Avemco v. Pond CV-94-73-B 04/11/96 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Avemco Insurance Company
v. Civil No. 94-73-B
J. Lawrence Pond, et al.
O R D E R
Avemco seeks a declaratory judgment that the "commercial
purpose" exclusion in its aircraft insurance policy releases it
from a duty to cover claims brought against its insured, Nathan
Pond, arising out of an air show accident. For the following
reasons, I determine that the exclusion does not bar coverage.
I. FACTS
The parties submitted memoranda of law and an agreed
"Statement of Undisputed Facts" including applicable policy
provisions and interrogatory answers and presented argument at a
hearing on January 18, 1996. I make the following findings of
fact based upon the parties' "Statement of Undisputed Facts." Avemco issued an aircraft liability policy to Nathan and
Lawrence Pond providing bodily injury and property damage
coverage for their Cessna airplane. The policy includes an
exclusion that states: "This Policy does not cover bodily
injury, property damage or loss: (1) When your insured aircraft
is: ... (b) used for a commercial purpose." "Commercial
purpose" is defined in the policy as follows:
"Commercial purpose" means passenger or cargo carrying, flight instruction, rental or other use for which an insured person gets money or other benefits. It does not include an insured person sharing operating costs of a flight or being reimbursed for a flight that is incidental to his business or job, as allowed a Private Pilot by the Federal Aviation Administration.
The policy was issued and delivered to the Ponds in Connecticut
where they kept the airplane.
Nathan Pond occasionally performed in parachuting events at
air shows with other family members who were known collectively
as the Pond Family Skydivers. Parker Aviation Enterprises, Inc.
("Parker") hired the Pond Family Skydivers to perform in an air
show to be held in Lebanon, New Hampshire, on July 24 and 25,
1993. Three members of the Pond Family Skydivers, Nathan, his
son Gary, and his nephew Scott, agreed to participate and the
Ponds agreed to charge their usual rate of $400.00 per day for
2 three skydivers. Parker also asked the Ponds to arrange for
three additional skydivers to perform for an additional charge of
$400 per day. The total charge for all six skydivers for both
days was to be $1,600.00. Of the $800 that the Pond family
skydivers were to receive for their performance, $200.00 was to
be used to reimburse Nathan for the use of the airplane, and the
balance was to be divided egually among Nathan, Gary, and Scott.
The Ponds planned to use Nathan's airplane, and Nathan
arranged for William Batesole to serve as a volunteer pilot. On
each day of the show, the airplane was to be used for three to
four hours. The average cost of operating the airplane, without
considering depreciation or insurance, was approximately $42.00
per hour.1 The airplane was not to be used to perform any stunts
or acrobatic flying either as part of the Pond's performance or
in other parts of the show.
During the opening act on July 24, 1993, Scott Pond jumped
from Nathan's airplane and collided with a bi-plane operated by
Mary McGrath who was also flying as part of the show. Both Scott
and McGrath died from injuries they suffered during the accident.
1 For other shows, if the Ponds could not find a volunteer pilot, they rented an airplane at the commercial rate of $100.00 per hour and paid a pilot $25.00 per hour.
3 As a result, claims have been brought against Nathan in an action
in this court. Pond v. McGrath, Civil No. 94-225-M. Avemco is
defending Nathan in that action under a reservation of rights
based on the policy's "commercial purpose" exclusion. The
company filed this declaratory judgment action to determine its
obligation to defend and indemnify Nathan in the underlying
action.
II. STANDARD OF REVIEW
The parties agree that Connecticut law should be used to
construe the terms of the insurance policy because it was issued
and delivered in Connecticut to cover an airplane that was
usually kept in Connecticut. See Glowski v. Allstate Ins. Co .,
134 N.H. 196, 198 (1991). Under Connecticut law, "it is the
function of the court to construe the provisions of the contract
of insurance." Town of Wallingford v. Hartford Accident and
Indem. C o ., 649 A.2d 530, 532 (Conn. 1994). " [A]n insurance
policy, like any other contract, must be given a reasonable
interpretation and the words used are to be given their common,
ordinary and customary meaning." Izzo v. Colonial Penn Ins. Co . ,
524 A.2d 641, 643 (Conn. 1987). Thus, coverage depends on "what
4 a reasonable person in the position of the insured would
understand to be covered." Clinton v. Aetna Life & Surety Co . ,
594 A.2d 1046, 1047 (Conn. Super. C t . 1991). Further, "when the
words of an insurance contract are, without violence, susceptible
of two [equally responsible] interpretations, that which will
sustain the claim and cover the loss must, in preference, be
adopted." Heyman Assocs. No. 1 v. Insurance Co. of the State of
P a ., 653 A.2d 122, 130 (Conn. 1995) (internal quotations
omitted). The insurer bears the burden of provinq an exclusion
of a risk otherwise covered by the policy. Souper Spud, Inc. v.
Aetna Casualty & Sur. Co., 501 A. 2d 1214, 1217 (Conn. A p p . 1985),
cert, denied, 503 A.2d 172 (Conn. 1986). I apply these standards
in determininq the meaninq of the "commercial purpose" exclusion.
