Underwriters At Lloyd's of London v. Cordova Airlines

• Decision Date: 25 October 1960
• Docket Number: No. 16283.,16283.
• Citation: 283 F.2d 659
• Parties: UNDERWRITERS AT LLOYD'S OF LONDON, Victoria Insurance Company, Ltd., Orion Insurance Company, Ltd., and Eagle Star Insurance Company, Ltd., Appellants, v. CORDOVA AIRLINES, INC., Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

283 F.2d 659 (1960)

UNDERWRITERS AT LLOYD'S OF LONDON, Victoria Insurance Company, Ltd., Orion Insurance Company, Ltd., and Eagle Star Insurance Company, Ltd., Appellants, v. CORDOVA AIRLINES, INC., Appellee.

No. 16283.

United States Court of Appeals Ninth Circuit.

October 25, 1960.

Edgar Paul Boyko, Los Angeles, Cal., Arthur D. Talbot, Anchorage, Alaska, for appellant.

Stanley J. McCutcheon, Anchorage, Alaska, for appellee.

Before HAMLIN and KOELSCH, Circuit Judges, and BOWEN, District Judge.

KOELSCH, Circuit Judge.

This is an appeal by the Underwriters at Lloyd's of London and other participating underwriters from a judgment entered upon a jury verdict in favor of Cordova Airlines, Inc., in the latter's suit to recover under an insurance policy for the total loss of an aircraft which crashed near Iliamma Lake, Alaska, on December 18, 1955. We have jurisdiction under 28 U.S.C.A. §§ 1291 and 1294(2).¹

At the time of the crash the plane was operating under a ninety-day charter or contract to Morrison-Knudsen Company and then engaged in transporting dynamite to a construction site at "Big Mountain," Alaska, where Morrison-Knudsen was a subcontractor for Western Electric Co. in erecting an air defense radar installation for the United States Air Force. It is undisputed that the dynamite being carried by the aircraft did not explode either before or after the accident; the actual cause of the accident is unknown (the pilot was killed instantly). After the crash, the airline promptly presented its claim under the policy for the full value of the aircraft ($15,200.00), but the insurer denied liability because of purported violations of the policy during the flight.

Appellant urges that Cordova breached the terms of the policy and presents three basic violations which assertedly preclude recovery on the insurance contract: (1) that Cordova carried dynamite on the flight without first obtaining a waiver from the Civil Aeronautics Authority, (2) that the carriage of dynamite without such waiver constituted an "unlawful purpose" proscribed by the terms of the policy, and (3) that the aircraft was overloaded in violation of the Operations Manual of the Civil Aeronautics Authority. Several errors are assigned to the lower court's instructions to the jury based upon appellant's view of the legal effect of the terms of the policy, but the essential point urged is that the lower court erred in refusing to grant appellant's motion for a directed verdict.²

We find it unnecessary to consider all of the issues asserted because we agree that the lower court should have directed a verdict in favor of appellant on the basis of the first question stated above, i. e., failure to obtain a waiver to carry the dynamite, and we rest our conclusion solely on that ground.

The particular clause in the policy relied upon by appellant is as follows:

"General Exclusions

"This Certificate and/or Policy do not cover:

"1. Any loss, damage or liability arising from:

"(a) * * *

"(b) * * *

"(c) * * * any flying in which a waiver issued by the Civil Aeronautics Authority is required unless with the express written consent of Farwest General Agency for Insurers."

It is not disputed, and the record clearly shows, that no waiver was obtained for carrying the dynamite on the flight.³ The questions raised under this exclusionary clause, then, are as follows: (1) whether a waiver was required under the applicable Civil Air Regulations, and if so, (2) whether the failure to obtain a waiver must have also caused or contributed to the loss incurred in order to preclude recovery by Cordova.

The applicable Civil Air Regulations are not a paragon of logical organization of graphic lucidity, yet they are not hopelessly unintelligible. The basic provision is 14 C.F.R. § 49.0, which provides in part that "explosives or other dangerous articles * * * shall not be loaded in or transported by civil aircraft in the United States * * * except as provided in this part i. e., Part 49." Section 49.81 contains a more specific prohibition:

"No explosive or dangerous article listed in the ICC Regulations (49 CFR Part 72) as an Explosive A, a Poison A, a forbidden article, or as an article not acceptable for rail express * * *, nor any article listed in Appendix A shall be carried on aircraft subject to the provisions of this part."

