Opinion ID: 1721980
Heading Depth: 1
Heading Rank: 3

Heading: Interpretation of the Policy.

Text: A. Whether the transaction was a rental or a charter. Schneider Leasing argues that an ambiguity exists in the policy. The policy does not define rental and charter. Schneider Leasing asserts that USAIG's failure to define these terms creates an ambiguity, and that they should be construed in a light most favorable to it. AMCO Ins. Co. v. Haht, 490 N.W.2d 843, 844-45 (Iowa 1992). Should this be a charter use, then Heimbecker arguably met the policy requirements. [3] USAIG submitted affidavits from persons knowledgeable in the aviation industry showing that, within that industry, a charter use has reference to providing an aircraft and flight crew. A rental use exists when the aircraft owner provides only the plane. In AMCO Insurance, we stated: [w]hen words are left undefined in a policy [they will not be given] a technical meaning. Rather [they will be given] their ordinary meaning, one which a reasonable person would understand them to mean. 490 N.W.2d at 845 (citation omitted) (emphasis added). However, we qualified this in Shain v. Mutual Benefit, Health & Accident Ass'n, in which we noted that the reasonable person is a reasonably prudent person applying for insurance of this type.  232 Iowa 1143, 1149, 7 N.W.2d 806, 809 (1943) (emphasis added). Aviation insurance poses many issues not normally raised in other insurance coverage disputes. The terms used may have meanings, unknown to the general population, which are well-settled in the aviation industry. See 43 Am.Jur.2d Insurance § 506, at 581 (1982). In cases like this, it is appropriate to consider extrinsic evidence to become familiar with the commercial aviation industry's specialized vocabulary. Several sections of the Restatement (Second) of Contracts (1979) bear on this issue. Section 202(3)(b) provides that: Technical terms and words of art are given their technical meaning when used in a transaction within their technical field. Another section of the Restatement provides: When the meaning attached by one party accorded with a relevant usage and the other knew or had reason to know of the usage, the other is treated as having known or had reason to know the meaning attached by the first party. Restatement (Second) of Contracts § 220(2). Finally, in resolving matters of this kind, the Restatement provides that unless the interpretation issue depends on the credibility of extrinsic evidence or on a choice of reasonable inferences to be drawn therefrom, the issue is to be determined by the court as a matter of law. Restatement (Second) of Contracts § 212(2). We approved the latter rule of interpretation in First National Bank v. Creston Implement Co., 340 N.W.2d 777, 782 (Iowa 1983). In the present dispute, Schneider Leasing, as an aircraft lessor, must be deemed to have been familiar with the industry meaning of the term rental use as contrasted to a charter use. The extrinsic evidence bearing on this transaction was undisputed, clear, and convincing. We believe it must be determined as a matter of law that Heimbecker's use of the plane is governed by the rental use provisions of the physical damage coverage. B. Interpretation and applicability of Iowa Code sections 515.101 and 515.102. Iowa's antitechnicality statute, virtually unchanged since its adoption in 1897, states that breaches of minor terms of an insurance policy provide the insurer no excuse to void the policy. Section 515.101 reads: Any 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. Iowa Code § 515.101 (derived from Iowa Code § 1743 (1897)). Some types of policy defenses are excepted from the provisions of this statute. Thus, in section 515.102, the legislature limits the effect of section 515.101, as follows: Any condition or stipulation referring: (8). To a change in the occupancy or use of the property insured, if such change or use makes the risk more hazardous, ... shall not be changed or affected by the provision of section 515.101. Iowa Code § 515.102(8) (emphasis added). We need not reach the issue of whether use of a pilot not meeting qualifications required by the policy is a change in use that makes the risk more hazardous. We are confident that the limitation on coverage that is being contested in this litigation is not of a type that triggers section 515.101. Although the court of appeals, in Global Aviation Managers v. Lees, 368 N.W.2d 209, 212 (Iowa App.1985), broadly interpreted section 515.101 to apply to all provisions contained in a policy of insurance, the effect of which is to avoid coverage, we are unable to read this statute in that manner. The statute only extends to any condition or stipulation in [a policy or contract of insurance that makes] the policy void before the loss occurs. Iowa Code § 515.101. Shortly after the enactment of section 515.101, this court, in Banco De Sonora v. Bankers' Mutual Casualty Co., 124 Iowa 576, 100 N.W. 532 (1904), held that the statute did not apply to a condition precedent to coverage under the terms of the contract. The insurance policy in the Banco case covered mailings of Mexican currency. For the insurance to be effective, the insured was required to mail a letter prior to the departure of the shipment describing the amount of currency mailed. The letter was to be deposited in the post office from which the currency was mailed. Id. at 578, 100 N.W. at 533. In seeking to demonstrate its compliance with the policy conditions, the bank relied on the letter postmarked after the money had been stolen from the mails. In seeking to recover notwithstanding its failure to comply with the policy condition, the bank relied on section 515.101 (then codified as section 1743). This court stated: This section has no application, for that, by not complying with the condition precedent, no contract of insurance was effected and hence there was no condition or stipulation to be violated. Id. at 582-83, 100 N.W. at 535. Similarly, in Midwest Office Technology, Inc. v. American Alliance Insurance Co., 437 N.W.2d 555, 557 (Iowa 1989), we reviewed our prior cases involving section 515.101 and approved the district court's conclusion that section 515.101 was inapplicable because the policy defense was not based on abrogation of the policy but rather the limits placed on the coverage afforded thereunder. Midwest Office, 437 N.W.2d at 557. We reach the same conclusion concerning the present policy dispute. The limitation on which USAIG relies does not void any existing coverage under its policy but simply places this particular loss outside the coverages afforded from the inception of the contract.