Ninth Circuit Affirms Application of Exclusion for "Pilot or Crew Member in an Aircraft"

Posted on July 13, 2009 by Diane Polscer

In Woodworth v. Stonebridge Life Ins. Co., 2009 U.S. App. LEXIS 15068 (9th Cir. July 8, 2009), the Ninth Circuit affirmed the district court’s grant of summary judgment based on its interpretation of an exclusion for “Loss caused by or resulting from: . . . an injury while the Covered Person is acting as a pilot or crew member in an aircraft.” The dispute arose out of an airplane accident in which flight instructor Roger Woodworth lost his life. Plaintiff, the deceased’s wife, argued that the exclusion should not apply, since it was unknown whether her husband was actually controlling the aircraft at the time that it crashed. She asserted that, because the insurer bears the burden of showing that an exclusion applies, the exclusion would not apply unless Stonebridge proved that her husband was in control of the plane at the time of the crash.

The Ninth Circuit stated that summary judgment was properly granted in favor of Stonebridge because Mr. Woodworth was at least acting as a “crew member” during the entire flight, whether or not he was controlling the plane at the time of the crash. Although the term “crew member” was not defined, the court noted that a reasonable layperson’s definition of the term comported with the federal regulatory definition under 14 C.F.R. § 1.1, which defines crewmember as “a person assigned to perform duty in an aircraft during flight time.” The court went on to state, “[a]s the flight instructor and the only pilot certified to fly the twin-engine aircraft, Mr. Woodworth had duties related to the operation of the aircraft and was a “crew member” for purposes of the exclusion.” Thus, the insurance company was not required to prove that Mr. Woodworth was actually controlling the airplane at the time of the crash in order to apply the exclusion.
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The Supreme Court of Washington Clarifies "Bad Faith" and Consumer Protection Act Claims

Posted on December 16, 2008 by Diane Polscer

The Supreme Court of Washington’s recent decision in St. Paul Fire and Marine Ins. Co. v. Onvia, Inc., 2008 Wash. LEXIS 1055 (November 26, 2008) addressed two claims commonly alleged against insurers in coverage disputes: “bad faith” and violation of the Consumer Protection Act. The matter reached the Court upon certified questions from the United States District Court for the Western District of Washington. The first question was whether an insured has a cause of action under Washington law “against its liability insurer for common law procedural bad faith for violation of the Washington Administrative Code and/or for violation of the Washington Consumer Protection Act (CPA), chapter 19.86 RCW, even though a court has held that the insurer had no contractual duty to defend, settle, or indemnify the insured?” Second, assuming a ‘yes’ answer to the first question, must the insured “prove that the insurer’s conduct caused actual harm, or should the court apply a presumption of harm?” Third, “[h]ow should damages be measured?” 2008 Wash. LEXIS 1055 at *2.

 

Earlier in the district court litigation, St. Paul had obtained a declaration on summary judgment that (1) it “had no duty to defend, indemnify, or settle the underlying action against Onvia” and (2) it did not ”commit bad faith when it refused to defend Onvia.” Id. at *6. Given that the underlying case had settled for $17.515 million, Id. at *5, these were important rulings for St. Paul. However, the rulings did not end the matter because claims remained for bad faith and violation of the CPA, both of which were premised on several alleged violations of Washington regulations governing the handling of insurance claims. Principally, the plaintiff argued that St. Paul “fail[ed] to timely acknowledge and act upon the notice of the claim and tender of defense” and “fail[ed] to promptly or reasonably investigate the claim.” Id. at *6.

 

The Court’s decision includes some good news for insureds and some good news for insurers. On the one hand, the Court ruled that “a third-party insured has a cause of action for bad faith claims handling [and for violation of Washington’s CPA] that is not dependent on the duty to indemnify, settle, or defend.” Id. a **14, 16. In other words, an insurer can be held liable to its insured even when the insurer possessed no duty to indemnify, settle or defend in the first place. On the other hand, the Court held that “coverage by estoppel is not recognized in this context,” and the insured is not entitled to a presumption of harm. Id. at *15. Rather, the insured “must prove actual harm” and its damages are limited to “the amount it has incurred as a result of the bad faith … as well as general tort damages” for a bad faith claim.  Id.  With respect to the CPA claim, damages are limited to “the statutory remedies available to any successful CPA claimant.” Id. at *16. These statutory remedies consist of “actual damages … together with the costs of the suit, including a reasonable attorney’s fee” plus, in the discretion of the court, the possibility of treble damages in an amount not to exceed $10,000. RCW 19.86.090. Significantly, this standard would generally preclude an award of damages for the underlying claim amount (here, $17,515,000) where the insurer did not breach the duty to defend, settle or indemnify.

 
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No Contribution For Defense Of Additional Insured

Posted on May 22, 2008 by Sara Thorpe

The duty to defend, in the context of a contribution lawsuit between insurers, and the right to pursue appeal after an unfavorable summary adjudication ruling, were the subjects of a decision from California’s Court of Appeal, Second Appellate District (Los Angeles).

In Monticello Insurance Company v. Essex Insurance Company (2008) __ Cal.App.4th __ (2008 WL 1851316), the court of appeal affirmed the trial court’s ruling that Monticello failed to prove on motion for summary adjudication/judgment that Essex had a duty to contribute to the defense of a general contractor (“GC”) in a construction defect case.  Monticello was the direct insurer of the GC and Essex insured the GC as an additional insured under a policy issued to a drywall subcontractor. While the legal principles of equitable contribution may not be new, the case is an example of what evidence was found to be inadequate to substantiate the right to contribution. Both the trial and appellate courts (even though reviewing by different standards) found Monticello failed to show there was a potential that the drywaller’s work caused damage to other property.

(What the court does not address, and perhaps Monticello did not feature, was that Essex must have concluded there was a potential for coverage as it was defending its direct insured, the drywaller.)

 

The case suggests the insurer seeking contribution should consider: (1) continuing to provide additional information to the other insurer, which information may impact a decision on the duty to defend, and (2) filing an earlier declaratory relief action (while the defense is ongoing).

The court also addressed whether the parties had standing to appeal. The appeal followed a ruling on summary judgment/adjudication. There were still issues that could have been litigated further, but it did not make much sense to litigate in light of the court’s ruling. Therefore, the parties stipulated judgment would be entered against Monticello for purposes of concluding the case so Monticello could immediately appeal. The court found this appropriate under the circumstances.
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