United Services Life Insurance Company v. Delaney

• Decision Date: 26 October 1962
• Docket Number: No. 19531.,19531.
• Citation: 308 F.2d 484
• Parties: UNITED SERVICES LIFE INSURANCE COMPANY, Appellant, v. Joan Flores DELANEY, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

308 F.2d 484 (1962)

UNITED SERVICES LIFE INSURANCE COMPANY, Appellant, v. Joan Flores DELANEY, Appellee.

No. 19531.

United States Court of Appeals Fifth Circuit.

September 26, 1962.

Rehearing Denied October 26, 1962.

Bond Davis, San Antonio, Tex., for appellant.

Horace P. Shelton, Jr., San Antonio, Tex., for appellee.

Before CAMERON, WISDOM and GEWIN, Circuit Judges.

CAMERON, Circuit Judge.

Robert H. Delaney was killed May 8, 1959 while he was on a night training flight in an Army airplane of the United States, while he was pilot and sole occupant of the plane which crashed. At the time of his death he was the insured in a life insurance policy issued by appellant United Services Life Insurance Company in which his wife, Joan Flores Delaney, appellee, was the beneficiary. She made demand on the Insurance Company for the payment of $20,000.00, the face of the policy, and upon the rejection of her demand, brought this action to recover that amount, together with statutory damages, attorneys' fees and interest. Appellant had, before suit, tendered to her the amount of premiums which the deceased had paid on the policy, and it paid the amount into court upon appellee's refusal of the tender and the beginning of this civil action.

The appellant plead that it was not liable under its policy on the ground that "the provisions contained in the LIMITATION DUE TO AVIATION HAZARD portion of the policy, are clear and unambiguous in providing that the liability of the Company under certain specified circumstances shall be limited to the premiums paid or the net reserve at the time of death." The Company plead further that, even if the language of the policy, taken alone, should be considered ambiguous, such ambiguity was removed by the actions of the parties and the construction placed thereon by them.

The case was tried by the court below without a jury upon admissions of, and stipulations as to the, facts by the two parties. Upon a written opinion filed by the court, now published in 201 F.Supp. 25, judgment was entered in favor of appellee and against appellant for the sum of $25,900.00, which by subsequent order was corrected to the sum of $28,600.00. We copy a portion of the opinion of the court below as epitomizing the facts before it and its decision upon them:

"In his application dated September 28, 1957, the insured, at that time a Lieutenant in the United States Army, stated, among other things, that he had applied for army aviation; that he had been accepted in the Judge Advocate's branch; that he did not then desire aviation; and that he would decline aviation if he was accepted. By an amendment to the application, dated the same day, the following provision was added:

"`Limitation Due to Aviation Hazard

"`If this policy shall become a claim by death of the insured due to any service, training, travel, flight, ascent or descent in, on, or from any species of aircraft at anytime, except death resulting from travel as a passenger on an aircraft owned and operated by the United States Government or as a passenger on a scheduled passenger air service regularly offered between specified airports, the liability of the company under this policy shall be limited to the premiums paid hereunder or to the then net reserve at time of death, if greater; any provision in this policy to the contrary notwithstanding.' * * * Emphasis supplied.

"When the policy was issued, it contained a rider incorporating the provision above quoted, and the words `Limitation Due to Aviation Hazard included,' were typed on its front and back. It was in full force and effect when the insured died on May 8, 1959 of injuries received as the pilot and only occupant of an aircraft owned and operated by the United States government, which crashed near Spring Branch, Texas, while on a night training flight. At the time of his death, the insured was receiving incentive pay and was on duty as a regular officer. * *

"The plaintiff claims that she is entitled to judgment, because when the insured was killed, he was a `passenger' in an aircraft owned and operated by the United States government; therefore, his death was clearly within one of the exceptions to the aviation rider.

"* * * There is no language in the aviation rider involved herein which would compel a different conclusion, and `the intent of the policy to exclude the pilot is not so certain as to make it wholly unreasonable to say that he was included.' Since the Warren Case * * * was decided more than four years prior to the date the policy herein was issued, it is even more significant that the insurer, after being put on notice, did not exclude the pilot `beyond question, by the simple insertion of a phrase such as "and not as the pilot."'

