Court Opinion

ID: 9465951
Source: CourtListenerOpinion
Date Created: 2023-08-05 01:01:11.651265+00
Date Added: 2024-06-11T17:39:28.066070
License: Public Domain

HUFSTEDLER, Circuit Judge,
dissenting:
I am unable to concur in the opinion of my brothers because I am convinced that the district court properly interpreted the contract in the light of the California cases that are the controlling law in this diversity case.
The key provision is the exclusion clause, providing, in relevant part:
“Not Covered: Any loss which results—
(5) from travel or other movement by means of, or descent from or with, any kind of moving aircraft aboard which the Employee has any duties relating in any way to such aircraft or to its operation, equipment, passengers or crew or aboard which he is giving or receiving training for any such duties . . .
The decedent was not performing any duties aboard the aircraft connected with his employment. Prudential refused payment citing the exclusion clause and contended that the exclusion was - applicable because the decedent, as a pilot, had “duties” relating to the aircraft or its operation. The district court decided that the exclusion clause “is ambiguous because the word ‘duties’ included therein, used in conjunction with ‘Employee,’ may be interpreted reasonably to mean either employment-related duties or any duties relating to the aircraft, whether employment-related or not.” Accordingly, the district court resolved the ambiguity against the insurer and granted summary judgment to the plaintiff.
The majority opinion overturns the district court on the grounds that the policy language was unambiguous and the plaintiff’s interpretation of the policy “unreasonable” because (1) “the sole function given the word [“Employee”] throughout is to designate the insured individual” (at 1313) and the word therefore does not carry any of its ordinary connotations; (2) the average person should not be surprised to discover that the insurance company had sought to limit its exposure by excluding aviation-related risks; and (3) plaintiff’s interpretation “renders the language of the exclusion meaningless because it fails to limit any risk.” (at 1314.)
*1315The California cases are solid in the acceptance of the principle “[i]f policy provisions are susceptible to alternative readings, doubts are resolved against the insurer.” (Paramount Prop. Co. v. Transamerica Title Ins. Co. (1970) 1 Cal.3d 562, 83 Cal.Rptr. 394, 398, 463 P.2d 746, 750; Gray v. Zurich Ins. Co. (1966) 65 Cal.2d 263, 54 Cal.Rptr. 104, 107, 419 P.2d 168.) “If semantically permissible, the contract will be given such construction as will fairly achieve its object of securing indemnity to the insured for the losses to which the insurance relates.” (Continental Cas. Co. v. Phoenix Constr. Co. (1956) 46 Cal.2d 423, 437, 296 P.2d 801, 809 [emphasis added].) The burden rests on the insurer to phrase an exclusion in “clear and unmistakable language.” (State Farm Mutual Automobile Ins. Co. v. Jacober (1973) 10 Cal.3d 193, 110 Cal.Rptr. 1, 6, 514 P.2d 953; Harris v. Glens Falls Ins. Co. (1972) 6 Cal.3d 699, 100 Cal.Rptr. 133, 134, 493 P.2d 861.) “If an insurer intends to exclude coverage ... it must draft its policy to avoid any misinterpretation by the average layman.” (State Farm Mutual Automobile Ins. Co. v. Jacober, supra, 110 Cal.Rptr. at 10, 514 P.2d at 962.)
The only question before us is whether plaintiff’s interpretation of the policy language is, as the district court found, reasonable, i.e., “semantically permissible.” “[W]e are not required, in deciding the cases at bar, to select one ‘correct’ interpretation from the variety of suggested readings. . . . Instead, even assuming that the insurer’s suggestions are reasonable interpretations which would bar recovery by the claimants, we must nonetheless affirm the trial courts’ finding of coverage so long as there is any other reasonable interpretation under which recovery would be permitted in the instant cases. ‘If semantically permissible, [an insurance] contract will be given such construction as will fairly achieve its object of securing indemnity to the insured for the losses to which the insurance relate[d].’ ” (State Farm Mutual Automobile Ins. Co. v. Jacober, supra, 110 Cal.Rptr. at 6-7, 514 P.2d at 958-959 [citation omitted].) Of course, “where the terms of the policy are plain and explicit, the court will indulge in no forced construction so as to cast a liability upon the insurance company which it has not assumed.” (New York Life Ins. Co. v. Hollender (1951) 38 Cal.2d 73, 81, 237 P.2d 510, 514.) However, that principle applies only where the language is not “susceptible to alternative readings” by the average layperson.
The district court correctly concluded that the word “duties,” used in conjunction with the word “Employee,” might reasonably be interpreted by an average layperson to mean employment-related duties. That may not be the most reasonable interpretation, but it is “semantically permissible.”
The majority opinion concludes that the word “Employee” in the policy is a cipher representing the name of the insured and that the ordinary connotations of the word are not to be considered. A similar argument was recently rejected by the California Court of Appeal. In National Indemnity Co. v. Demanes (1978) 86 Cal.App.3d 155, 150 Cal.Rptr. 117, the court construed an exclusion for bodily injury to a “named insured.” The name of the decedent appeared as one of two names on the first page of the policy after the words “Name of Insured.” The court found the attempted exclusion “cloudy” and therefore ineffective. Noting that there was no express definition of the term “named insured,” the court stated: “It is arguable that the layman purchasing the policy and reading it might deduce from this that the two men matched the term of art, ‘the named insured’; but it is likely enough that, seeing the words ‘insured’ (merely ‘insured persons’ such as permissive users are not within the exclusion) and ‘named insured’ used repeatedly throughout the policy, they would not be struck by the fact that they were in a special and, in circumstances such as are present here, a disfavored category.” (150 Cal.Rptr. at 120.)
