Steven v. Fidelity & Cas. Co. of New York

Citation27 Cal.Rptr. 172,58 Cal.2d 862,377 P.2d 284
CourtUnited States State Supreme Court (California)
Decision Date18 December 1962
Parties, 377 P.2d 284 Kathryn E. STEVEN, Plaintiff and Appellant, v. The FIDELITY AND CASUALTY COMPANY OF NEW YORK, Earle A. Lloyd, MercuryInternational insurance Underwriters, Defendants and Respondents. L. A. 26927.

Gerald H. Gottlieb, Beverly Hills, and John W. Preston, Jr., Los Angeles, for plaintiff and appellant.

Crider, Tilson & Ruppe , Edward A. DeBuys and Henry E. Kappler, Los Angeles, for defendants and respondents.

TOBRINER, Justice.

We point out here why we have concluded that the provisions of an airplane trip insurance policy on the life of the beneficiary's husband did not plainly or clearly provide for non-coverage, and why, in the absence of such provision, in this unusual case, the insurer is liable. Accordingly, we do not believe that the judgment for the insurer, rendered after trial without a jury, should stand.

On March 3, 1957, Mr. George A. Steven purchased at Los Angeles, California, a round-trip airplane ticket to Dayton, Ohio. As part of the return trip Mr. Steven's itinerary included a flight from Terre Haute, Indiana, to Chicago, Illinois. Mr. Steven simultaneously purchased for a premium of $2.50 a $62,500 life insurance policy which named his wife, appellant, as the beneficiary.

Mr. Steven bought the policy by means of a vending machine. The policy set out across the top the following specifications: 'DO NOT PURCHASE MORE THAN A TOTAL OF $62,500 PRINCIPAL SUM NOR FOR TRAVEL ON OTHER THAN SCHEDULED AIR CARRIERS. THIS POLICY COVERS ON ONE-WAY TRIP ONLY UNLESS ROUND TRIP TICKET IS PURCHASED BEFORE DEPARTURE.' Below this printed statement a box form provided for the insertion on appropriate lines of the insured's name, the name and address of the beneficiary, the point of departure and destination, the extent of the trip as on a one-way or round-trip ticket, the date, the principal sum of insurance ($62,500), the amount of the premium ($2.50), and the insured's signature. The evidence does not clearly show whether at the time of purchase the aperture of the vending machine disclosed the entire top portion of the policy, including the printed warning as to amount and coverage for travel on 'scheduled air carriers,' or merely the form for the personal data and flight information to be furnished by the purchaser. After obtaining the policy, Mr. Steven, using the envelope provided by the machine, mailed it to his wife.

On March 6, 1957, on his return trip from Dayton, Mr. Steven, according to his original plan, stopped off at Terre Haute. He arrived there between 7 and 8 o'clock in the morning. His round-trip ticket scheduled him to take a Lake Central Airlines plane to Chicago at noon that day. At about that time the public address system at the airport announced that the Lake Central plane had been grounded in Indianapolis and that there would be some delay. After several further announcements of repeated delays, the scheduled Lake Central flight to Chicago was finally cancelled at 4:30 p. m.

The agent of Lake Central Airlines then attempted to arrange for Mr. Steven and three other men substitute means of transportation to Chicago. The agent phoned railroads, bus lines and even an automobile rental company. After concluding that he could not thereby arrange a connection with the scheduled Chicago flight to Los Angeles, the agent took Mr. Steven and the other three men to the office of the Turner Aviation Corporation (hereinafter designated Turner) at the Terre Haute airport and introduced them to the agent there in charge. The Lake Central agent indicated that a flight on a Turner plane provided the only means for Mr. Steven to make his scheduled connection with the Chicago plane, a connection which Mr. Steven particularly desired because an essential work project awaited him in Los Angeles the next morning. Turner agreed to fly the men to Chicago for $36 per person, or, if two more passengers could be obtained, for $21 a person. Two additional passengers were obtained and accordingly Mr. Steven and each of the other passengers paid Turner $21 for his ticket.

Mr. Steven boarded the Turner aircraft, a Piper Tri-Pacer airplane, which took off from the Terre Haute airfield at 5:55 p. m. Some time around 7 p. m. on March 6, 1957, near Grant Park, Illinois, the plane crashed. Mr. Steven suffered fatal injuries.