"The defendant, however, points to the fact that the insured was admittedly on a training flight, and says that according to the plain language of the aviation rider his death was excluded from the coverage.

"Plaintiff, on the other hand, argues that such language can reasonably be interpreted to mean that it applies in the event the death of the insured was due to any aviation training, except as a result of travel as a passenger on an aircraft owned and operated by the United States government; that the insurance company chose the words and is bound by them; that the language of the insurance policy which is susceptible of more than one construction should be interpreted strictly against the insurer and liberally in favor of the insured; and that since the insured, as the pilot, under the law, was a `passenger' on a government owned and operated aircraft, his death was covered by the policy, despite the fact that he was on a night training flight.

"It certainly cannot be said that plaintiff's argument is unreasonable, even if it could be said that the defendant's interpretation constitutes `a more likely reflection of the intent of the parties.' * * *"

Based upon these holdings and its findings that while the conduct of the insured suggested the possibility that he did not think his training as a student pilot was covered by the policy, the conclusion that he knew and understood that he did not have such coverage does not follow therefrom as a matter of law, the trial court rejected the defenses interposed by the Insurance Company and held that the appellee was entitled to recover the face of the policy, $20,000.00, with interest, the twelve percent penalty provided by law, and $3,500.00 attorneys' fees stipulated by the parties to be reasonable.

We gather that the trial court was constrained to its conclusion by the decision of the Supreme Court of Texas — it being conceded that Texas substantive law governs — in Continental Casualty Co. v. Warren, 1953, 152 Tex. 164, 254 S.W.2d 762, affirming the decision of the Court of Civil Appeals of Texas, Fort Worth, 1952, 248 S.W.2d 315, which, in turn, reversed the judgment of the District Court of Harris County, Texas. After a close study of that case we conclude that the principles of law established by it control the decision of this case and we affirm the judgment of the court below.

The Warren case grew out of a suit based upon a policy indemnifying Warren's employer against loss resulting from injury sustained by him in consequence of riding as a passenger in a Beechcraft Aircraft owned by the employer. The insurance company answered the suit brought by Warren's widow and urged a special exception to her petition "asserting that since said petition alleged that Jesse C. Warren * * * was piloting the aircraft when the fatal injury occurred, he was not in fact riding as a passenger and therefore was not covered."¹ The District Court of Harris County sustained this special exception, but its action was reversed by the Court of Civil Appeals.

We bring together a portion of two paragraphs (248 S.W.2d pages 316-317) of the Court of Civil Appeals' opinion which constitute the gist of its holding:

"Since the insurance policy before us for construction did not specifically exclude the pilot from coverage, we must therefore resort to fundamental rules of interpreting life insurance policies which have been handed down by our courts, such as, terms of the policy must be interpreted in the light of common sense; that the language of an insurance policy which is susceptible of more than one construction should be interpreted strictly against the insurer and liberally in favor of the insured. * * * that any ambiguity in an insurance contract drafted by the insurer will be resolved in favor of the insured and against the insurer * * *.

"If the parties intended for the contract to eliminate coverage of the pilot, it could have so provided by using some reasonable term, such as `exclusive of pilot,\' or, `this policy does not cover the pilot, mechanics or any person riding in the plane employed by the assured to manipulate, to work on, to supervise, or to assist in operation of the plane.\'"

In addition to the quoted language, the Court of Appeals devoted nearly half of its opinion to a careful consideration of the meaning of the word "passenger," quoting from dictionaries and textbooks, and concluding that, as used in the policy before it, the word "passenger" is used "in the ordinary sense with the word `occupant.'"

The Supreme Court of Texas went into the decision of the Court of Civil Appeals at great length and with great particularity, and what the Supreme Court intended to hold is brought into sharp focus by the vigorous dissenting opinion in which four of the justices concurred. The dissenting opinion emphasized that, if Warren was to be protected while he was piloting the plane, the use of the words "piloted by a duly licensed pilot" is surplusage and without meaning. It, too, explored the authorities and quoted from a decision by the United States Supreme Court and from the Uniform State Law for Aeronautics to demonstrate that a plane passenger is considered to include only "any...