Smith v. American Family Life Assur. Co., Columbus

• Decision Date: 28 September 2009
• Docket Number: No. 08-31032.,08-31032.
• Parties: Angela SMITH, in Her Own Right, and as Representative of her husband's estate and on behalf of her minor child, on behalf of D'Angela Noel Smith, Plaintiff-Appellee, v. AMERICAN FAMILY LIFE ASSURANCE COMPANY OF COLUMBUS, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

584 F.3d 212

Angela SMITH, in Her Own Right, and as Representative of her husband's estate and on behalf of her minor child, on behalf of D'Angela Noel Smith, Plaintiff-Appellee, v. AMERICAN FAMILY LIFE ASSURANCE COMPANY OF COLUMBUS, Defendant-Appellant.

No. 08-31032.

United States Court of Appeals, Fifth Circuit.

September 28, 2009.

As Revised October 16, 2009.

Conrad S.P. Williams, III (argued), Melanie G. Lagarde, St. Martin, Williams & Bourque, Houma, LA, for Plaintiff-Appellee.

Corinne Ann Morrison (argued), Douglas L. Grundmeyer, Gregory Joseph Walsh, Chaffe, McCall, Phillips, Toler & Sarpy, New Orleans, LA, Thomas S. Carlock (argued), Atlanta, GA, for Defendant-Appellant.

Appeal from the United States District Court for the Western District of Louisiana.

Before GARWOOD, OWEN and SOUTHWICK, Circuit Judges.

GARWOOD, Circuit Judge:

After her husband's death in a helicopter crash, plaintiff-appellee, Angela Smith (Mrs. Smith), in her own right and as representative of her husband's estate and on behalf of her minor child, sued defendant-appellant, the American Family Life Assurance Company of Columbus (Aflac), seeking to recover sums allegedly owed under the terms of an accident insurance policy issued by Aflac. Both parties moved for summary judgment. The district court granted Mrs. Smith's motion, denied Aflac's motion, and entered judgment in favor of Mrs. Smith. Aflac now appeals both the judgment in favor of Mrs. Smith and the denial of its motion for summary judgment. For the following reasons, we reverse.

FACTS AND PROCEEDINGS BELOW

Mrs. Smith's husband, Darrel Smith (Mr. Smith), was an employee of Island Operating Company, Inc. (Island). The Apache Corporation (Apache) provided oilfield services to Island. On March 14, 2006, Mr. Smith boarded a helicopter in Patterson, Louisiana, that had been chartered by Apache to transport him and several other employees to an offshore platform in the Gulf of Mexico. The helicopter crashed shortly after takeoff, and he was burned to death when the wreckage caught fire.

At the time of her husband's death, Mrs. Smith was the insured under an accident insurance policy that she had purchased from Aflac. The policy's effective date was May 20, 2004. It provided for a twotiered lump sum benefit in the event of the accidental death of the insured's spouse. If the insured's spouse died in a "Common-Carrier Accident," the insured was entitled to a benefit of $150,000. But if the insured's spouse died in an "Other Accident," then the insured was only entitled to a benefit of $40,000. "Common-Carrier Accidents" were defined as:

"accidents that occur on or after the Effective Date of coverage and while coverage is in force directly involving a vehicle in which a covered person is a passenger at the time of the accident and which is duly licensed by a proper authority to transport passengers for a fee. Common-carrier vehicles are limited to airplanes, trains, buses, trolleys, and boats that operate on a regularly scheduled basis between predetermined points or cities. A taxi is not a common-carrier vehicle." (Emphasis in original.)

"Other Accidents" were defined as:

"accidents that occur on or after the Effective Date of coverage and while coverage is in force that are not classified as Common-Carrier Accidents and that are not specifically excluded in the Limitations and Exclusions section."

The "Limitations and Exclusions" section of the policy provided that:

"[Aflac] will not pay benefits for an accident or Sickness that is caused by or occurs as a result of a covered person's:

. . .

9. Participating in any form of flight aviation other than as a fare-paying passenger in a fully licensed, passenger-carrying aircraft."

The helicopter that crashed with Mr. Smith on board was owned and operated by Rotorcraft Leasing Company, LLC (Rotorcraft). Rotorcraft had conducted the flight pursuant to a contract between it and Apache that provided for Apache, from time to time at Apache's discretion, to request of Rotocraft chartered helicopter transport for workers to offshore platforms in the Gulf as needed. These chartered helicopter flights were operated under an "FAR 135" certification from the Federal Aviation Administration (FAA). "FAR 135" stands for "Federal Aviation Regulations Part 135," which governs "commuter or on-demand operations." See 14 C.F.R. § 135.1(a) (2009). According to a report concerning the accident made by the National Transportation Safety Board (NTSB), the flight was operated under an "On-demand Air Taxi" certificate. The NTSB report also described the type of flight as "Non-scheduled."