The controlling provision "of this part" is found in Section 49.41 under the subheading, "Cargo Aircraft," which provides as follows:

"In addition to the articles acceptable for transportation on aircraft carrying passengers,⁴ any article acceptable for and packed, marked, and labeled in accordance with the ICC Regulations (49 CFR Parts 71-78) for transportation by rail express may be carried in cargo aircraft: Provided, That no article listed in Appendix A of this part shall be carried except under the provisions of § 49.71 special authority or "waiver" by the CAA Administrator. The maximum quantity in any one outside package or container shall not exceed that prescribed in the commodity list of the ICC Regulations (49 CFR Part 72)."

Applied to the present case, we must first determine whether the dynamite in question was a "prohibited article" within the meaning of Section 49.81, and if so, whether its carriage was permissible under Section 49.41 without requiring the special authority of Section 49.71.

The dynamite carried on the flight here involved was described in a letter from Morrison-Knudsen Co., Inc., to the Civil Aeronautics Board (Defendant's Exhibit B, admitted in evidence without objection by appellee), which stated that the plane hauled a "* * * cargo of 50-pound boxes of Atlas Giant 40% stick dynamite * * *."⁵ Section 49.81 prohibits those explosives designated as "Class A" under the ICC Regulations, 49 CFR Part 72; those regulations, at Section 72.5, list numerous articles, their lettered classifications, exemptions from packing and labeling requirements, and the maximum quantities to be shipped in one container by rail express: under the heading "Dynamite" is the reference, "See High explosives," and the latter has two headings, "High explosives" and "High explosives, liquid"; both are designated as Class "A" and neither is exempted from packing and labeling requirements. Thus, it is clear that all dynamite is treated as a high explosive, listed as an "Explosive A," and therefore prohibited from transportation unless otherwise excused.

Section 49.41 of the Civil Air Regulations allows cargo planes to carry articles allowed on passenger-carrying aircraft, but these do not include Class "A" explosives (see note 4, supra); in addition, however, this same regulation does allow transportation of any article "acceptable for and packed, marked, and labeled in accordance with the ICC Regulations * * * for transportation by rail express * * *," provided the maximum quantity does not exceed the maximum allowed for each outside container in the ICC Regulations (49 CFR Part 72).

In 49 CFR § 72.5, under the heading "Maximum quantity in 1 outside container by rail express," liquid high explosives are stated to be "Not accepted"; all other high explosives are referred to § 73.86. The latter section refers to rail express shipments in subparagraph (d), "Samples of explosives and explosive articles for transportation by * * * rail express * * *" and imposes certain requirements, for example: samples must consist of not more than one-half pound of explosive and not more than twenty one-half pound samples for laboratory examination can be packed in one outside package.

It is clear from the foregoing that dynamite is a prohibited article which cannot be transported unless acceptable for railway express shipment; but under the ICC Regulations, § 73.86, the only acceptable explosives are "samples" which cannot exceed twenty one-half pound packages, or ten pounds maximum. In this case there was some dispute as to how many cartons were carried on the plane; there was no dispute, and in fact the parties stipulated, "* * * that the dynamite carried on the flight in question weighed 50 pounds net per carton * * *."

The airline argues, however, that Section 73.61 of the ICC Regulations makes it impossible to determine in this case whether the type of explosive carried by it was in fact prohibited, for the section states that "high explosives (dynamite), except gelatin dynamite, when offered for transportation by rail freight or highway must not contain in excess of 60 per cent of liquid explosive * *." It is urged that there is no way of knowing from the present record whether the dynamite in question was gelatin or contained in excess of 60% liquid explosive.

This argument is without merit because Section 73.61 is in no way connected with the classification of explosives or shipment by railway express; it merely states the shipping requirements of high explosives, excluding gelatin dynamite and certain liquid explosives, which are thoroughly covered under Sections 73.62 and 73.63. All of these explosives are classified under Section 72.5 as "high explosives" — Class A, and all are prohibited from transportation under Civil Air Regulations (14 CFR § 49.81) unless they fall within the limited exception for a shipment of "samples" by railway express under 49 CFR § 73.86.

We can therefore find no basis in either the CAB or ICC Regulations which would exempt the carriage of dynamite from the provisions of 14 CFR § 49.81, prohibiting its transportation by aircraft. Under such circumstances, Cordova was required to follow the procedure outlined in 14 CFR § 49.71(a), "Deviations from any of the provisions of this part for a particular flight may be authorized by the Administrator where he finds that the conditions under which the articles are to be carried are such as to permit the safe carriage of persons and cargo." See also, §§ 49.71-1, 49.71-2, 49.71-3. We think, therefore, that a "waiver" was required within the meaning of Clause 1(c...