During March 1957 Turner operated out of Terre Haute under an air-taxi certificate issued either by the Civil Aeronautics Board or the Civil Aeronautics Administration. As of the date of the crash, Turner held no certificate of public convenience and necessity from the Civil Aeronautics Board, the governmental authority empowered to issue such certificates. Neither the State of Illinois nor the State of Indiana grants certificates of public convenience and necessity or other authorization to air carriers of any kind. During March 1957 Turner did not publish schedules and tariffs for regular passenger service between named cities within the boundaries of either Illinois or Indiana at regular and specified times. The plane trip on which the accident occurred was not a regular and scheduled flight of Turner.

The trial court found that the deceased at the time of the accident 'was not riding as a passenger on an aircraft operated by a scheduled air carrier, as defined in (the) policy, 1 and further * * * that he was riding a charter plane from Terre Haute, Indiana, to Chicago, Illinois,' and concluded that appellant could not recover on the policy.

Applying and principle that ambiguous clauses in insurance policies are to be interpreted against the insurer, we believe, for the reasons we shall set out, the provisions of the policy both as to coverage for a substituted flight and as to coverage for scheduled air carriers must be held to impose liability upon the insurer. We shall also explain why we have concluded that Mr. Steven's failure to exchange his ticket at Terre Haute does not absolve the insurer from such liability.

The special circumstances of this case establish a second reason for our conclusion that the insurer cannot successfully claim that the policy did not cover the substituted transportation. In this type of standardized contract, sold by a vending machine, the insured may reasonably expect coverage for the whole trip which he inserted in the policy, including reasonable substituted transportation necessitated by emergency. If the insurer did not propose such coverage, it should have plainly and clearly brought to the attention of the purchaser such limitation of liability.

We turn to the first point. We must determine whether, when Mr. Steven faced the necessity of arranging substituted transportation at Terre Haute, the policy afforded him clear notice of non-coverage of such substituted transportation. We examine the question in the light of the purpose and intent of the parties in entering into the contract, 2 Mr. Steven's knowledge and understanding as a reasonable layman, 3 his normal expectation of the extent of coverage of the policy and the effect, if any, of the substitution of the transportation upon the risk undertaken by the insurer. 4

The purpose and intent of the insured in taking out the insurance was to obtain insurance protection for the trip. The insured could fairly believe that the policy would cover a reasonable emergency substitution necessitated by the exigencies of the situation. Since weather conditions and mechanical failure upon not infrequent occasions require such substitution, the insured would not ordinarily expect that his insurance would fail in the event of these foreseeable contingencies. Since his contract covered the trip, he would not contemplate a hiatus in coverage; he bargained for protection for the whole, not part of, the trip.

A reasonable person, having bought his ticket for a fixed itinerary, and thus having at the moment of purchase of the policy gained insurance protection for the whole trip, would normally expect that if a flight were interrupted by breakdown or other causes, his coverage would apply to substitute transportation for the same flight. If, for instance, the scheduled plane crashlanded, he would certainly assume that the policy covered the emergency relief plane whether or not it were a scheduled air liner. The same normal expectation would apply to the substitution of an alternate plane because the scheduled one had been grounded by mechanical failure.

The risk of injury on the substitute conveyance in many cases will be no greater than the risk on the scheduled flight; in all cases it will be less than if the scheduled air line attempts to fly the scheduled flight despite bed weather or mechanical difficulty. Thus, both in the terms of occurrence and magnitude of risk, substitute emergency transportation falls well within the obligation undertaken by the insurer.

The language of the policy does not specifically exclude the expected coverage for the substituted flight. Neither the insuring clause, the definitions of a scheduled air carrier nor section 3(b) infra negates, without ambiguity, protection for the emergency substitute flight.

The insuring clause alludes to a loss occurring 'during the first one-way or round airline trip taken by the Insured after the purchase of this policy on Aircraft Operated by a Scheduled Air Carrier as defined below * * *' and does not mention the subject of substitution of another carrier in the event of breakdown. Section 4, which defines 'aircraft operated by a scheduled air carrier' differentiates between the scheduled and nonscheduled carriers but likewise does not describe the accorded coverage if an emergency causes the use of a nonscheduled carrier. These sections provide that the policy applies, as the heading in the box states, to the 'round trip ticket * * * purchased before departure.' Mr. Steven complied...

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