Most of these cases are annotated in 9 A.L.R.2d 581 and 48 A.L.R.2d 704, and cited in 29A Am.Jur. § 1348, Insurance. From these authorities, and others, a few general principles have been established.

First, these authorities reveal that the rules of construction generally applicable to insurance policies are used to construe policies covering aircraft. Ambiguities are construed in favor of the insured, but contracts of insurance which do not contravene public policy and which employ plain and unambiguous language must be enforced as written. Bruce v. Lumbermen's Mutual Casualty Co., D.C.E.D.N.C.1954, 127 F.Supp. 124, affirmed 4 Cir., 1955, 222 F.2d 642; Petro v. Ohio Cas. Ins. Co., D.C.S.D.Cal. 1950, 95 F.Supp. 59; Federal Ins. Co. v. McNichols, Fla.1959, 77 So.2d 454, 48 A.L.R.2d 702.

Second, an insurer may lawfully limit its liability by excluding certain risks and hazards from coverage. While the insured is engaged in such forbidden conduct, coverage is suspended. Bruce v. Lumbermen's Mutual Casualty Co., supra; Globe Indemnity Co. v. Hansen, 8 Cir., 1956, 231 F.2d 895; Powell Valley Elec. Coop. v. United States Aviation U., D.C.W.D.Va.1959, 179 F.Supp. 616.

Third, the insurer need not show a causal connection between the forbidden conduct and the resulting loss to successfully avoid liability under such a clause because the rights of the insured flow from the contract and not from a claim arising in tort. See the latter two cases, supra. For cases not involving aircraft insurance policies see Travelers' Protective Ass'n of America v. Prinsen, 1934, 54 S.Ct. 502, 291 U.S. 576, 78 L.Ed. 999; Conner v. Union Automobile Ins. Co., 1932, 122 Cal.App. 105, 9 P.2d 863; Bradley v. Pacific Employers Ins. Co., 1942, 53 Cal.App.2d 619, 127 P.2d 1007.

The policy of insurance in question states that it did not apply while the aircraft was "being operated by any person other than the pilot or pilots approved hereunder * * *." The only pilot named and approved in the policy is Richard Case. Lee Baxter, the pilot at the time of the loss, was not named in the policy and while he was operating the helicopter coverage was suspended under the terms of said exclusionary clause. Plaintiff urges that the clause is ambiguous because it further reads: "or by a pilot otherwise approved but whose Cerificate has been restricted, revoked or suspended or has expired * * *" (Emphasis added). Plaintiff urges that the italicized words should be construed to mean approved in some other manner such as by the Civil Aeronautics Administration or to mean any pilot who had ever been named in a similar policy issued by Lloyds. Baxter apparently had been named and approved as a pilot in a similar policy prior to his employment with the plaintiff. To accept this construction would ignore the true meaning of the clause and words considered ambiguous by the plaintiff. These words reasonably read and fairly construed mean that the policy does not apply while the pilot otherwise approved, meaning Richard Case, has had his certificate restricted, revoked, etc. If the insurer had meant to extend the broad coverage which plaintiff reads into the policy it would have no doubt indicated such by appropriate language as it did in the last part of the clause which reads: "except the mechanics and pilots certified by the Civil Aeronautics Administration may when so authorized by the Assured operate the aircraft on the ground or water." No such general coverage was extended while the helicopter was being operated in the air by a pilot other than the one named in the policy. With some diligence plaintiff most likely could have had Lee Baxter's name added to the policy, but he admittedly failed to request such an addition.

Plaintiff also argues that this violation of the exclusionary clause is irrelevant because the defendant has failed to prove any causal connection between the violation and the resulting loss. It is true that the exact cause of the crash has not been determined, but under the third general principle, supra, causation is immaterial. The policy plainly states that the certificate is...