Skyways Aircraft Ferrying Service, Inc. v. Stanton

• Decision Date: 17 May 1966
• Citation: 242 Cal.App.2d 272,51 Cal.Rptr. 352
• Court: California Court of Appeals Court of Appeals
• Parties: SKYWAYS AIRCRAFT FERRYING SERVICE, INC., a corporation, Plaintiff, Respondent and Appellant, v. Harold Stevens Garrity STANTON, Defendant and Appellant, Northwest Underwriters et al., Defendants and Respondents. Civ. 29021.

Page 352

51 Cal.Rptr. 352

242 Cal.App.2d 272

SKYWAYS AIRCRAFT FERRYING SERVICE, INC., a corporation, Plaintiff, Respondent and Appellant, v. Harold Stevens Garrity STANTON, Defendant and Appellant, Northwest Underwriters et al., Defendants and Respondents.

Civ. 29021.

District Court of Appeal, Second District,

Division 1, California.

May 17, 1966.

Hearing Denied July 13, 1966.

Gerald H. Gottlieb, Beverly Hills, and Marvin Zinman, Los Angeles, for Skyways Aircraft, plaintiff, respondent and appellant.

Kirtland & Packard, by Robert L. Wilson and Austin C. Smith, Jr., Los Angeles, for respondent Bird and appellant Stanton.

Darling, Shattuck, Hall & Call, Los Angeles, for respondents Northwest Underwriters, Northwest Underwriters Agency, Inc., and Gordon Jacobson.

LILLIE, Justice.

Skyways Aircraft Ferrying Service, Inc., sued Bird and Stanton, both Lloyd's underwriters, for breach of insurance contract (Bird on the old policy; Stanton on the new one); in the second and third causes of action, Skyways sued Jacobson and Northwest Underwriters for breach of warranty of authority to place insurance on the life of Jack Ford, and Jacobson for negligence in failing to obtain insurance on Ford's life. Recovery was sought in the alternative; and the jury was instructed that it could find against Stanton, but not against Jacobson and Northwest, if it found that Jacobson had actual or ostensible authority from Stanton to orally bind Ford for the type of flight on which he was engaged at the time of his death. The following verdicts were rendered: for Skyways against defendant Northwest in the sum of $49,675; for Skyways against defendant Stanton in the sum of $49,675; and for defendant Bird against Skyways. Thereafter, the trial court granted motions of Northwest for judgment notwithstanding the verdict and for new trial. Skyways' motion for new trial against Bird was denied, as was motion of Stanton. Stanton appeals from judgment against him in favor of Skyways; Skyways appeals from judgment notwithstanding the verdict and order granting motion for new trial, and from judgment against it in favor of Bird.

Skyways is engaged in ferrying and delivering airplanes on a world-wide basis; Jack Ford was its president. Bird is an individual underwriter at Lloyd's, London, subscribing to Ford's expiring policy (August 31, 1958--August 31, 1959). Stanton is an individual underwriter at Lloyd's, London subscribing to Lloyd's contract of insurance No. AOC 1247, and represented all underwriters subscribing to the contract. Jacobson was manager and senior partner of Northwest Underwriters, an insurance broker and agent; Jacobson was also president of Northwest Underwriters Agency, Inc.; he died after the action was filed but before the trial. Skyways was beneficiary of a $50,000 insurance policy on the life of Jack Ford, its president. The policy carried an expiration date of August 31, 1959, noon, Standard Time, at the residence of the assured; it had been arranged by Merritt Galbraith, then of Galbraith & Flower, Inc., through Fairfax Underwriters of Kansas City; Bird, an individual underwriter at Lloyd's, subscribed to the policy. Ford was killed while piloting a plane at Wake Island on September 1, 1959, on a ferrying flight to deliver an airplane from Wichita, Kansas, to Tokyo.

We view the evidence in a light most favorable to Skyways, as respondent on Stanton's appeal (Crawford v. Southern Pacific Co., 3 Cal.2d 427, 429, 45 P.2d 183; Callahan v. Gray, 44 Cal.2d 107, 111, 279 P.2d 963) and as appellant on its appeal from judgment notwithstanding the verdict. (Lewis v. Franklin, 161 Cal.App.2d 177, 182, 326 P.2d 625.)

Galbraith, a former principal of the firm of Galbraith & Flower, Inc., had for some time handled insurance for Skyways and Ford. On August 28, 1959, Galbraith and Taylor, vice-president of Skyways, discussed over the telephone the matter of accident insurance on Ford and one Cairns (not involved herein). Taylor told him that Ford's policy, placed through Galbraith's former firm, expired on August 31, 1959. On Saturday, August 29, 1959, Galbraith called again and Taylor told him to handle the insurance. Galbraith had known Ford for many years and knew that he was in the business of ferrying private aircraft throughout the world; he had previously written insurance for Ford through Lloyd's obtained from one Jacobson. Galbraith had specialized in aviation insurance for twelve years; he had a background in aviation and was a pilot. Galbraith had written insurance for Fleetways, a firm for which Ford was chief pilot; he had obtained the insurance on Ford through Lloyd's placing it through Jacobson. Galbraith had known Jacobson for eight or ten years and knew that Jacobson specialized basically in Lloyd's coverages, odd-lines that were difficult to place in the domestic market, such as ferry flights, etc.

