Case Name: AVIATION CHARTERS, INC., PLAINTIFF-RESPONDENT, v. AVEMCO INSURANCE COMPANY, DEFENDANT-APPELLANT
Court: New Jersey Superior Court, Appellate Division
Jurisdiction: New Jersey
Decision Date: 2000-12-21
Citations: 335 N.J. Super. 591
Docket Number: 
Parties: AVIATION CHARTERS, INC., PLAINTIFF-RESPONDENT, v. AVEMCO INSURANCE COMPANY, DEFENDANT-APPELLANT.
Judges: 
Reporter: New Jersey Superior Court Reports
Volume: 335
Pages: 591–610

Head Matter:
763 A.2d 312
AVIATION CHARTERS, INC., PLAINTIFF-RESPONDENT, v. AVEMCO INSURANCE COMPANY, DEFENDANT-APPELLANT.
Superior Court of New Jersey Appellate Division
Argued November 8, 2000
Decided December 21, 2000.
Before Judges CONLEY, WECKER and LESEMANN.
John E. Salmon, argued the cause for appellant (Rawle & Henderson, attorneys; Joseph A Ricchezza and Phillip J. Meyer, of counsel; Mr. Meyer, on the brief).
George T. Dougherty, argued the cause for respondent (Katz & Dougherty, attorneys; Mr. Dougherty, on the brief).

Opinion:
The opinion of the court was delivered by
CONLEY, J.A.D.
Defendant Avemco Insurance Company (Avemco), an aviation insurer, appeals summary judgment granted plaintiff Aviation Charters, Inc. (Charters), its insured. The effect of the summary judgment obligates Avemco to cover Charters' aircraft property damage loss of $52,500 despite the existence of a clear and unambiguous exclusionary clause in the insurance policy. The motion judge concluded that the exclusionary clause could not be resorted to as Avemco could not prove a causal connection between the circumstances that triggered application of the exclusion and the loss. We reverse.
The pertinent facts are not particularly complex or disputed. The property damage was sustained by one of plaintiffs aircrafts that was covered, at the time of the damage, by Avemco's policy. However, the policy contains an exclusionary clause which applies where the insured aircraft is "operated in flight by a pilot who is not approved [as defined by the policy]." The policy defines "in flight" as "the time starting when your insured aircraft moves forward for takeoff and continues until it has landed. It has landed when it has safely stopped or left the runway under control." An "approved pilot" is a pilot who has logged at least 5000 total flight hours. It is undisputed that at the time the property damage occurred, the pilot operating the aircraft had logged only 2000 total flight hours.
As to the occurrence itself, the record before the motion judge established without dispute that the damage was sustained by the aircraft after it had landed and while it was taxiing on the runway. It had neither "safely stopped" nor "left the runway under control" and, thus, under the specific definition of the policy, was still "in flight." Since the aircraft was still "in flight" and the pilot was not an "approved pilot," the exclusionary clause was applicable regardless of the cause of the damage.
Plaintiff presents neither ambiguity nor directly applicable public policy reasons, either statutory or adjudicatory, that would countenance against application of the plain terms of the policy. The legal principles that must govern our analysis under these circumstances, then, are rather well-established. Generally it is said that insurance contracts will be construed in accordance with the reasonable expectations of the average policy holder and any ambiguity must be resolved against the insurer. Gibson v. Callaghan, 158 N.J. 662, 670, 730 A.2d 1278 (1999). In the absence of a definition of a particular term used in the policy, the term or terms will be interpreted in accordance with the "plain, ordinary meaning." Ibid.; Boddy v. Cigna Prop. & Cas. Co., 334 N.J.Super. 649, 656, 760 A.2d 823 (App.Div.2000).
