Tadday v. National Aviation Underwriters

• Decision Date: 17 March 1983
• Docket Number: No. 5741,5741
• Parties: Eitel F. TADDAY and Ben Gerber, Appellants (Defendants), v. NATIONAL AVIATION UNDERWRITERS, Attorney-in-Fact for National Insurance Underwriters, a reciprocal exchange, Appellee (Plaintiff).
• Court: Wyoming Supreme Court

Page 1148

660 P.2d 1148

Eitel F. TADDAY and Ben Gerber, Appellants (Defendants), v. NATIONAL AVIATION UNDERWRITERS, Attorney-in-Fact for National Insurance Underwriters, a reciprocal exchange, Appellee (Plaintiff).

No. 5741.

Supreme Court of Wyoming.

March 17, 1983.

Evalyn B. Carson, Mooresville, N.C., and Ellen Crowley, Cheyenne, for appellants.

William S. Bon and Richard R. Wilking, Casper, and Hugh C. Griffin, Terry W. Backus, and Victoria A. Clonninger, of Lord, Bissell & Brook, Los Angeles, Cal., for appellee.

Before ROONEY ^*, C.J., and RAPER, THOMAS, ROSE ^** and BROWN, JJ.

BROWN, Justice.

Appellee insurance company was plaintiff and appellants were defendants in a declaratory judgment action concerning a dispute over insurance coverage. The trial court granted a directed verdict for appellee on the issues of waiver and estoppel. The jury returned a general verdict for appellants, and returned answers to special interrogatories. The trial court granted a judgment notwithstanding the verdict (JNOV) to appellee, because one of the special interrogatories answered by the jury was inconsistent with the general verdict. Appellants appeal from the granting of the directed verdict and from the granting of the JNOV.

Appellants raise four issues: whether the trial court erred in directing a verdict on the issues of waiver and estoppel; whether the trial court erred in granting a JNOV; whether appellants were entitled to a special interrogatory concerning ambiguity in the insurance policies; and whether appellants were entitled to attorney fees.

We will affirm.

In January, 1978, appellee issued an insurance policy on certain aircraft to Wyoming Central Aero-Ways, Inc. (Wyoming Central). The airplane involved here was added to this policy of insurance in November, 1978. After the initial policy was issued, Wyoming Central sold or conditionally sold the airplane to Delta II, which then leased the airplane back to Wyoming Central.

On December 19, 1979, the airplane involved here crashed in Montana, injuring appellants, who were passengers. They filed suit in the United States District Court in Montana in May, 1980, for damages. The defendants in the Montana case were Wyoming Central (the insured) and Anderson and Soester, dba Delta II (purchaser of the airplane from Wyoming Central). Appellee defended Wyoming Central, subject to a reservation of its rights.

In October, 1980, appellee brought a declaratory judgment action against appellants and others, asking the trial court to determine that its policy of insurance issued to Wyoming Central did not afford liability coverage for the December 19, 1979, accident.

I

Appellants' first assignment of error is based on the trial court's granting a directed verdict for appellee on appellants' defenses of waiver and estoppel. Appellants' argument is twofold.

A. Appellee waived or is estopped from denying liability coverage under the policies because they settled with one of the defendants to the declaratory judgment action; and

B. Appellee retained premiums paid by Wyoming Central for insurance on the aircraft involved here.

A

In the district court there were defendants other than appellants, who are not involved in this appeal. Wyoming Central was one such party. Appellee made a settlement with Wyoming Central on hull insurance; appellants unsuccessfully tried to introduce the settlement into evidence.

Appellants argue that they should have been allowed to introduce evidence of this settlement because it showed that the appellee "had by its conduct waived any right it possessed to claim forfeiture by the insured." Appellants' argument fails for two reasons: appellee was not trying to claim a forfeiture of coverage by the insured; and a payment of one claim does not estop an insurer from contending that another claim arising out of the same occurrence was not covered by the policy.

A case from the Tenth Circuit Court of Appeals made the distinction between an insurer trying to claim forfeiture of coverage by an insured, and an insurer arguing that the policy simply never covered the insured. In State Farm Mutual Automobile Insurance Company v. Petsch, 261 F.2d 331 (10th Cir.1958), the court held that even an express representation by an insured's agent that the policy when issued fully protected the insured against an employee's claim did not estop the insurer from subsequently denying coverage where the policy provisions plainly excluded coverage for workmen's compensation. The court of appeals said, at 335:

" * * * [T]he coverage of an insurance policy may not be extended by waiver or estoppel. This is in accord with general law. The Wyoming cases of Wyatt v. State Farm Fire & Casualty Co., Wyo., 322 P.2d 137, and New Hampshire Fire Ins. Co. of Manchester v. Boler, 55 Wyo. 530, 102 P.2d 39, are not in point because they involved waiver of right to avoid or forfeit rather than extension of coverage."