III. ANALYSIS
The policy's definition of "commercial purpose" includes
"other use[s] [of the airplane] for which an insured person qets
money" unless the money was reimbursement "for a fliqht that is
incidental to [the insured's] business or job, as allowed a
5 private pilot by the Federal Aviation Administration."2 In this
case, the $200 Nathan was to receive for the use of his airplane
qualifies as a reimbursement because Nathan's actual operating
costs for the airplane were greater than $200. Therefore, the
question that must be resolved is whether Nathan's use of his own
airplane to transport the Pond Family Skydivers to the jump site
reasonably could be considered "incidental" to the skydiving
business. For the reasons that follow, I conclude that the
answer to this question is yes.
In ordinary usage, "incidental" means "having a minor role
in relation to a more important thing [or] event," The Concise
Oxford Dictionary, 597 (8th ed. 1990), or "happening or likely to
happen in an unplanned or subordinate conjunction with something
else," Random House Unabridged Dictionary, 966 (2d ed. 1993). If
"incidental" is understood in this sense, the phrase "incidental
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Avemco v. Pond CV-94-73-B 04/11/96 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Avemco Insurance Company
v. Civil No. 94-73-B
J. Lawrence Pond, et al.
O R D E R
Avemco seeks a declaratory judgment that the "commercial
purpose" exclusion in its aircraft insurance policy releases it
from a duty to cover claims brought against its insured, Nathan
Pond, arising out of an air show accident. For the following
reasons, I determine that the exclusion does not bar coverage.
I. FACTS
The parties submitted memoranda of law and an agreed
"Statement of Undisputed Facts" including applicable policy
provisions and interrogatory answers and presented argument at a
hearing on January 18, 1996. I make the following findings of
fact based upon the parties' "Statement of Undisputed Facts." Avemco issued an aircraft liability policy to Nathan and
Lawrence Pond providing bodily injury and property damage
coverage for their Cessna airplane. The policy includes an
exclusion that states: "This Policy does not cover bodily
injury, property damage or loss: (1) When your insured aircraft
is: ... (b) used for a commercial purpose." "Commercial
purpose" is defined in the policy as follows:
"Commercial purpose" means passenger or cargo carrying, flight instruction, rental or other use for which an insured person gets money or other benefits. It does not include an insured person sharing operating costs of a flight or being reimbursed for a flight that is incidental to his business or job, as allowed a Private Pilot by the Federal Aviation Administration.
The policy was issued and delivered to the Ponds in Connecticut
where they kept the airplane.
Nathan Pond occasionally performed in parachuting events at
air shows with other family members who were known collectively
as the Pond Family Skydivers. Parker Aviation Enterprises, Inc.
("Parker") hired the Pond Family Skydivers to perform in an air
show to be held in Lebanon, New Hampshire, on July 24 and 25,
1993. Three members of the Pond Family Skydivers, Nathan, his
son Gary, and his nephew Scott, agreed to participate and the
Ponds agreed to charge their usual rate of $400.00 per day for
2 three skydivers. Parker also asked the Ponds to arrange for
three additional skydivers to perform for an additional charge of
$400 per day. The total charge for all six skydivers for both
days was to be $1,600.00. Of the $800 that the Pond family
skydivers were to receive for their performance, $200.00 was to
be used to reimburse Nathan for the use of the airplane, and the
balance was to be divided egually among Nathan, Gary, and Scott.
The Ponds planned to use Nathan's airplane, and Nathan
arranged for William Batesole to serve as a volunteer pilot. On
each day of the show, the airplane was to be used for three to
four hours. The average cost of operating the airplane, without
considering depreciation or insurance, was approximately $42.00
per hour.1 The airplane was not to be used to perform any stunts
or acrobatic flying either as part of the Pond's performance or
in other parts of the show.
During the opening act on July 24, 1993, Scott Pond jumped
from Nathan's airplane and collided with a bi-plane operated by
Mary McGrath who was also flying as part of the show. Both Scott
and McGrath died from injuries they suffered during the accident.
1 For other shows, if the Ponds could not find a volunteer pilot, they rented an airplane at the commercial rate of $100.00 per hour and paid a pilot $25.00 per hour.
3 As a result, claims have been brought against Nathan in an action
in this court. Pond v. McGrath, Civil No. 94-225-M. Avemco is
defending Nathan in that action under a reservation of rights
based on the policy's "commercial purpose" exclusion. The
company filed this declaratory judgment action to determine its
obligation to defend and indemnify Nathan in the underlying
action.
