United States Fire Insurance v. Confederate Air Force , 16 F.3d 88 ( 1994 )

United States Court of Appeals,
Fifth Circuit.
No. 93-7100.
UNITED STATES FIRE INSURANCE CO., Plaintiff-Counter Defendant-
Appellant, Cross-Appellee,
v.
CONFEDERATE AIR FORCE, Defendant-Third Party Plaintiff-Counter
Claimant-Appellee, Cross-Appellant,
v.
AVIATION OFFICE OF AMERICA, Third Party Defendant-Appellant,
Cross-Appellee.
March 15, 1994.
Appeals from the United States District Court for the Southern
District of Texas.
Before VAN GRAAFEILAND,* SMITH and WIENER, Circuit Judges.
VAN GRAAFEILAND, Circuit Judge:
United States Fire Insurance Company ("U.S. Fire") and
Aviation Office of America, Inc. ("AOA") appeal from a final
judgment awarding Confederate Air Force ("CAF") $2,047,500,
representing interest, attorney's fees and damages arising out of
the alleged misrepresentation of coverage provided in a U.S. Fire
aircraft insurance policy issued to CAF. Although the judgment was
entered against AOA, U.S. Fire's aviation insurance manager, the
parties and the court below treated U.S. Fire and AOA as "one
entity," and the judgment so provided. CAF cross-appeals from that
part of the judgment that "discounted" $1,000,000 from the original
*
Circuit Judge of the Second Circuit, sitting by
designation.
1
award of $3,047,500, because of U.S. Fire's payment of $1,000,000
to CAF pursuant to a settlement agreement, which provided for
repayment of the $1,000,000 if that amount was found to be in
excess of the policy limits. We vacate the judgment in its
entirety and remand to the district court with instructions to
enter judgment in favor of U.S. Fire and against CAF in the amount
of $1,000,000 plus interest and attorney's fees as provided in the
settlement agreement, together with the costs of this appeal.
CAF is a Texas corporation which maintains a "flying museum"
of over 100 vintage aircraft used in displays and air shows. Prior
to 1984, CAF insured its aircraft under a policy issued by American
Continental Insurance Company through its managing agent Southern
Aviation Insurance Group (the "SAIG policy"). The SAIG policy
provided CAF with "Single Limit Bodily Injury and Property Damage"
coverage of $1,000,000 per "occurrence." However, it contained a
recovery sublimit of $100,000 per passenger for bodily injuries.
Dissatisfied with the passenger sublimit restriction in the SAIG
policy, CAF decided to replace it with a policy omitting that
limitation.
In early 1984, John Allen, an agent who procured insurance for
CAF, and Richard Post, an underwriter for AOA, discussed the
possibility of acquiring a policy from U.S. Fire. Allen furnished
Post with a copy of the SAIG policy and told him that CAF desired
the same kind of coverage without the passenger sublimit. Post
agreed to provide CAF with single combined limit coverage of
$1,000,000 per aircraft with no sublimits under U.S. Fire's
2
"SuperPlain" aircraft policy. Post notified Allen over the
telephone that coverage of CAF's fleet under the U.S. Fire policy
commenced on September 17, 1984.
On October 13, 1984, a PBY-6 Catalina aircraft owned by CAF
crashed into Laguna Madre, killing seven passengers and severely
injuring three others. At the time of the crash, an AT-6 aircraft,
also owned by CAF, was flying near the PBY-6. A passenger aboard
the AT-6 was photographing the PBY-6 in flight. The AT-6 pilot
requested the pilot of the PBY-6 to fly closer to the water so that
the AT-6 could obtain better photographs. However, the AT-6 did
not perform any maneuver that caused the crash, which, absent any
plane defect, was caused by error on the part of the PBY-6 pilot.
The U.S. Fire policy was delivered to Allen in November 1984.
Allen read the policy and, with the exception of a policy
endorsement unrelated to the instant case, believed it provided the
coverage he had requested. The policy stated in relevant part:
6. COVERAGES AND LIMITS OF LIABILITY: The most we will pay
under each coverage we provide is shown below for each aircraft....
LIABILITY TO OTHERS:
...
D. Single Limit
Bodily Injury
Property Damage
Including Pass[engers]
each occurrence $1,000,000
In September 1985, representatives of the families of injured
or deceased passengers received letters from CAF indicating that
3
the U.S. Fire policy provided total coverage of only $1,000,000.
Neither Allen nor CAF raised the question whether the U.S. Fire
policy might provide coverage in excess of $1,000,000 until a
lawyer for one of the families pointed out in October 1985 that
another covered aircraft, the AT-6, was present when the PBY-6
crashed. Although U.S. Fire disputed the existence of coverage in
excess of $1,000,000, it agreed to settle the claims of the
victims' families for a total payment of $2,000,000. However, in
the settlement agreement U.S. Fire reserved the right to litigate
with CAF the coverage dispute regarding the additional $1,000,000
payment.