Where an exclusionary clause is involved, such clauses are narrowly construed; indeed it is the insurer's burden to establish the exclusion. American Motorists Ins. Co. v. L-C-A Sales Co., 155 N.J. 29, 41, 713 A.2d 1007 (1998). But where the words of an exclusionary clause are clear and unambiguous, "a court should not engage in a strained construction to support the imposition of liability." Longobardi v. Chubb Ins. Co. of N.J., 121 N.J. 530, 537, 582 A.2d 1257 (1990); Cobra Prod., Inc. v. Federal Ins. Co., 317 N.J.Super. 392, 400, 722 A.2d 545 (App.Div.1998), certif. denied, 160 N.J. 89, 733 A.2d 494 (1999). Although we favor construing insurance policies so as to provide coverage, we cannot "write for the insured a better policy of insurance than the one purchased." Walker Rogge, Inc. v. Chelsea Title & Guar. Co., 116 N.J. 517, 529, 562 A.2d 208 (1989). Thus, while where there are several interpretations of an exclusion's meaning we would tend to favor the one for coverage, Cobra Prod. v.. Federal Ins. Co., supra, 317 N.J.Super. at 401, 722 A.2d 545, "[t]his does not mean . that any far-fetched interpretation of a policy exclusion will be sufficient to create an ambiguity requiring coverage", Stafford v. T.H.E. Ins. Co., 309 N.J.Super. 97, 105, 706 A.2d 785 (App.Div.1998). This is so because exclusionary clauses are presumptively valid and will be given effect if " 'specific, plain, clear, prominent, and not contrary to public policy.' " Princeton Ins. Co. v. Chunmuang, 151 N.J. 80, 95, 698 A.2d 9 (1997) (quoting Doto v. Russo, 140 N.J. 544, 559, 659 A.2d 1371 (1995)). See Zacarias v. Allstate Ins. Co., 330 N.J.Super. 231, 234, 749 A.2d 394 (App.Div. 2000); Boddy v. Cigna Property & Cas. Co., supra, 334 N.J.Super. at 658-59, 760 A.2d 823.
Charters makes no effort to address these principles. Neither does the dissent. Rather, in addition to referring to out-of-state "minority view cases" which Charters and the dissent claim are illustrative of the "modern trend" (to which we will shortly return), Charters and the dissent assert that Cooper v. Government Employees Ins. Co., 51 N.J. 86, 237 A.2d 870 (1968), supports the motion judge's determination. The court in Cooper, Charters and the dissent assert, "struck a blow for the typical insured . when it refused to give force to a plainly-worded clause in a motor vehicle policy." Charters and the dissent contend this "blow" extends to clear and unambiguous exclusionary clauses. We do not believe such a broad reading of Cooper is warranted.
To begin with, Cooper did not concern an exclusionary clause, much less a clear and unambiguous one. It concerned a provision governing the timeliness of a notice of claim, characterized by other courts as a "condition subsequent." Cooper, supra, 51 N.J. at 91, 237 A.2d 870; AVEMCO Ins. Co. v. Chung, 388 F.Supp. 142, 150-51 (D.Haw.1975).
The dissent sees no difference between a notice provision such as that in Cooper, which is unrelated to the scope of coverage but simply acts "to aid the insurance carrier in investigating, settling and defending claims," Zuckerman v. National Union Fire Ins. Co., 100 N.J. 304, 323, 495 A.2d 395 (1985), and an exclusionary clause. This distinction between the type of notice provision in Cooper, and the governing coverage provisions of an insurance policy was explained by the Court in Zuckerman v. National
Union Fire Ins. Co., supra, 100 N.J. 304, 495 A.2d 395. There, in the context of a "claims made" policy, the Supreme Court said:
The automobile liability policy in Cooper was a classic occurrence policy that provided the insured with coverage in the event of her negligence. The notice requirement in that policy did not define the coverage provided by the policy but rather was included to aid the insurance carrier in investigating, settling, and defending claims _Accordingly, the requirement of notice in an occurrence policy [such as that in Cooper] is subsidiary to the event that invokes coverage, and the conditions related to giving notice should be liberally and practically construed.
By contrast, the event that invokes coverage under a "claims made" policy is transmittal of notice of the claim to the insurance carrier. In exchange for limiting coverage only to claims made during the policy period, the carrier provides the insured with retroactive coverage for errors and omissions that took place prior to the policy period. Thus, an extension of the notice period in a "claims made" policy constitutes an unbargained-for expansion of coverage, gratis, resulting in the insurance company's exposure to a risk substantially broader than that expressly insured against in the policy.
[100 N.J. at 323-24, 495 A.2d 395 (emphasis added).]