II. STANDARD OF REVIEW
The parties agree that Connecticut law should be used to
construe the terms of the insurance policy because it was issued
and delivered in Connecticut to cover an airplane that was
usually kept in Connecticut. See Glowski v. Allstate Ins. Co .,
134 N.H. 196, 198 (1991). Under Connecticut law, "it is the
function of the court to construe the provisions of the contract
of insurance." Town of Wallingford v. Hartford Accident and
Indem. C o ., 649 A.2d 530, 532 (Conn. 1994). " [A]n insurance
policy, like any other contract, must be given a reasonable
interpretation and the words used are to be given their common,
ordinary and customary meaning." Izzo v. Colonial Penn Ins. Co . ,
524 A.2d 641, 643 (Conn. 1987). Thus, coverage depends on "what
4 a reasonable person in the position of the insured would
understand to be covered." Clinton v. Aetna Life & Surety Co . ,
594 A.2d 1046, 1047 (Conn. Super. C t . 1991). Further, "when the
words of an insurance contract are, without violence, susceptible
of two [equally responsible] interpretations, that which will
sustain the claim and cover the loss must, in preference, be
adopted." Heyman Assocs. No. 1 v. Insurance Co. of the State of
P a ., 653 A.2d 122, 130 (Conn. 1995) (internal quotations
omitted). The insurer bears the burden of provinq an exclusion
of a risk otherwise covered by the policy. Souper Spud, Inc. v.
Aetna Casualty & Sur. Co., 501 A. 2d 1214, 1217 (Conn. A p p . 1985),
cert, denied, 503 A.2d 172 (Conn. 1986). I apply these standards
in determininq the meaninq of the "commercial purpose" exclusion.
III. ANALYSIS
The policy's definition of "commercial purpose" includes
"other use[s] [of the airplane] for which an insured person qets
money" unless the money was reimbursement "for a fliqht that is
incidental to [the insured's] business or job, as allowed a
5 private pilot by the Federal Aviation Administration."2 In this
case, the $200 Nathan was to receive for the use of his airplane
qualifies as a reimbursement because Nathan's actual operating
costs for the airplane were greater than $200. Therefore, the
question that must be resolved is whether Nathan's use of his own
airplane to transport the Pond Family Skydivers to the jump site
reasonably could be considered "incidental" to the skydiving
business. For the reasons that follow, I conclude that the
answer to this question is yes.
In ordinary usage, "incidental" means "having a minor role
in relation to a more important thing [or] event," The Concise
Oxford Dictionary, 597 (8th ed. 1990), or "happening or likely to
happen in an unplanned or subordinate conjunction with something
else," Random House Unabridged Dictionary, 966 (2d ed. 1993). If
"incidental" is understood in this sense, the phrase "incidental
to [the insured's] business or job" could reasonably be
understood to cover any use of an insured's airplane that plays a
minor or subordinate role in comparison with the primary work for
which the insured is receiving compensation. This would
2 The policy also provides an exception for payments to an insured person for the purpose of sharing operating costs that does not apply under the circumstances in this case.
6 seemingly include situations like the present case where an
airplane is used to transport commercial skydivers to a jump
site. In this sense, the use of an airplane is incidental to
commercial skydiving, even though a skydiver needs an airplane to
perform, because the use of the airplane is subordinate to the
primary activity for which the skydiver is being compensated.
An analysis of the pertinent Federal Aviation Administration
("FAA") regulations and case law applying those regulations
provides further support for this interpretation. The FAA
regulations provide generally that
a private pilot may not act as pilot in command of an aircraft that is carrying passengers or property for compensation or hire; nor may he, for compensation or hire, act as pilot in command of an aircraft.
14 C.F.R. § 61.118 (1993). Nevertheless, the regulations also
permit a private pilot to receive compensation for using an
airplane
if the flight is only incidental to that business or employment and the aircraft does not carry passengers or property for compensation or hire.
14 C.F.R. § 61.118(a). Similarly, the FAA's definition of
"commercial operator" states that
7 [w]here it is doubtful that an operation is for "compensation or hire", the test applied is whether the carriage by air is merely incidental to the person's other business or is, in itself, a major enterprise for profit.
14 C.F.R. § 1.1 (1993). In a decision interpreting § 1.1, the
Colorado Supreme Court determined that a private corporation
operating a skydiving business did not act as a "commercial
operator" in ferrying skydivers to jump sites because the
"[c]arriage [of the skydivers] by air was incidental" to the
company's skydiving business. Jones v. Dressel, 623 P.2d 370,
376 (Colo. 1981). Thus, if anything, the FAA regulations support
the use of the commonly understood meaning of the term
"incidental" to interpret the "commercial purpose" exclusion.
Under the circumstances presented in this case, a reasonable
insured in Nathan Pond's position could plausibly have concluded
that his insurance would provide coverage for liability arising
from the use of his airplane to transport the Pond Family
Skydivers to the jump site. This is all that is reguired under
Connecticut law to obligate the insurer to provide coverage in
this case.
8 IV. CONCLUSION
For the foregoing reasons, the clerk is instructed to enter
judgment in favor of the defendants.
SO ORDERED.
Paul Barbadoro United States District Judge
April 11, 1996
cc: Andrew Dunn, Esg. Jeffrey Cohen, Esg. Garry Lane, Esg. Michael Gfroerer, Esg. David Kaplan, Esg.