In February 1986, U.S. Fire sued CAF in the United States
District Court for the Southern District of Texas seeking a
declaratory judgment that it was liable for no more than $1,000,000
as a result of the Laguna Madre crash and that CAF was obligated to
repay it $1,000,000 plus interest and attorney's fees pursuant to
the terms of the settlement agreement. U.S. Fire moved for summary
judgment. In a memorandum and order dated August 5, 1987, the
district court granted U.S. Fire's motion, holding that there had
been only one "occurrence" and that "occurrence" involved only one
aircraft, the PBY-6. The court ordered CAF to pay U.S. Fire
$1,000,000 plus prejudgment interest and attorney's fees.
Before judgment was entered, however, the district court
permitted CAF to amend its pleadings to assert a counterclaim
against U.S. Fire and third-party claims against AOA, Allen and
Allen's company, Falcon Insurance Agency, for misrepresentation of
4
insurance coverage in violation of the Texas Deceptive Trade
Practices Act ("DTPA"), Tex.Bus. & Com.Code Ann. §§ 17.41 et seq.,
and the Tex.Ins.Code Ann. art. 21.21, § 16. Although CAF
subsequently withdrew its claims against Allen and Falcon Insurance
Agency, the claim against U.S. Fire and AOA, which the parties
treated as one entity, went to trial. At the close of CAF's
evidence, U.S. Fire and AOA moved for a directed verdict. The
district court deferred ruling on the motion, stating it would
"just carry [the motion] along." In a special verdict, the jury
found that Richard Post, an agent of AOA, knowingly had
misrepresented the coverage provided CAF in the U.S. Fire policy
and that this misrepresentation was the producing cause of damages
to CAF.
The district court denied U.S. Fire and AOA's motion for
judgment notwithstanding the verdict. The judgment thereafter
entered held AOA liable for $3,047,500, representing CAF's actual
and trebled damages, prejudgment interest and attorney's fees.
This figure then was "discounted" in the judgment by the $1,000,000
that U.S. Fire had paid in excess of its policy limits.
THE POLICY LIMITS
In evaluating a district court's decision to grant summary
judgment, we review the record under the same standards that guided
the district court. See Walker v. Sears, Roebuck & Co., 853 F.2d
355, 358 (5th Cir.1988). We review questions of law de novo, see
Moore v. Eli Lilly & Co., 990 F.2d 812, 815 (5th Cir.), cert.
denied, --- U.S. ----, 114 S.Ct. 467, 126 L.Ed.2d 419 (1993), and
5
we affirm the grant of summary judgment only if there are no
genuine issues of material fact and the moving party is entitled to
judgment as a matter of law, see Celotex Corp. v. Catrett, 477 U.S.
317, 322-23, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); Ranger
Ins. Co. ex rel. Bernstein v. Estate of Mijne, 991 F.2d 240, 243
(5th Cir.1993). The district court correctly held that the above
requirements were met in the instant case.
The U.S. Fire policy's definition of occurrence, so far as
pertinent, is "a sudden event ... involving the aircraft ...
neither expected nor intended by you, that causes bodily injury ...
to others...." The district court interpreted the word
"occurrence" as "the occurrence of the event or incident for which
CAF was liable, namely the crash of the PBY-6 aircraft." The
parties had stipulated that the AT-6 plane did not perform any
maneuver which caused the crash. The request by the AT-6 pilot
that the PBY-6 pilot fly somewhat lower so that a better picture
could be taken was not a "sudden event involving the [AT-6]" within
the policy coverage of that plane. In other words, it was not an
"occurrence" involving the AT-6 within the plain meaning of the
policy.
Under Texas law, an unambiguous insurance policy, like any
other contract, will be enforced as written. Upshaw v. Trinity
Companies, 842 S.W.2d 631 (Tex.1992); Melton v. Ranger Ins. Co.,
515 S.W.2d 371, 373 (Tex.Civ.App.—Fort Worth 1974, writ ref'd
n.r.e.). Under the plain and unambiguous meaning of the U.S. Fire
policy, the "occurrence" that caused the injuries and damages in
6
the instant case was the crash of the PBY-6 into the water.
Insofar as the AT-6 was concerned, this was not an occurrence. See
Maurice Pincoffs Co. v. St. Paul Fire & Marine Ins. Co., 447 F.2d
204, 206 (5th Cir.1971). The district court did not err in
granting U.S. Fire's motion for summary judgment.