The court, thus, rejected the insured's claim that the insurer could not enforce the policy's provision requiring a claim to be made during the period of the policy unless it could establish "appreciable prejudice." Zuckerman, 100 N.J. at 322, 495 A.2d 395. In doing so, our Supreme Court limited Cooper to non-coverage provisions, i.e., those conditions relating to subsequent, non-coverage, events. Imposing a burden upon the insurer where it seeks to deny coverage based upon a non-coverage event to demonstrate prejudice, as the Court did in Cooper, imposes no particular harm to the insurer and does promote the policy against forfeiture of the coverage for which the insured paid his or her premiums.
The dissent equates application of the exclusionary clause here to nothing more than "triggering] . forfeiture because of an immaterial noncompliance with a policy provision." This view eschews the fact that clear, unambiguous exclusionary clauses in insurance policies are coverage related clauses. They directly affect the risk the insurer assumes and upon which premiums are established. Moreover, the exclusionary provision here is not a hyperteehnieal notice provision. It relates to pilot qualifications and, thus, aircraft safety. Enforcement of its clear and unambiguous terms would serve to encourage compliance with those qualifi cations, certainly a countervailing policy consideration to the concerns of forfeiture.
Charters in its appellate brief points to Massachusetts Mut. Life Ins. Co. v. Manzo, 122 N.J. 104, 584 A.2d 190 (1991), as "evidence of the balance and fairness which can be produced by maintaining Cooper's focus on the expectations of the parties when the policy was being written" (emphasis in original). Manzo has no application to this ease. To begin with, Manzo concerns a misrepresentation in the context of a life insurance application policy, triggering the application of N.J.S.A. 17B:24-3. See n. 2, supra. But, even in the context of that statute and a claim of material misrepresentations by the insured, our Supreme Court has expressly rejected causation as a necessary element of the insurer's burden when seeking to disclaim coverage premised upon such misrepresentations. In doing so, the Court said:
The Appellate Division recognized that an insurer need show only that the misrepresentation materially affected either the acceptance of the risk or the hazard assumed. 234 N.J.Super. at 293-94, 560 A.2d 1215. After determining that Manzo's misrepresentations did not influence Mass. Mutual's acceptance of the risk, it further concluded that the false statements did not materially affect the "hazard assumed" by Mass. Mutual. Id. at 294, 560 A.2d 1215. Under its construction of N.J.S.A. 17B:24-3(d), "the hazard assumed . includes the requirement that there be a causal connection between the insured's false statements and the ultimate cause of death." Id. at 294, 560 A.2d 1215. In so construing the statute, the court implicitly rejected, without citing, the earlier decision of another panel of the Appellate Division that "emphatically reject[ed] the . suggestion that there must be a causal relationship between an applicant's false statements and the cause of his death [to prevail in an action to] rescind a life policy [because of] . equitable fraud." Formosa [v. Equitable Life Assurance Soc'y], 166 N.J.Super. [8,] 22, 398 A.2d 1301 [(App.Div.), certif. denied, 81 N.J. 53, 404 A.2d 1153 (1979)].
By requiring a causal connection between the disability misrepresented and the insured's death, the decision below conflicts not only with Formosa, but also with the general rule that "in the absence of a statute establishing a different rule, there need be no causal connection between the cause of death and the misrepresentation." Couch, supra, § 37:110 at 633. This rule is accepted by a majority of jurisdictions. Couch, supra, § 37:87 at 102 and 37:110 at 632; Appleman, supra, § 245 at 125; R. Keaton and A. Widiss, Insurance Law, A Guide to Fundamental Principles, Legal Doctrines and Commercial Practices 572 n.20 (West 1988) (the "clear majority rule" is that no causal connection is required); see, e.g., Shafer v. John Hancock Mut. Life Ins. Co., 410 Pa. 394, 399, 189 A.2d 234 (1963) ("It is of no consequence that the death ensued from a cause unconnected with the false representations.").
[122 N.J. at 117-18, 584 A.2d 190 (emphasis added).]
And see Weinstein v. Mutual Benefit Life Rehab., supra, 313 N.J.Super. at 614, 713 A.2d 569 ("[i]n Manzo, our Supreme Court concluded that no causal connection between an insured's false statements and the ultimate cause of death is required . "). If the court will not impose the burden of a causal nexus where statutory "materiality" is required, most assuredly it will not do so where such requirement does not exist.
