Opinion ID: 404998
Heading Depth: 2
Heading Rank: 2

Heading: Olson Brothers' Hull Policy.

Text: 26 The jury returned a verdict for Olson Brothers based on its claim under its separate insurance policy, which carried a stated value of $110,000. The district court, however, entered judgment n. o. v. for the Insurance Company on the ground that Olson Brothers did not hold an insurable interest in the airplane at the time of the crash. 16 27 The Insurance Company concedes that Olson Brothers had an insurable interest in the airplane, and, therefore, admits that the basis for the trial court's ruling was erroneous. It argues, however, that the court properly entered judgment n. o. v. because the pilot's flight pattern, which resulted in the crash, violated the terms of the policy's pilot clause, thereby cancelling Olson Brothers' insurance coverage. 28 Item 7 of the policy declarations provides: 29 PILOT CLAUSE: Only the following pilot or pilots holding valid and effective pilot and medical certificates with ratings as required by the Federal Aviation Administration for the flight involved will operate the aircraft in flight(.) (Emphasis supplied.) 30 The policy specifically excludes from coverage any damage or loss occurring while the aircraft is operated in flight by other than the pilot or pilots set forth under Item 7 of the Declarations(.) 31 The parties do not dispute that the policy lists Larry McAfee as a pilot authorized to fly the aircraft, and that he was rated for flight only under Visual Flight Rules (VFR). The parties, however, disagree on whether the fatal flight should be characterized as a VFR flight, for which McAfee carried a proper rating. 32 Prior to takeoff, VFR weather conditions prevailed at Great Falls, Montana, the point of departure, and at McAfee's destination in O'Neill, Nebraska. Although some cloud cover existed in the flight path, Olson Brothers' expert testified that McAfee could have completed the entire flight under VFR conditions. However, seventeen minutes after takeoff, McAfee requested and received permission from the air traffic control center in Salt Lake City, Utah, to fly at altitudes of 21,000 and 23,000 feet. Shortly after climbing to 23,000 feet, McAfee apparently lost control of the airplane and it crashed. 33 Under FAA regulations, Instrument Flight Rules (IFR) govern flight into air space above 18,000 feet. 17 The Insurance Company contends that the flight in question became an IFR flight and that insurance coverage ceased when McAfee flew above that altitude. According to the Insurance Company, the trial judge incorrectly permitted a determination that the flight in question was a VFR flight for which McAfee was properly rated, when he instructed the jury that a flight (was) to be characterized or determined at the time of take-off. 18 We disagree. 34 At the outset, we note that Nebraska law governs whether McAfee was properly rated for the flight within the terms of the Olson Brothers' policy. 19 We have been unable to find controlling Nebraska precedent to guide our determination of whether the trial court properly instructed the jury that the flight was to be characterized as VFR or IFR at the time of takeoff. 20 35 The Insurance Company refers to Arnold v. Globe Indemnity Co., 416 F.2d 119 (6th Cir. 1969), and Jim Hawk Chevrolet-Buick, Inc. v. Insurance Co. of North America, 270 N.W.2d 466 (Iowa 1978), as authority for its argument that insurance coverage ceased when McAfee flew into a positive control area without holding an instrument rating. These cases, however, may be distinguished. 36 In Arnold and Jim Hawk, the pilots took off under IFR conditions, while holding only VFR ratings. In Arnold, IFR weather conditions prevailed at takeoff. 416 F.2d at 122. In Jim Hawk, the evidence suggests that IFR conditions existed throughout the entire flight: (A)t the time of operation and the crash    weather conditions were such that the sky was overcast, there was a 600 foot ceiling, it was dark at night, foggy and raining(.) 270 N.W.2d at 467. Thus, the facts of both Arnold and Jim Hawk differ materially from those in the present case. Here, the flight unmistakably began under VFR conditions. 37 National Insurance Underwriters v. King Craft Custom Products, Inc., 368 F.Supp. 476 (N.D.Ala.1973), aff'd, 488 F.2d 1393 (5th Cir. 1974), and Glover v. National Insurance Underwriters, 545 S.W.2d 755 (Tex.1977), support the district court's instruction that the character of the flight should be determined at takeoff. 21 38 In King Craft, an insurance carrier denied coverage based on a policy exclusion similar to the one at issue in the instant case. The pilot in King Craft, while holding only a VFR rating, flew into IFR weather conditions and crashed when attempting to land. 368 F.Supp. at 477-78. The insurer argued that the pilot was not properly rated for the flight under the policy's pilot clause. The court noted that, at the time of takeoff, VFR weather conditions prevailed at both the point of departure and destination. Id. at 478. The insurance carrier there, as here, urged the court to break the flight into segments, and to treat that portion of the flight when the crash occurred as an IFR flight for which the pilot did not hold an appropriate rating. The court declined, observing that such an interpretation of the policy could result in coverage during a particular flight flickering on and off as particular weather conditions were encountered. Id. at 479. 39 The court in Glover similarly confronted the question whether a pilot holding a VFR rating was properly rated for the flight when he encountered IFR weather conditions and crashed. 545 S.W.2d at 758-59. The pilot in Glover began his flight in VFR weather conditions and later encountered IFR weather conditions. The evidence in Glover, however, indicated that at the time of takeoff IFR weather conditions prevailed over the final one-third of the flight as well as the destination. Id. at 759. The court, nevertheless, declined to characterize the flight as an IFR flight. Instead, the court held that a flight must be characterized at its inception. Id. at 762. Because the pilot took off under VFR conditions and VFR conditions prevailed throughout the first one-third of the flight, the court determined the flight to be a VFR flight. Id. at 763. 40 The Insurance Company would distinguish King Craft and Glover from this case on the ground that the pilots in those cases encountered IFR weather conditions. The Insurance Company contends that McAfee did not encounter IFR weather conditions, but simply chose to fly into air space that required an instrument rating. 22 41 The Insurance Company's contention must be examined in light of the well-settled rule that exceptions, limitations and exclusions to insuring agreements require a narrow construction on the theory that the insurer, having affirmatively expressed coverage through broad promises, assumes a duty to define any limitations upon that coverage in clear and explicit terms. Roach v. Churchman, 431 F.2d 849, 851 (8th Cir. 1970); see also City of Cedar Rapids v. Northwestern National Insurance Co., 304 N.W.2d 228, 230 (Iowa 1981); cf. Neal v. St. Paul Fire & Marine Insurance Co., 197 Neb. 718, 250 N.W.2d 648, 650 (1977) (insurance policy will be liberally construed in favor of the insured). 42 The Insurance Company here knew how to exclude coverage for a flight into air space requiring an instrument rating. 23 It failed to do so in clear and explicit terms in Olson Brothers' policy. In such circumstances, the pilot clause should not be interpreted to exclude coverage as a matter of law. See National Insurance Underwriters v. King Craft Custom Products, Inc., supra, 368 F.Supp. at 479; Glover v. National Insurance Underwriters, supra, 545 S.W.2d at 764. 43 Accordingly, the district court correctly instructed the jury that the flight was to be characterized at the time of takeoff. Because the Insurance Company failed to establish a basis for exclusion of coverage as a matter of law, the jury verdict in favor of Olson Brothers on the hull policy must stand. 44