THE DECEPTIVE TRADE PRACTICES AWARD
At the outset, we hold that pursuant to this Court's liberal
and equitable interpretation of Fed.R.Civ.P. 50(b), U.S. Fire
preserved its right to challenge the sufficiency of CAF's evidence.
See Davis v. First Nat'l Bank, 976 F.2d 944, 948-49 (5th Cir.1992),
cert. denied, --- U.S. ----, 113 S.Ct. 2341, 124 L.Ed.2d 251(1993); Merwine v. Board of Trustees, 754 F.2d 631, 634-35 (5th
Cir.), cert. denied, 474 U.S. 823, 106 S.Ct. 76, 88 L.Ed.2d 62(1985). We therefore have considered the merits of U.S. Fire's
motion for judgment n.o.v. and conclude that it should have been
granted.
Since the seminal case of Boeing Co. v. Shipman, 411 F.2d
365, 374 (5th Cir.1969) (en banc), we have followed its teachings
in deciding when a case should be taken from the jury. We there
said that "[i]f the facts and inferences point so strongly and
overwhelmingly in favor of one party that the Court believes that
reasonable men could not arrive at a contrary verdict, granting of
the motion[ ] is proper." We added: "A mere scintilla of evidence
is insufficient to present a question for the jury." Id. For
later consistent holdings, see Love v. King, 784 F.2d 708, 710 (5th
Cir.1986); Mack v. Newton, 737 F.2d 1343, 1351 (5th Cir.1984);
7
Ford v. General Motors Corp., 656 F.2d 117, 119 (5th Cir.1981).
Viewed in the light of these teachings, U.S. Fire's motion for
judgment n.o.v. should have been granted.
In order to find misrepresentation in the instant case, the
jury would have had to find either that U.S. Fire represented that
CAF would receive a particular kind of policy that it did not
receive or that it denied coverage against loss under specific
circumstances that it previously had represented would be covered.
See Parkins v. Texas Farmers Ins. Co., 645 S.W.2d 775, 776-77
(Tex.1983); Employers Casualty Co. v. Fambro, 694 S.W.2d 449, 452
(Tex.App.—Eastland 1985, writ ref'd n.r.e.). As to the first
issue, there is no question but that CAF received the policy it
requested. It wanted a policy similar to the SAIG policy it
already had, but without the $100,000 per passenger limitation on
liability. That is what it received. Moreover, with regard to the
definition of "occurrence" which is the pivotal issue in this case,
the definitions in the two policies are substantially the same.
That is what CAF's expert, Gary Beck, said and no witness disputed
it. Neither does this Court.
Q And, as we discussed earlier, the definition of
occurrence is something you would normally find in an aviation
insurance contract, right?
A Yes.
Q That is something that you would expect?
A Yes.
Q And there is one also in the AOA policy that is at Item
No. M here and on this one it is No. 3 here?
A Yes.
8
Q Right? Now we have the Southern Aviation one
reproduced here and we have already had this identified. I
would like for you to look again if you would, please, at the
substance of the definition of occurrence in the Southern
policy, the substance of the definition of occurrence in the
AOA policy, and tell me whether they are substantively the
same?
A I think they are substantively the same.
Gary Beck—Cross, TR 296.
CAF attempts to frame the issue of misrepresentation as if a
statement that each of its planes had $1,000,000 in coverage was
false. Such a statement, if made, was not false. Each plane did
have $1,000,000 in coverage. Coverage, as that word generally is
used in reference to insurance contracts, refers to the aggregate
or sum of the risks covered by the policy. See D'Angelo v. Cornell
Paperboard Prods. Co., 59 Wis.2d 46, 207 N.W.2d 846, 849 (1973);
Webster's Third New International Dictionary at 525. It does not
identify the risks that are covered. To say, therefore, that plane
AT-6 had $1,000,000 in coverage does not mean that a total of
$1,000,000 would be paid to those who make a claim of any nature
against the company. The money is available only for the risks
insured against, in this case the happening of an occurrence, a
"sudden event involving the [AT-6] neither expected nor intended by
[CAF]."
During the discussions between Post and Allen that preceded
the Laguna Madre crash, which is the only period during which any
misrepresentation by Post could have affected CAF adversely, Post
and Allen never discussed how the terms of the policy would apply
to hypothetical circumstances involving CAF aircraft. Certainly,
9
no discussion ever was had concerning a hypothetical accident
anything like the unusual one at issue herein. The district court
erred as a matter of law in denying U.S. Fire's motion for judgment
notwithstanding the verdict.
The judgment of the district court is VACATED. The matter is
REMANDED to the district court with instructions to enter judgment
in favor of U.S. Fire and against CAF in the amount of $1,000,000
plus interest and attorney's fees as provided in the settlement
agreement, together with the costs of this appeal.
10