We, then, turn to the out-of-state cases. The majority of those cases reject the proposition that, in the context of aviation insurance, a causal nexus between the loss and a coverage disclaiming event is required before the insurer can disclaim coverage. See generally, Noralyn 0. Harlow, Annotation, Aviation Insurance: Causal Link Between Breach of Policy Provisions and Accident as Requisite to Avoid Insurer's Liability, 48 AL.RAVa 778 (1986); 11 Lee R. Russ & Thomas F. Segalla, Couch on Insurance 3d § 155:23 (1998). E.g. Arnold v. Globe Indem. Co., 416 F.2d 119, 122 (6th Cir.1969); Ranger Ins. Co. v. Kovach, 63 F.Supp.2d 174, 180-82 (D.Conn.1999); National Ins. Underwriters, Inc. v. Bequette, 280 F.Supp. 842, 844 (D.Alaska 1968), aff'd, 429 F.2d 896 (9th Cir.1970); Grigsby v. Houston Fire & Cas. Ins. Co., 113 Ga.App. 572, 574, 148 S.E.2d 925, 927 (1966); Schneider Leasing, Inc. v. United States Aviation Underwriters, Inc., 555 N.W.2d 838, 841-42 (Iowa 1996); Avemco Ins. Co. v. White, 841 P.2d 588, 590-91 (Okla.1992); Economic Aero Club, Inc. v. Avemco Ins. Co., 540 N.W.2d 644, 646 (S.D.1995).
There is, in this unique area of aircraft insurance, a minority view. Finding that "[ojnly their number, not the[ ] reasoning [of the majority cases], lend support," some courts have concluded that causality is a key element of the insurer's burden to avoid coverage on the notion that, as a matter of public policy, denial of coverage to the insured based on a "technicality" would be unfair. Bayers v. Omni Aviation Managers, Inc., 510 F.Supp. 1204, 1207 (D.Mont.1981); Avemco v. Chung, supra, 388 F.Supp. at 151; South Carolina Ins. Co. v. Collins, 269 S.C. 282, 237 S.E.2d 358, 362 (1977).
These "minority view" eases have rejected the insurer's attempts to disclaim coverage based on pilot qualifications where the insurer has not demonstrated a causal connection between the pilot's lack of qualification and the loss. Fidelity & Cas. Co. of New York v. Burts Bros., Inc., 744 S.W.2d 219 (Tex.App.1987). See 48 A.L.R. 4th, supra at § 4. Many of the cases, however, are distinguishable. Some cases arise in the context of state "anti-technicality" statutes. See Puckett v. United States Fire Ins. Co., 678 S.W.2d 936, 938 (Tex.1984) (relying in part upon a Texas "anti-technicality" statute applicable to fire insurance policies which states "[n]o breach or violation by the insured of any warranty, condition or provision of any fire insurance policy, contract of insurance, or applications therefor, upon personal property, shall render void the policy or contract, or constitute a defense to a suit for loss thereon, unless such breach or violation contributed to bring about the destruction of the property." Tex.Ins.Code Ann. art. 6.14. ). Other cases involve insurance policies which do not contain a specific exclusionary clause. See Bayers v. Omni Aviation Managers, Inc., supra, 510 F.Supp. at 1207 ("[i]n this case the insurance company could easily have incorporated the medical certification requirement in its exclusion clause. It did not, and it must be held to provide coverage."). South Carolina Ins. Co. v. Collins, supra, 269 S.C. 282, 237 S.E.2d 358, upon which the dissent relies, is grounded upon "a line of South Carolina cases involving contracts of automobile liability and life insurance." Id., 237 S.E.2d at 360.
New Jersey does not have an "anti-technicality" statute that would apply here. And, unlike, for instance, South Carolina, we have consistently enforced exclusionary clauses that are clear and unambiguous without imposition of a causal nexus where the exclusionary clause does not facially so require. We cannot give the insured more than he paid his premiums for.
We add the following final comments. The exclusionary clause here has no causality requirement. Where, of course, an exclusionary clause has such a requirement, causality will be a consideration in determining its application under the particular attendant circumstances. See e.g., Kievit v. Loyal Protective Life Ins. Co., 34 N.J. 475, 170 A.2d 22 (1961) (exclusion in accident insurance policy for losses not directly caused by accident); Mahon v. American Cos. Co. of Reading, Pa., 65 N.J.Super. 148, 167 A.2d 191 (App.Div.), certif. denied, 34 N.J. 472, 169 A.2d 746 (1961) (same). See also American Motorists Ins. Co. v. L-C-A Sales Co., supra, 155 N.J. 29, 713 A.2d 1007 ("arising out of and in the course of employment" requirement of employer's comprehensive general liability exclusionary clause precluded coverage for employee's wrongful discharge claim.).