Further, “named insured” is a relatively neutral term; “Employee” is not. Words in an insurance policy are to be given their ordinary meaning, unless circumstances indicate a contrary intention. (Healy Tibbitts Constr. Co. v. Employers’ Surplus Lines Ins. *1316Co. (1977) 72 Cal.App.3d 741, 140 Cal.Rptr. 375, 379.) No such intention is manifested here. In fact, the choice of the word “Employee” to designate the insured person, in the context of the policy’s coverage terms, invites the layperson to consider the word in its ordinary sense. Coverage is only available to Getty employees; when the insured ceased to be an “Employee” in the ordinary sense, his insurance coverage terminates. The fact that Prudential could have avoided any ambiguity by using the word “Insured” instead of the word “Employee,” as, in fact, it did in the policy at issue in Prudential Insurance Co. of America v. Barnes (9th Cir. 1960) 285 F.2d 299, is an argument that cuts against, rather than for, Prudential’s position.
We should tread cautiously in declaring an interpretation favorable to an insured “unreasonable.” California cases abound with seemingly clear language which has been held ambiguous. In Mid-Century Ins. Co. v. Hauck (1973) 35 Cal.App.3d 293, 110 Cal.Rptr. 707, coverage included “bodily injury, including death at any time resulting therefrom, sustained by any person,” but excluded “bodily injury” sustained by a member of the same household. The court held that “bodily injury” in the exclusion clause did not include death. The court observed that if the insurer sought to exclude an action for wrongful death, it could have included a definition that would have achieved that goal. In State Farm Mutual Automobile Ins. Co. v. Jacober, supra, the court held that an exclusion for “bodily injury to the insured” was ambiguous, and could reasonably be read to refer “only to that person . . . who faces potential liability,” that is, the driver, rather than, as the insurer argued, to all insured persons or the named insured. In Paramount Prop. Co. v. Transamerica Title Ins. Co., supra, the court held that “payment in full” was ambiguous, and did not include a payment followed, two months later, by a suit for refund. In Gray v. Zurich Ins. Co., supra, the coverage excluded defense of a suit for an intentional tort. The court held that the insurer was obligated to defend a suit charging the insured with assault, when the insured claimed self-defense, although the plaintiff had prevailed against the insured. The court found the policy language ambiguous “by its very nature.”
The cases relied upon by the majority opinion do not carry the reversal freight. Prudential Insurance Company of America v. Barnes (9th Cir. 1960) 285 F.2d 299, is irrelevant because California law was not involved. In that case, the insured and the employer were domiciled in Arizona, where the accident occurred, and the insurance company was a citizen and resident of New Jersey. Moreover, in Barnes, Prudential chose to write the aviation exclusion clause using the word “Insured” rather than the word “Employee.” The Barnes opinion did not consider the issue before us. Rather, the opinion says that the issue was; “Is the phrase ‘passenger with no duties aboard the aircraft while in flight’ subject to a reasonable interpretation which would result in coverage of Deputy Sheriff Barnes?” (285 F.2d at 300.) The court answered that question affirmatively.
General Casualty Co. of America v. Azteca Films, Inc. (9th Cir. 1960) 278 F.2d 161, is relevant only as a general statement of the principles of construing insurance contracts. The exclusionary clause involved was completely different from the one which we are considering. In any event, our reading of the California law as of 1960 provides no guidance for interpreting the California law at the present time because California insurance law has undergone significant changes since then.
The majority opinion simply does not address the now well-settled principles in California that “[w]hereas coverage clauses are interpreted broadly so as to afford the greatest possible protection to the insured, exclusionary clauses are interpreted narrowly against the insurer.” (State Farm Mutual Automobile Ins. Co. v. Partridge (1973) 10 Cal.3d 94, 109 Cal.Rptr. 811, 816, 514 P.2d 123, 128 [citations omitted].)
The majority opinion suggests that the district court’s construction of the language of the aviation exclusion clause would ren*1317der that clause nugatory because Getty did not have any employees with duties relating to aircraft. The fact that, at the time the policy was issued, Getty did not have any employees with aircraft-related duties is a neutral factor. We know nothing from the record about Getty’s history in respect of hiring persons with aircraft-related duties, nor do we know anything about Getty’s intentions in the future during the period of policy coverage. Insurance policies frequently cover risks that may or may not be encountered during the period of policy coverage. For example, a clause in the same policy excludes losses resulting from suicide, whether the employee is sane or insane. That clause limits a risk even if there were evidence that none of Getty’s employees was insane at the time the policy was written.
I can find nothing in the record to support the majority’s conclusion that the insured should have known that Prudential would attempt to exclude aviation-related risks, (at 1313-1314.) This policy manifestly excludes some, but not all, aviation-related losses. The question is whether the policy language that Prudential chose excluded this particular loss. We have no basis upon which to take judicial notice that people generally, or plaintiff’s decedent in particular, have knowledge of “common exclusions” in insurance policies. Even if we could take such judicial notice, such general knowledge would not be relevant in deciding whether a particular common exclusion was within or without the policy in question.
There is surely more than a slight amount of irony in holding that the insurance policy was not ambiguous when, of the four judges who have construed the policy, two read the exclusion one way, and two another. Under all of the circumstances, I see no basis, under controlling California law, to disturb the district court’s decision.