United States: Recent Aviation Insurance Coverage Decisions

Last Updated: November 9 2016
Article by Deborah Elsasser

New York Federal Judge Holds "Owned Aircraft Exclusion" Bars Coverage for Helicopter Crash in Arizona

Granting an insurer's pre-answer motion to dismiss, the United States District Court for the Southern District of New York upheld an insurer's disclaimer of coverage to an aircraft owner and its president, based on the owned aircraft exclusion in an aviation general liability insurance policy. The case arose out of a tour helicopter accident in Arizona. The injured passenger brought an action against the helicopter operator, as well as the Alaska-based owner/lessor of the helicopter, and the owner's president individually. After settling with the tour operator for its policy limits, the passenger made a policy limit demand under the owner's general liability policy. The insurer denied coverage stating that the owned aircraft exclusion applied to bar coverage for any claims against the owner as well as its president.   Plaintiff entered into a Dameron agreement with the insured by which the insured assigned its rights under the policy to the plaintiff. Plaintiff then commenced an action in federal court in New York alleging bad faith refusal to defend and settle the claim under the policy. Plaintiff argued that the existence of a severability of interests clause in the policy rendered the owned aircraft exclusion applicable only to the helicopter owner, and not to the individual president. The court ruled that Alaska law was applicable to the dispute and noted that there is no Alaska case law squarely addressing the interplay between a separation of insureds clause and this type of exclusion. The court, however, found that the majority of courts to consider the issue have held that a separation of insureds clause does not render a clearly worded exclusion ambiguous, and that the Alaska Supreme Court would likely follow that view. Finding the exclusion unambiguous, the court granted the insurer's motion to dismiss the complaint in all respects.

Barba v. Allianz, 2016 WL 6236324 (S.D.N.Y. October 25, 2016)

Louisiana Appellate Court Affirms Summary Judgment in Favor of Insurer on Non-Owned Aircraft Endorsement Interpretation

In a 2-1 decision, a Louisiana appellate court affirmed a trial court's grant of summary judgment in favor of the insurer on the grounds that an aviation insurance policy's non-owned aircraft endorsement did not provide coverage for a wrongful death action brought against the pilot and builder of an experimental aircraft. The gyrocopter was registered with the FAA with an experimental category airworthiness certificate, but was not listed in the declarations section of the policy as a covered aircraft. Rather the policy covered only a single scheduled fixed wing aircraft. The plaintiff argued that the policy's non owned aircraft provision provided coverage for any aircraft that is used by the named insured which is not an aircraft listed in the declarations. The insurer argued that the gyrocopter did not meet all five requirements set forth in the endorsement for coverage, including the requirement that the aircraft have a standard airworthiness certificate. Plaintiff argued that the exclusion was ambiguous because it was unclear whether all five requirements had to be met or just one requirement was sufficient due to the absence of the word "and" separating each requirement. Plaintiff further argued that the provision should be construed in favor of coverage based on the pilot's widow's affidavit that her husband believed that the policy provided coverage for the gyrocopter. The court found that the trial court properly awarded summary judgment to the insurer based on the unambiguous policy wording which required all of the delineated requirements to be fulfilled. Notwithstanding the lack of Louisiana case law interpreting this particular endorsement, the court found that each clause of the provision stated a separate qualification that must be satisfied in order for the endorsement to provide coverage for particular aircraft, and the widow's affidavit was not admissible to contradict the clear policy wording.

King v. Old Republic Insurance Co., 2016 WL 4698248 (La. Ct. App., 4th Cir., Sept. 7,2016)

California Federal Court Limits Insurer's Liability to Products Completed Operations Sublimit 

The Northern District of California recently granted summary judgment to an insurer limiting the insurer's liability under a broad form airport liability insurance policy to a per person sublimit of $100,000, finding that the policy's products completed operations clause applied rather than the policy's airport operations clause.

The insured operated a small aircraft repair business at Lampson Field airport in Lake County, California where it serviced a small plane that crashed on its first flight after the insured's servicing. The insured argued that the policy covered the claim because the bodily injury was caused by an occurrence arising out of the insured's "airport operations", which was defined as liability arising out of the insured's "ownership, maintenance, operation or use of the airport and all of [its] operations at the airport necessary or incidental thereto...." The insurer argued that the definition of airport operations contained an exception that excluded liability "arising out of goods or product manufacturing, sales, distribution or service operations performed by [the insured]." The court held that the exclusion for liability arising out of service operations performed by the insured unambiguously applied because the legal liability arises from the repair services the insured provided for the aircraft. The court further held that the policy's products completed operations coverage provision, which carried a sublimit of $100,000 per person, applied to the claim because it covered service operations performed by the insured in connection with fixed wing aircraft as set forth in the hazard description schedule attached to the policy. Additionally, the court held that an issue of fact existed as to whether the per person sublimit of $100,000 applied to both the pilot's bodily injury claim and his wife's derivative loss of consortium claim, or whether the per person sublimit applied to each claim for a total limit of liability of $200,000.

Hallmark American Insurance Co. v. Broyles, 2016 WL 4951079 (N.D. Cal. Sept. 15, 2016).

Recent Aviation Insurance Coverage Decisions

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