Trishan Air Inc. v. Fed. Ins. Co.

• Decision Date: 16 February 2011
• Docket Number: No. 09–55317.,09–55317.
• Citation: 635 F.3d 422
• Parties: TRISHAN AIR, INC.; Kerry Acquisitions, LLC, Plaintiffs–Appellants,v.FEDERAL INSURANCE COMPANY; Starr Aviation Agency, Inc.; The Buckner Company, Inc.; David Wittwer; Arlington/Roe & Company, Inc., Defendants–Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

635 F.3d 422

11 Cal. Daily Op. Serv. 2142

2011 Daily Journal D.A.R. 2565

TRISHAN AIR, INC.; Kerry Acquisitions, LLC, Plaintiffs–Appellants,

v.FEDERAL INSURANCE COMPANY; Starr Aviation Agency, Inc.; The Buckner Company, Inc.; David Wittwer; Arlington/Roe & Company, Inc., Defendants–Appellees.

No. 09–55317.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted June 11, 2010.Filed Feb. 16, 2011.

David A. Shaneyfelt (argued), Finley T. Harckham, Dennis J. Artese, and Ann M. Piazza, Anderson Kill & Olick, Ventura, CA, and New York, NY, and Louis Franecke, Franecke Law Group, San Rafael, CA, for appellants Trishan Air, Inc. and Kerry Acquisitions, LLC.Ralph S. LaMontagne, Jr., LaMontagne & Terhar LLP, Los Angeles, CA, for appellee Federal Insurance Co.Appeal from the United States District Court for the Central District of California, R. Gary Klausner, District Judge, Presiding. D.C. No. 2:07–cv–06204–RGK–FMO.Before: ALFRED T. GOODWIN, JOHNNIE B. RAWLINSON, Circuit Judges, and MARK W. BENNETT, District Judge.^*

OPINION

RAWLINSON, Circuit Judge:

Appellants Trishan Air, Inc. and Kerry Acquisitions, LLC (collectively Trishan) purchased an aviation insurance policy from Appellee Federal Insurance Co. (Federal). After an accident involving one of Trishan's corporate jets, Trishan filed a claim with Federal. Federal denied coverage because the co-pilot had not undergone the training mandated by the policy's pilot warranty. We affirm the district court's summary judgment in favor of Federal due to Trishan's failure to raise a material issue of fact regarding strict compliance with the pilot warranty, breach of the implied covenant of good faith and fair dealing, or bad faith. In addition, Trishan's claim for coverage under Coverage 29 of the policy was not properly raised in the district court.

I. BACKGROUND

Trishan retained David Wittwer (Wittwer) and the Buckner Company to procure the renewal of Trishan's aviation insurance policy covering a Dassault Falcon 900 B aircraft. Trishan's chief pilot informed Wittwer that Trishan sought a renewal policy that provided for second-in-command pilots' compliance only with the training requirements of 14 C.F.R. § 61.55.¹

Arlington/Roe & Company (A/R) acted as the insurance broker for Trishan. Accordingly, Wittwer contacted Connie French (French) of A/R “to obtain a quote for the replacement policy from Starr Aviation.” ² Sam Seybert (Seybert), Starr Aviation's underwriter, determined that he could not provide a pilot warranty limited to the basic requirements listed in 14 C.F.R. § 61.55. As a result, Seybert transmitted a quotation to French that included a pilot warranty requiring pilots to complete ground and flight courses, including simulator training, for the make and model of the covered aircraft. In a subsequent email to French, Seybert clarified that the pilot warranty covered second-in-command pilots (SICs).³ French forwarded this information to Wittwer, who understood that, “under the Starr Aviation proposal, the schooling requirements and simulator requirements would apply to back-up SICs.”

Wittwer subsequently requested a binder for the policy. The binder included a pilot warranty endorsement that provided:

It is required that the aircraft is operated by a two pilot crew at all times that has been approved by the named insureds [sic] chief pilot.

It is further required that such pilot(s) must have successfully completed a ground and flight recurrent/initial training course for the make and model operated within the past 18 months. Any such course must incorporate the use of a motion-based simulator specifically designed for the insured make and model/make and model series.

The policy contained a nearly identical pilot warranty and Exclusion F, which excluded coverage consistent with the pilot warranty provisions.⁴

Scott Michael (Michael), Trishan's chief pilot, was in command of the covered aircraft during the accident. Michael was unaware at the time of the accident that the Federal policy contained “commercial flight school and simulator training requirements” for second-in-command pilots. According to Michael, he would “have never, and would never, permit any pilot to operate any aircraft if that pilot did not meet both the applicable minimum requirements under federal regulations and any further training requirements set forth in the insurance policy covering the aircraft.”