On Monday, August 31, 1959, at 7:30 a.m., Pacific Standard Time, Galbraith in Tulsa, Oklahoma, called Jacobson in Portland, Oregon, relative to the Ford policy. From his experience in doing business with Jacobson ('He was one source of securing coverages of this type that were hard to get.'), Galbraith believed that he would be able to effect the coverage on Ford; he remembered that Jacobson had previously placed the coverage on Ford (when Ford was with Fleetways) through Lloyd's.

Jacobson had an extensive aviation background and was familiar with the aviation industry; he specialized in 'a great volume' of personal accident aviation insurance--a 'very substantial amount'--all Lloyd's coverages, and held himself out as a representative of Lloyd's of London--his business letterheads used on August 31, 1959, and for five years preceding, read,

'G. F. Jacobson's

Northwest Underwriters

Lloyd's, London Representative,'

on which he had sent several hundred letters to C. E. Heath & Co., London brokers for the underwriters (Stanton) on Contract AOC 1247. Jacobson had dealt with Lloyd's for over twenty years and had his own firm (Northwest) for nine and one-half years. He held approximately thirty different contracts of various kinds and descriptions with Lloyd's underwriters, ten of which applied exclusively to aviation insurance; he has had Lloyd's contract of insurance, No. AOC 1247 (previously 1035), to which appellant Stanton, an individual underwriter, subscribed, for twenty or more years. Under Contract No. AOC 1247 no proposal form was required, and Jacobson had the power to bind over the telephone and could issue certificates of insurance under this contract. AOC 1247 contained the following statement: 'GEOGRAPHICAL LIMITS: Worldwide, but transoceanic flights by Regular Air Lines Only.' (The trial judge held, as a matter of law, the words to be unambiguous, and that the ferrying service performed by Ford at the time of his death was not within the coverage of AOC 1247.) Jacobson was familiar with the terms of contract AOC 1247, having read it many times; he had sufficient experience that London underwriters usually went along with the wording of insurance certificates thereunder. Jacobson had previously written a policy for Don Flower under contract AOC 1247, which contained the following endorsement: 'It is further understood and agreed that all transoceanic flights as a pilot, * * * shall be by scheduled airlines only except as respects flights in the West Indies and Caribbean area.' Jacobson knew Ford and that he did air ferrying of private aircraft overseas; and from 1956 through 1958 had placed personal accident aviation insurance for Ford and other pilots at Fleetways. Jacobson had also known Galbraith for some time and had done business with him for ten years, placing a substantial number of personal accident aviation risks for him through Lloyd's under his contract AOC 1247. In August 1956 Galbraith placed through Jacobson insurance on Ford and Fleetways; Jacobson knew that Fleetways and Ford made transoceanic flights other than by regular airlines, and single engine flights over water; he issued three policies of insurance for Ford.

On August 31, 1959, Galbraith told Jacobson that he had to get Ford and Cairns of Skyways covered 'right away' (Jacobson admitted that he knew 'it would require immediate attention'). They discussed Ford's activities in running a ferrying company (Skyways) and being a ferrying pilot for it; Jacobson asked if Ford was doing the same business as with Fleetways; Galbraith said 'Yes.' (Jacobson admitted that he knew Ford was still engaged in transoceanic ferrying of private planes.) Jacobson told Galbraith that he could not cover single engine aircraft; Galbraith said that Ford rarely, if ever, would undertake a single engine flight. Jacobson said that the insurance could be arranged, mentioning August 31, 1959, as the date on which it would be bound, when the other policy expired. Jacobson told Galbraith that this was a risk he would like to put on the open market, but until he could get the policy details he would bind it under his cover. At that time neither Galbraith nor Jacobson had a copy of the expiring policy; Jacobson told Galbraith he wanted the policy to match the terms and look at the rate; Galbraith said he would have it sent to him immediately.

At the close of this conversation Galbraith believed that the insurance was bound, relying upon Jacobson's statement that he would bind the risk under his cover. He had no reason to question it or to believe that Jacobson's cover was not sufficiently broad to include the risk. Relative to the breadth of his cover with Lloyd's, Jacobson mentioned to Galbraith only one limitation--that single engine aircraft on overwater flights could not be covered. This was the only question raised by Jacobson; Jacobson did not mention overwater flights by other than regular airlines. Galbraith having called Jacobson for the purpose of replacing Ford's expiring policy, and Jacobson having promised to bind him under his Lloyd's...