State v. Underwriters at Lloyds London
| Decision Date | 06 May 1988 |
| Docket Number | 140,Nos. 48,800,53,312,960,402,295,950,97,No. 576,256,No. S-1909,942,595,s. 48,576,S-1909 |
| Citation | 755 P.2d 396 |
| Parties | STATE of Alaska, United Liability Insurance Company, Midland Insurance Company and Alaska Pacific Assurance Company, Appellants, v. UNDERWRITERS AT LLOYDS, LONDON, who are members of Syndicateof the list of underwriting members of Lloyds numbered 1975/8; the British Aviation Insurance Co., Ltd.; Cornhill Insurance Co., Ltd.; Sovereign Marine & General Insurance Co., Ltd.; Drake Insurance Co., Ltd.; Aviation & General Ins. Co., Ltd.; Phoenix Assurance Co., Ltd.; Orion Insurance Co., Ltd.; Scottish Lion Ins. Co., Ltd.; Commercial Union Assurance Co., Ltd.; Excess Insurance Co., Ltd.; Aviation and General Insurance Company Limited; Highlands Insurance Company Limited; London Edinburgh General Insurance Company Limited; American Home Assurance Company and those underwriters at Lloyds and insurance companies subscribing to the insurance policy(s) excess to policy/AK 90367, Appellees. |
| Court | Alaska Supreme Court |
Lloyd B. Ericsson, Timothy E. Miller, and Robert J. Ericsson, Martin, Bischoff, Templeton, Biggs & Ericsson, Anchorage, for appellants.
Katherine B. Posner, Condon & Forsyth, New York City, and Rand Dawson, Anchorage, for appellees.
Before MATTHEWS, C.J., and RABINOWITZ, BURKE, and COMPTON JJ.
This appeal raises the question whether an airline's premises-operations insurance provides coverage for a taxiway accident.
In 1975, a Boeing 747 aircraft owned by Japan Airlines (JAL) was damaged when it slid off an icy taxiway at Anchorage International Airport. The cost of repairing the aircraft was nearly $20 million. JAL and its property insurers sued the State of Alaska, the owner of the airport, claiming that the accident resulted from the faulty design and maintenance of the taxiway. 1 The state tendered its defense to JAL's liability insurers, but the tender was refused. 2 Following a trial on the question of liability, the jury found that the state was 80% responsible for the accident, and that JAL was 20% responsible. The state settled with JAL and its property insurers prior to entry of final judgment.
At the time of the taxiway accident, JAL was the named insured under a policy issued by the Underwriters at Lloyds, London. The state was an additional insured under the policy. In the instant case, the state and its liability insurers seek a declaration that the Underwriters provided liability insurance for the state which covered the accident, and a money judgment for a share of defense and settlement costs. 3 Both parties moved for summary judgment on the question of coverage. The trial court granted the Underwriters' motion and denied that of the state. A final judgment dismissing the state's claims was entered and this appeal followed.
At the time of the accident, JAL had leased from the state eight areas at Anchorage International Airport for its ticket counter, gate, baggage, and office operations. Each of the leases were substantially identical with regard to applicable covenants and conditions. The leases contained a clause requiring JAL to indemnify, defend, and save harmless the state from claims arising in connection with JAL's use of the leased premises. 4 In addition, the leases contained a paragraph requiring JAL to maintain insurance protecting the state against comprehensive public liability, products liability and property damage. 5
In compliance with the insuring clause of the leases, JAL furnished the state with a Certificate of Insurance on a state-supplied form. The certificate described the insurer as "Appleton & Cox/Lloyds, London," 6 noted that the limits of liability were at least $50,000 per accident for property damage, and described the State of Alaska as an additional insured.
The policy to which the certificate refers was issued to JAL by the Underwriters. It applies to JAL and additional insureds from numerous places in the United States and Canada. The insuring agreement states in part:
The Insurers hereby agree with the Insured, named in the declarations, ...
COVERAGE B--PROPERTY DAMAGE LIABILITY. To pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of injury to or destruction of property, including the loss of use thereof, caused by an occurrence and arising out of the hazards hereinafter defined.
The section entitled "Definition of Hazards" reads in part:
Division 1--Premises--Operations.
The ownership, maintenance or use of all buildings and/or premises utilized by Japan Air Lines personnel in the scope of their employment by Japan Air Lines and/or for which Japan Air Lines are responsible, and all airport and airline operations necessary or incidental thereto.
The policy expressly excludes hazards related to certain aircraft:
THIS POLICY DOES NOT APPLY:
(a) Under Division 1 of the Definition of Hazards, to (1) any aircraft owned by, hired by or for, or loaned to the Insured or to any aircraft in flight by or in the interest of the Insured....
The limit of liability for property damage under the premises operations division of the policy is $1 million for each occurrence.
The policy also contains a cross-liability clause which states:
The inclusion of more than one corporation, person, organization, firm or entity as insured under this Policy shall not in any way affect the rights of any such corporation, person, organization, firm or entity as respects any claim, demand, suit or judgment made, brought or recovered by or in favour of any other Insured, or by or in favour of any employee of such other Insured, this Policy shall protect each corporation, person, organization, firm or entity in the same manner, as though a separate Policy had been issued to each: but nothing herein shall operate to increase the Insurers' liability as set forth elsewhere in this Policy beyond the amount or amounts for which the Insurers could have been liable if only one person or interest had been named as Insured.
Finally, the policy includes a "severability of interests" clause which states that: "[t]he term 'the Insured' is used severally and not collectively."
The state argues that coverage exists because the taxiway where the accident occurred is a premise utilized by JAL personnel in the scope of their employment or, in the alternative, that taxiing the airplane was an airline operation necessary or incidental to the use of the leased premises. The state contends that the policy exclusion for aircraft operations does not apply because the state did not own, rent, borrow, or fly the aircraft.
The Underwriters raise four objections to a finding that coverage exists. First, they argue that the policy coverage extends only to risks which arise out of JAL's operations or activities on the leased premises. Second, they contend that there must be a causal connection between JAL's operations and the occurrence giving rise to liability and that such a connection is lacking in this case. Third, the Underwriters argue that the aircraft exclusion applies. Fourth, independent of the policy language, the Underwriters argue that coverage for the taxiway accident was not within the expectation of the parties.
The trial court generally agreed with the Underwriters. We conclude that coverage exists.
First, premises operations coverage is not narrowly confined to accidents occurring on the insured premises. For example, in Hale v. Fireman's Fund Insurance Co., 731 P.2d 577, 579-80 (Alaska 1987), we ruled that a premises-operations liability provision which insured "all operations necessary or incidental" to the use of a produce stand provided coverage for an accident which occurred at a location well away from the premises while produce which was destined for the stand was being unloaded for the purposes of storage. We indicated that unloading at the separate location was either necessary or incidental to the "course of the produce stand business" and thus the insuring language applied. 7
In the instant case, we conclude that taxiing aircraft is an operation necessary to JAL's use of the leased premises. An airline cannot sell tickets or board passengers without taxiing aircraft. The trial court opined that taxiing was a central activity of an airline; therefore, it could not be considered "incidental" to the airline's indoor terminal activities. However, this reasoning does not preclude coverage since the hazards definition applies to airline operations which are "necessary" as well as those which are merely incidental.
Second, the causation requirement is met since the hazard was the taxiing operation from which the accident arose. The...
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