On April 10, 2006, Mrs. Smith signed a "PROOF OF DEATH—BENEFICIARY'S STATEMENT" verifying her husband's death and submitted it to Aflac. On May 23, 2006, Aflac paid Mrs. Smith $40,000 after determining that the accident was an "Other Accident" under the terms of the policy. Aflac refused to classify the accident as a "Common-Carrier Accident," because it stated that the helicopter had not been an airplane, train, bus, trolley, or boat that operated on a regularly scheduled basis between predetermined points or cities.

Mrs. Smith sued Aflac, seeking $110,000 in additional benefits, as well as attorneys' fees and penalties under LA.REV.STAT. ANN. § 22:1821(B)¹ on the ground that Aflac had acted in bad faith by refusing to classify her husband's accident as a "Common-Carrier Accident." Mrs. Smith initiated her action against Aflac by amending the petition of her suit against Rotorcraft and several other defendants that was already underway in Louisiana state court. Aflac removed the suit to federal court based on diversity jurisdiction and then successfully moved to sever all claims against Rotorcraft and the other defendants.²

Aflac then moved for summary judgment to dismiss Mrs. Smith's claims on the ground that the helicopter crash could not qualify as a "Common-Carrier Accident" under the terms of the policy, because a helicopter was not an airplane. Aflac also moved for partial summary judgment to dismiss Mrs. Smith's claims for penalties and attorneys' fees on the ground that there was no evidence that Aflac had acted in bad faith by denying her request for additional benefits. Mrs. Smith opposed both of Aflac's motions and filed a cross-motion for summary judgment, arguing that the language of the policy was ambiguous and therefore had to be interpreted in favor of the policyholder under established principles of Louisiana law. Aflac filed a response to this motion in which it reasserted that a helicopter was not an airplane and added that, even if "airplane" were interpreted to include helicopters, Mr. Smith's helicopter could not have been a "common-carrier vehicle," under the policy because its flight had not been "regularly scheduled . . . between predetermined points or cities." Aflac had not previously raised this not "regularly scheduled" argument, so Mrs. Smith requested a continuance to conduct additional discovery on the issue. The district court granted her request, but there is no indication that Mrs. Smith ever conducted any discovery on this issue. Aflac asserts that she did not, and Mrs. Smith does not deny that assertion.

On September 29, 2008, the district court issued a memorandum ruling granting Mrs. Smith's cross-motion for summary judgment and denying Aflac's motion for summary judgment. The memorandum ruling also granted Aflac's motion for partial summary judgment and dismissed Mrs. Smith's claim for statutory penalties and attorneys' fees. In accordance with its memorandum ruling the district court entered a separate judgment without specifying the monetary relief. Aflac reserved its rights to appeal and moved to amend the judgment, asking the court to correct a typographical error and to enter a final monetary judgment. On October 17, 2008, the district court entered an amended judgment accordingly, rendering judgment that Mrs. Smith recover $110,000, and prejudgment interest, from Aflac. Aflac timely filed a notice of appeal. Mrs. Smith did not appeal the dismissal of her claims for statutory penalties and attorneys' fees.

DISCUSSION

The sole issue before this panel is whether or not the district court erred when it granted summary judgment on Mrs. Smith's cross-motion and denied Aflac's motion for summary judgment. The issue is one of pure contract interpretation. There are no contested facts, and the law in this area is well-defined.

I. Standard of Review

The grant or denial of a motion for summary judgment is reviewed de novo. E.g., Robinson v. Orient Marine Co., 505 F.3d 364, 366 (5th Cir.1999). Summary judgment is appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Id. (quoting FED.R.CIV.P. 56(c)). Interpretation of an insurance contract generally involves a question of law. In re Katrina Canal Breaches Litig., 495 F.3d 191, 206 (5th Cir.2007) (citing Bonin v. Westport Ins. Corp., 930 So.2d 906, 910 (La.2006)). Whether or not ambiguity exists in an insurance policy is also a question of law. Am. Marine Underwriters, Inc. v. Holloway, 826 F.2d 1454, 1456 (5th Cir.1987).

II. Principles of Louisiana Insurance Law

The parties agree that Louisiana law governs the interpretation of Mrs. Smith's insurance policy. Under Louisiana law, an insurance policy is a contract between the parties and should be interpreted according to the general rules of interpretation of contracts prescribed in the Louisiana Civil Code. Katrina Canal Breaches, 495 F.3d at 206.

An insurance contract must be construed according to the entirety of its terms and conditions as set forth in the policy. LA.REV.STAT. ANN. § 22:881 (2009).³ "The words of a contract must be given their generally prevailing meaning." LA. CIV.CODE ANN. art. 2047 ...