Title: Aviation Charters, Inc. v. Avemco Insurance Company

State: new-jersey

Issuer: New Jersey Supreme Court

Document:

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized). COLEMAN, J., writing for a unanimous Court. The issue in this aviation insurance case is whether the insured, whose covered aircraft sustained damages while being operated by a pilot who lacked the necessary hours of experience to be covered by the policy, may nevertheless recover when there was no causal connection between the accident and the pilot's lack of experience. On February 10, 1998, Dennis Kripov, was taxiing a twin-engine Piper Seneca II airplane on a runway just after touchdown at the Robbinsville Airport in Trenton, when the nose wheel landing gear of the aircraft collapsed, causing damage to the aircraft. The aircraft was owned by Aviation Charters. Kripov was an employee of Aviation who had logged approximately 2,000 hours of flight time at the time of the accident. The cause of the gear collapse was a purely mechanical failure and would have occurred regardless of Kripov's experience as a pilot. The airplane was insured by Avemco Insurance Company under a policy that contained two pertinent sections. The first section, entitled the Approved Pilot Endorsement, provided for application of the policy of insurance when the insured aircraft was operated in flight by a pilot who meets all of the requirements specified in the endorsement. One of the provisions set forth in that endorsement required the pilot operating the insured aircraft to have logged 5,000 total flight hours. Although Avemco offered for a higher premium a policy that required fewer pilot-flight hours, Aviation Charters did not chose that policy for the aircraft in question. However, it had chosen to purchase that policy from Avemco in the past on other airplanes. The second pertinent section of the policy, which dealt with exclusions and definitions, required that the insured aircraft be operated in flight by a pilot who is approved under the terms of the Approved Pilot Endorsement. The policy contained a specific exclusion for coverage when the aircraft was not operated in flight by an approved pilot as defined by the policy. Thus, the Approved Pilot Endorsement requirement of an approved pilot was intended to be both a condition of coverage and a coverage exclusion. After the accident, Aviation Charters made a timely claim under the policy issued by Avemco for $52,000 to repair the damage to the aircraft. Avemco's investigation disclosed the Kripov was not an approved pilot because he had logged only 2,000 hours, as opposed to the 5,000 hours required under the policy. Thus, Avemco denied coverage for the accident. Aviation Charters subsequently filed suit against Avemco based on its denial of coverage. Both Aviation Charters and Avemco filed cross-motions for summary judgment. The Law Division granted partial summary judgment to Aviation Charters. In a reported decision, a majority of the Appellate Division reversed, finding the exclusionary clause in the policy at issue to be clear and unambiguous, and further noting that the exclusionary clause of the policy did not contain a causality requirement. The majority determined that to afford coverage in such a case would be tantamount to writing for the insured a better policy of insurance than the one for which it has paid premiums. The dissenting member of the panel believed that in the absence of causality and lack of prejudice to the insurer, coverage should be extended to the insured. The judge also did not believe Avemco's position to be supported by the Supreme Court's opinions in Zuckerman v. National Union Fire Insurance Co., 100 N.J. 304 (1985), and Massachusetts Mutual Life Insurance Co. v. Manzo, 122 N.J. 104 (1991). The appeal is before the Supreme Court as of right, based on the dissent below. 1. The Court's focus in Cooper on the expectations of the parties when the policy was written has no application to the present issue since the parties in this matter knew that the pilot's total flight hours directly related to the risks against which Aviation Charters was insured. (pp. 5-6) 2. Under the facts of this case, requiring a causal connection between the accident and the unambiguous exclusionary clause would constitute an unbargained-for expansion of coverage resulting in the insurer's exposure to a risk substantially broader than that expressly insured against in the policy. (p. 6) 3. The unambiguous exclusionary clause and the Approved Pilot Endorsement involved in this appeal define the coverage provided. (p. 7) 4. The Court does not decide whether on other facts, a lack of causality in the face of a clear and unambiguous exclusionary provision would result in coverage. Although the cause of the accident in this case had nothing to do with the pilot's logged flight time, the pilot's experience was highly significant to the risk undertaken by the insurer. It cannot be said that the policy is a contract of adhesion especially because the higher risk coverage was available at a higher price. (pp. 7-8) Judgment of the Appellate Division as MODIFIED, is AFFIRMED. CHIEF JUSTICE PORITZ and JUSTICES STEIN, LONG, VERNIERO, LaVECCHIA, and ZAZZALI join in JUSTICE COLEMAN's opinion. SUPREME COURT OF NEW JERSEY A- 91 September Term 2000 AVIATION CHARTERS, INC., Plaintiff-Appellant, v. AVEMCO INSURANCE COMPANY, Defendant-Respondent. Argued October 10, 2001 -- Decided November 20, 2001 On appeal from the Superior Court, Appellate Division, whose opinion is reported at 335 N.J. Super. 591 (2000). George T. Dougherty argued the cause for appellant (Katz & Dougherty, attorneys). John E. Salmon argued the cause for respondent (Rawle & Henderson, attorneys; Mr. Salmon and Joseph A. Ricchezza, on the brief). The opinion of the Court was delivered by COLEMAN, J. The issue raised in this aviation-insurance case is whether the insured, whose covered aircraft sustained damages while being operated by a pilot who lacked the necessary hours of experience to be covered by the policy, may nonetheless recover when there was no causal nexus between the accident and the pilot's lack of experience. The trial court ruled in favor of the insured. In a published opinion, a divided Appellate Division reversed. Aviation Charters, Inc. v. Avemco Ins. Co., 335 N.J. Super. 591, 593 (2000). We hold that, under the facts of this case, the absence of causality is not a justifiable basis to disregard the unambiguous policy provisions and afford coverage. NO. A-91 AVIATION CHARTERS, INC., Plaintiff-Appellant, v. AVEMCO INSURANCE COMPANY, Defendant-Respondent. DECIDED November 20, 2000 Chief Justice Poritz