Clear & unambiguous policy language must be enforced: insurer may decide what it wants to insure.
In King v. Old Republic Ins. Co., Court of Appeal of Louisiana,--So.3d--2016 WL 4698248 (Sept. 7, 2016) the court was asked to ignore the language of an aircraft liability insurance policy and provide coverage for the death of a passenger in an experimental aircraft.
On September 21, 2014, Wilt was killed in an aircraft crash, along with Darren Mahler ("Mahler"). Mahler was the pilot of a gyrocopter, an experimental amateur-built aircraft, in which Wilt was Mahler's passenger at the time of the crash. Prior to the crash, Mahler purchased the gyrocopter from Christopher Brupbacher ("Brupbacher"), who also built the gyrocopter. The gyrocopter was registered with the Federal Aviation Association ("FAA") with an experimental category airworthiness certificate.
King alleged that Old Republic issued to Mahler an aviation insurance policy (the "policy"), which King alleged provided coverage for bodily injury and property damage resulting from the crash.
Old Republic filed a motion for summary judgment on May 8, 2015, contending that the policy it issued to Mahler provided no coverage for the flight or crash of the gyrocopter or for the death of Mahler's passenger, Wilt. Old Republic argued that its policy covered only a 1973 Piper PA-28-140 fixed wing aircraft (the "Piper"), which was listed in the declarations section of the policy and was not involved in the crash. Mahler did not seek to add the gyrocopter as a covered aircraft under the policy.
King opposed summary judgment, arguing that the policy provided coverage for "any aircraft" that is "used by the named insured [Mahler]" which "is not an aircraft described in Item 5 of the Declarations."
King argued that Mahler believed there was coverage for the gyrocopter, and Mahler's wife attested to her understanding of this belief in an affidavit, which was introduced by King in opposition to summary judgment.
In its reply to King's opposition, Old Republic argued that King's interpretation of the endorsement would lead to absurd results, in that such an interpretation would render the policy as providing coverage for any aircraft that Mahler chose to use while the policy was specific to the use of a particular aircraft, of an aircraft meeting specific detailed requirements.
The district court rendered judgment, finding that Old Republic was entitled to judgment as a matter of law and dismissing all claims brought by King against Old Republic with prejudice.
A dispute as to whether, as a matter of law, an insurance policy provides or precludes coverage to a party usually involves a legal question which can be resolved in the framework of a motion for summary judgment. When determining whether or not a policy affords coverage for an incident, it is the burden of the insured to prove the incident falls within the policy's terms. Summary judgment declaring a lack of coverage under an insurance policy may not be rendered unless there is no reasonable interpretation of the policy, when applied to the undisputed material facts shown by the evidence supporting the motion, under which coverage could be afforded.
An insurance policy is a contract between the parties and should be construed using the general rules of interpretation of contracts set forth in the Civil Code. The judicial responsibility in interpreting insurance contracts is to determine the parties' common intent. Words and phrases used in an insurance policy are to be construed using their plain, ordinary and generally prevailing meaning, unless the words have acquired a technical meaning. An insurance policy should not be interpreted in an unreasonable or a strained manner so as to enlarge or to restrict its provisions beyond what is reasonably contemplated by its terms or so as to achieve an absurd conclusion. Unless a policy conflicts with statutory provisions or public policy, it may limit an insurer's liability and impose and enforce reasonable conditions upon the policy obligations the insurer contractually assumes.
If after applying the other general rules of construction an ambiguity remains, the ambiguous contractual provision is to be construed against the insurer and in favor of coverage. An insurer, like other individuals, is entitled to limit its liability and to impose and enforce reasonable conditions upon the policy obligations it contractually assumes; it may change or amend the coverage provided by the policy by an endorsement attached to the policy as long as the provisions and/or endorsements do not conflict with statutory law or public policy. If a conflict between the endorsement and the policy exists, the endorsement prevails. If coverage is provided in the policy, but then excluded in the endorsement to the policy, coverage will be excluded.
The Old Republic policy at issue, which listed Mahler as its insured, was in effect from September 18, 2014 to September 18, 2015. The gyrocopter accident occurred on September 21, 2014.
The parties cite to no Louisiana case, and the court could find none, interpreting either the endorsement or the grammatical construction advanced by King on appeal. The court of appeal was unable to find ambiguity in the endorsement. The endorsement sets forth five clauses, (a) through (e), each separated by a semicolon. Each clause states a qualification that must be satisfied in order for the endorsement to provide coverage for a particular aircraft.
The court of appeal refused to acknowledge the affidavit of Mahler's wife, attesting to Mahler's purported understanding of the terms and conditions of the policy, creates ambiguity in the endorsement or raises any genuine issue of material fact. The record on appeal does not reflect that Old Republic moved to strike the affidavit of Mahler's wife or that the district court explicitly ruled upon the admissibility or competency of this evidence. Regardless, courts are prohibited from taking parol evidence to explain or contradict the insurance contract's clear meaning.
Here, it is undisputed that the gyrocopter satisfies clause (b), because the gyrocopter is not listed in the policy declarations. However, the undisputed facts also show that the gyrocopter does not meet the requirements of either clause (a) or (c), in that Mahler owned the gyrocopter and the gyrocopter lacked a standard airworthiness certificate, instead having only an experimental airworthiness certificate.
Because the gyrocopter does not satisfy all five clauses set forth in the endorsement, was not listed in the policy declarations, and because Mahler did not obtain additional coverage for the gyrocopter, there is no genuine issue of material fact that the policy did not provide coverage to Mahler for damages arising from the gyrocopter accident on September 21, 2014. Therefore, Old Republic was entitled to summary judgment and dismissal of all claims against it in this matter.
It is amazing to me that litigants still refuse to accept the fact that an insurance policy is a contract whose clear and unambiguous terms must be enforced. Here, Mahler purchased the gyrocopter, did nothing to add it to his Old Republic policy (probably because, as an experimental aircraft it would not be eligible) and only after the accident tried to change the wording of the policy by parsing language.
Barry Zalma, Esq., CFE, has practiced law in California for more than 42 years as an insurance coverage and claims handling lawyer. He now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He founded Zalma Insurance Consultants in 2001 and serves as its only consultant.
Look to National Underwriter Company for the new Zalma Insurance Claims Library, at www.nationalunderwriter.com/ZalmaLibrary. The new books are Insurance Law, Mold Claims Coverage Guide, Construction Defects Coverage Guide and Insurance Claims: A Comprehensive Guide.
The American Bar Association, Tort & Insurance Practice Section has published Mr. Zalma's book "The Insurance Fraud Deskbook" available at http://shop.americanbar.org/eBus/Store/ProductDetails.aspx?productld=214624, or 800-285-2221 which is presently available.
The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.
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|Date:||Feb 13, 2017|
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