On the other hand, where exclusionary clauses have no causality requirement and their meaning is clear and unambiguous, neither we nor the Supreme Court have hesitated in applying them even where the triggering event of the clause has no relationship to the cause of the particular loss. See, e.g., Rutgers Cas. Ins. Co. v. Collins, 158 N.J. 542, 730 A.2d 833 (1999) (exclusion in automobile policy for non-permitted drivers); Ryan v. LCS, Inc., 311 N.J.Super. 618, 710 A.2d 1050 (App.Div.1998), aff'd o.b., 157 N.J. 251, 723 A.2d 975 (1999) (same); Campbell v. Lion Ins. Co., 311 N.J.Super. 498, 710 A.2d 576 (App.Div.1998) (UM and UIM exclusion in automobile policy where vehicle is being used to carry property for a fee); Sneed v. Concord Ins. Co., 98 N.J.Super. 306, 237 A.2d 289 (App.Div.1967) (automobile policy exclusion for nonlicensed driver); Saliba v. American Policyholders Ins. Co., 158 N.J.Super. 48, 385 A.2d 328 (Law Div.1976), aff'd, 157 N.J.Super. 476, 385 A.2d 239 (App.Div.1978) (aircraft policy exclusion for renter pilots).
Reversed and remanded.
As to the cause of the damage, a report by the Federal Aviation Administration concluded that the downlock link assembly spring in the landing gear on the front wheel was "weak" causing the landing gear to buckle and the nose of the plane to collapse during "roll out."
We use the term "directly" because plaintiff claims that N.J.S.A. 1733:24-3 expresses a legislative policy that exclusionary clauses should not apply absent causation. NJ.S.A. 1713:24-3 is inapposite. It concerns material misrepresentations "at the inception of" annuities and health insurance and life insurance policies. Weinstein v. Mutual Benefit Life in Rehab., 313 N.J.Super. 609, 614, 713 A.2d 569 (App.Div.1998). Moreover, our Supreme Court has rejected a causality requirement even where this statute applies. Massachusetts Mut. Life Ins. Co. v. Manzo, 122 N.J. 104, 118, 584 A.2d 190 (1991).
The dissent treats our discussion of Manzo as though we directly rely upon it. We do not. We discuss Manzo because Charters relies upon it. As the dissent correctly points out, Manzo "involve[s] different issues and different principles." To the extent Manzo has any application, it is that even where materiality is a requirement for avoiding coverage, a causal nexus is still not required.
Not all courts have agreed that such "anti-technicality" statutes require a causal nexus where pilot qualifications are at issue. In Schneider Leasing, Inc. v. United States Aviation Underwriters, Inc., supra, 555 N.W.2d at 841, for instance, Iowa Code Ann. § 515.101 provided: "[a]ny condition or stipulation in an application, policy, or contract of insurance making the policy void before the loss occurs, shall not prevent recovery thereon by the insured, if it shall be shown by the plaintiff that the failure to observe such provision or the violation thereof did not contribute to the loss." The Iowa court concluded that disclaimer of coverage based on required pilot qualifications did not trigger the Iowa "anti-technicality" statute because such qualifications concerned the risk to be insured and, thus, "simply places this particular loss outside the coverage afforded from the inception of the contract." Id. at 842.
Plaintiff contends that N.J.S.A. 17B:24-3 is a comparable "anti-technicality" statute. As we have previously pointed out, that statute concerns life and fire insurance policies and annuities. It does not, as construed by our Supreme Court in Mamo, adopt a requirement of causation. Moreover, the statute focuses upon action and statements of the insured at the inception of the policy when the insurer determines whether to accept the risk and at what price. If that is the focus here, surely it cannot be said that the limitation of coverage premised upon the qualifications of the pilot was a mere "technicality" in the acceptance of the risk. United States Aviation Underwriters v. Cash Air, Inc., 409 Mass. 694, 697, 568 N.E.2d 1150, 1152 (1991) (pilot experience qualifications in aviation insurance policies "is significant as to the willingness of an insurer to underwrite the risk and defines the exposure to risk that the insurer is willing to assume for the premium charged.").