This court applied the same principle in Sowers v. Iowa Home Mutual Casualty Insurance Company, Wyo., 359 P.2d 488 (1961), holding that an agent's representations concerning policy coverage did not estop the insurer from denying coverage and that the representations did not mean that the insurer waived the policy provisions excluding coverage for the accident.

" 'While a forfeiture of benefits contracted for in an insurance policy may be waived, the doctrine of waiver or estoppel cannot create a liability for benefits not contracted for. Nor may a contract, under the guise of waiver, be reformed to create a liability for a condition specifically excluded by the specific terms of the policy. * * * The doctrine of implied waiver or estoppel is not available to bring within the coverage of an insurance policy risks that are not covered by its terms or that are expressly excluded therefrom * * *.' " (Emphasis added.) Sowers v. Iowa Home Mutual Casualty Insurance Company, supra, at 493.

The cases cited by appellants do not stand for a contrary rule; rather, they each involve an alleged forfeiture of benefits by the insured, to which the doctrines of waiver and estoppel may be applied. No issue of forfeiture of benefits otherwise contracted for is presented here. Rather, as in Sowers v. Iowa Home Mutual Casualty Insurance Company, supra, and in State Farm Automobile Insurance Company v. Petsch, supra, the directed verdict for the appellee on the issues of waiver and estoppel was entered because only flights made for a business purpose of Wyoming Central were covered under the policy. The waiver and estoppel doctrines are therefore inapplicable.

Appellants could be trying to imply that the appellee admitted coverage of anything having to do with the airplane and business use by settling on the hull coverage. This argument also fails. An insurer, by settling one claim arising from an accident, may still deny coverage as to another claim. 45 C.J.S. Insurance, § 743, p. 755 (1946). In Saggau v. State Farm Mutual Insurance Company, 16 Ariz.App. 361, 493 P.2d 528 (1972), an insurer settled one claim arising from an accident. The settlement was made after the execution of a nonwaiver agreement. There was nothing in the record to show that the people claiming insurance had relied to their injury on the settlement. The court held that the insurer was not estopped from denying coverage of the disputed claim.

A settlement on a policy or part of it may be made for many reasons. In Randolph v. Fireman's Fund Insurance Company, 255 Iowa 943, 124 N.W.2d 528 (1963), well before appellant employee was injured, another employee had sustained an injury which the insurer had covered without protest. As to the previous payment without protest to the first employee, the court said:

" * * * Whether the defendant paid it by oversight, or because it was so small it did not care to provoke a controversy, or to promote public relations, or because of any other reason does not clearly appear. In any event, the governing rule is clear, * * * 'The rule is well established that the doctrines of implied waiver and of estoppel, based upon the conduct or action of the insurer, are not available to bring within the coverage of a policy risks not covered by its terms, or risks expressly excluded therefrom * * *.' " Randolph v. Fireman's Fund Insurance Company, supra, at 531.

Here, appellee's settlement of the hull coverage claim with Wyoming Central was made with a full reservation of appellee's rights and the express provision that the settlement should not in any way be construed as admitting coverage under the policy or waiving any of appellee's rights or any of Wyoming Central's rights. We do not know the reason appellee settled with Wyoming Central on the hull insurance. We do know that it was not saying that Wyoming Central had forfeited its hull coverage, but that appellee was going to pay it anyway. Because this case does not involve an alleged forfeiture, the doctrines of waiver and estoppel do not apply.

B

Appellee double-billed Wyoming Central and retained both payments for over two years. Appellants contend that appellee by this act also "waived any right it possessed to claim forfeiture by the insured." Again, appellee was only asserting that there had never been any coverage to forfeit. Generally an insurer waives the right to assert a forfeiture when it accepts or enforces payment of a premium or retains a premium which it has received, providing that it knows the insured has acted in a way which might entitle the insurer to claim a forfeiture of the policy. Jackson v. United Benefit Life Ins. Co., 54 Wyo. 62, 86 P.2d 1089 (1939). However, appellants' argument once again fails because appellee was not claiming a forfeiture of policy coverage. It was claiming that coverage for appellants' damages never existed under the policy and was never intended to exist when the airplane was not being used for the business purposes of Wyoming Central. Appellants' waiver and estoppel...