Dennis Piermarini (Piermarini) served as the second-in-command for the aircraft during the accident. Piermarini had “45 years and 15,000 hours of flight experience with 13,000 hours in jet aircraft.” He also “flew as co-pilot in the Falcon 900 as second-in-command for approximately five round-trip flights and a total of approximately nine hours of flight time.” Piermarini maintained that, if he had performed the simulator training, he “would have learned no new information or training that would have either alerted [him] to any condition or contributed to any of the actions that [he] took ...”

According to Michael's expert witness report, Piermarini received “approximately 8–10 hours of static cockpit simulation of procedures, emergency procedures, placement of placards, markings, instrumentation and other operations of the aircraft.” Michael stated that this training was “very similar to simulator training, and in some cases better ...” After conducting “[a] check ride flight,” Michael believed that Piermarini “was well versed and procedurally accurate in all particulars of the Falcons systems.” Piermarini also “flew in the jump seat as an observer on several flight legs ...” Michael opined that Piermarini's failure to undergo simulator training would not have affected Piermarini's qualifications to operate the aircraft.

In his declaration, Charles Tatum (Tatum), Trishan's expert, stated that the accident would not have been prevented if the pilots had undergone simulator or ground training. In his expert report, Tatum opined that Piermarini's “8–10 hours of static cockpit training [was] very similar to simulator training and in some cases better ...” Tatum concluded that “a full motion simulator course” would not have altered Piermarini's qualifications “in the slightest.”

According to Seybert, “Starr Aviation consider[ed] simulator training to be critical—particularly for purposes of emergency training, as there are a number of emergency procedures that can easily be practiced in a flight simulator that cannot be safely practiced in an actual aircraft.” (emphasis in the original). Seybert also stated that Piermarini “would not have been approved as a pilot [because] he had only flown a total of about 25 hours in the preceding four years ...”

Federal denied coverage for the accident because Piermarini “never attended any formal course relative to any Falcon aircraft” in violation of the pilot warranty and Exclusion F (emphasis in the original).

In its first amended complaint, Trishan alleged claims for breach of contract; tortious breach of the implied covenant of good faith and fair dealing; reformation; and declaratory judgment based on Federal's denial of coverage.⁵ The district court held that Federal's denial of coverage comported with California law, as Trishan did not strictly comply with the pilot warranty. The district court granted summary judgment in favor of Federal, and Trishan filed a timely notice of appeal.

II. STANDARDS OF REVIEW

“We review the district court's grant of summary judgment de novo.” Hesse v. Sprint Corp., 598 F.3d 581, 586–87 (9th Cir.2010) (citation omitted).

“Construction of a contractual insurance policy provision is a question of law and therefore subject to de novo review.” Assurance Co. of America v. Wall & Assocs. LLC of Olympia, 379 F.3d 557, 560 (9th Cir.2004) (citation omitted).

“We review de novo a district court's interpretation of law, including state law.” Office Depot Inc. v. Zuccarini, 596 F.3d 696, 699 (9th Cir.2010) (citation omitted). “When interpreting state law, federal courts are bound by decisions of the state's highest court.” Assurance Co. of America, 379 F.3d at 560 (citation and alteration omitted). “In the absence of such a decision, a federal court must predict how the highest state court would decide the issue using intermediate appellate court decisions, decisions from other jurisdictions, statutes, treatises, and restatements as guidance.” Id. (citation omitted).

III. DISCUSSIONA. Substantial Compliance With The Pilot Warranty

Trishan asserts that summary judgment was improper because, under California law, it was not required to strictly comply with the pilot warranty to receive coverage.⁶

There is a notable paucity of recent California Supreme Court precedent concerning an insured's strict compliance with insurance warranties. However, the California Supreme Court has held that strict compliance may be required. In McKenzie v. Scottish Union & Nat'l Ins. Co., 112 Cal. 548, 44 P. 922 (1896), the California Supreme Court determined that the insured's failure to employ a watchman at a sawmill as required by a warranty precluded coverage for damage caused by a fire. The California Supreme Court observed:

By a warranty the insured stipulates for the absolute truth of the statement made, and the strict compliance with some promised line of conduct, upon penalty of forfeiture of his right to recover in case of loss should the statement prove untrue, or the course of conduct promised be unfulfilled. A warranty is an agreement in the nature of a condition precedent, and, like that, must be strictly complied with.... If the warranty be a statement of facts, it must be literally true; if a stipulation that a certain act shall or shall not be done, it must be literally performed.

Id. at 555, 44 P. 922 (citation omitted). Although the California Supreme Court articulated that “there was neither a literal nor a substantial compliance with the terms of the warranty,” id. at 556, 44 P. 922, it appears that the ...