decided: December 29, 1982.
PIPER AIRCRAFT CORPORATION, PLAINTIFF
INSURANCE COMPANY OF NORTH AMERICA AND COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF TRANSPORTATION, DEFENDANTS
Original jurisdiction in the case of Piper Aircraft Corporation v. Insurance Company of North America and Pennsylvania Department of Transportation.
F. Hastings Griffin, Jr., with him Alfred A. Gollatz and Richard A. Deak, Dechert, Price & Rhoads, for plaintiff.
J. Grant McCabe, III, with him Thomas P. Wagner, Rawle & Henderson, for Defendant, Insurance Company of North America.
George D. Wenick, Assistant Attorney General, for respondent, Department of Transportation.
President Judge Crumlish, Jr. and Judges Rogers and MacPhail, sitting as a panel of three. Opinion by Judge Rogers.
[ 70 Pa. Commw. Page 590]
Before us in this declaratory judgment action are the parties' cross motions for summary judgment. The single issue presented is whether, by the issuance of a policy of aviation insurance to DOT in 1976 and the execution in 1977 of an endorsement to that policy naming Piper Aircraft Corporation (Piper) as an additional insured, the Insurance Company of North
[ 70 Pa. Commw. Page 591]
America (INA) contracted to conduct Piper's defense in nine wrongful death actions now pending and arising out of the crash on February 24, 1977 of a Piper Cheyenne aircraft then leased by Piper to DOT and made the subject of the policy endorsement. The parties each allege that no material facts are in dispute and each agrees that the issue posed may be resolved with reference alone to the language of the contract of insurance.
The endorsement, effective as of February 1, 1977, and designated Number 12 is, in its entirety, as follows:
It is understood and agreed that such insurance as is provided by this policy with respect to Coverage C, G, and I is extended to Piper Aircraft Corporation as an additional insured, but only as respects their interest as owner/lessor of Piper Cheyenne N-631 Pt.
It is further agreed that endorsement No. 7 shall apply with respect to Piper Cheyenne N-631 Pt.
Coverage G, referred to in the endorsement, commits INA, with certain exceptions, exclusions, and conditions not here asserted to be applicable
To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages:
(1) including damages for care and loss of services, because of bodily injury, sickness, disease and, if arising out of the foregoing, mental anguish, including death at any time resulting therefrom, sustained by any person caused by an occurrence [defined elsewhere in the policy as an accident] during the policy period and arising out of:
[ 70 Pa. Commw. Page 592]
(a) the ownership, maintenance or use of the aircraft as described in this policy;
The Company shall have the right and duty to defend any suit against the insured seeking damages on account of bodily injury or property damage. . . .
Piper argues that these provisions, properly construed, end the matter; that the endorsement provides Piper with the coverages enumerated in schedule G and schedule G entitles to any insured to which it is applicable a defense in suits for damages sustained as a result of the crash of the designated aircraft.
INA erects two arguments which it says require a different interpretation. First, INA refers to the definitional section of the policy which specifies the meaning of the term "insured" as follows:
The unqualified word "insured" wherever used in the policy with respect to Coverage D, E, F and G includes not only the Named Insured but also any person while using or riding in the aircraft and any person or organization legally responsible for its use, provided the actual use is by or with the permission of the Named Insured. The insurance with respect to any person or organization other than the Named Insured does not apply to:
(b) any person or organization, or any agent or employee thereof, other than agents or employees of the Named Insured, engaged in the manufacture or sale of aircraft, aircraft engines or aircraft accessories . . . with respect to any occurrence or accident arising out of the manufacture or operation thereof.
[ 70 Pa. Commw. Page 593]
This definitional provision is, we are told, not unusual in liability policies, is called the "omnibus clause," and functions in the usual case to describe the circumstances under which and the extent to which an individual not a party to the contract of insurance and not otherwise identified in that instrument will nevertheless be eligible for the benefits and coverages described therein.
INA contends that it has not contracted to defend Piper under these circumstances because the liability of aircraft manufacturers for accidents arising out of that manufacture is expressly excluded from coverage in the omnibus clause by subsection (b) set forth above and because endorsement Number 12 designates Piper as an "additional insured" and not as a "Named Insured" (a designation applicable, in INA's view, only to DOT), and because the gravamen of the tort actions now pending against Piper are that Piper's design and manufacture of the aircraft were negligent and in breach of express and implied warranties of fitness and were such as to ground strict products liability within the meaning of Section 402A of the Restatement (Second) of Torts.
In sum, INA contends that although endorsement 12 ostensibly extends to Piper "such insurance as is provided by this policy with respect to Coverage C, G, and I," in fact the coverage described in schedule G is available to Piper only to the extent authorized by the definitional omnibus clause. Such a reading, however, so greatly limits the effect of endorsement 12 as to violate the cardinal rule of construction requiring that all of the provisions of the policy be given some operational meaning.*fn1 That is, a reading of the whole
[ 70 Pa. Commw. Page 594]
of the policy so as to limit the schedule G coverage available to Piper to that which would have been available in any event under the omnibus provision would frustrate the parties' presumptive intention to work
[ 70 Pa. Commw. Page 595]
some operative change in the policy by the addition of endorsement 12.
Apparently recognizing this difficulty with its proffered construction, INA describes in its written argument before this Court certain benefits described in schedules C and I which are available to Piper as a consequence of endorsement 12. However, endorsement 12 extends to Piper the coverage of schedule G as well and we must reject INA's attempt now to render ineffective this critical provision of its contract.*fn2
INA also argues that it has not contracted to provide to Piper a defense under these circumstances because endorsement 12 contains the following language qualifying or conditioning the schedule G coverage available to Piper:
Coverage . . . G is extended to [Piper] as an additional insured, but only as respects their [sic] interest as owner/lessor of Piper Cheyene N-631 Pt. (Emphasis added.)
INA asserts that the emphasized language means that liability coverage under schedule G is available to Piper only if the plaintiff's theory of recovery against Piper as defendant concerns activities of Piper in its capacity as the owner or lessor of the aircraft and not in its capacity as, for example, the aircraft's designer or manufacturer. Therefore, since the instant tort plaintiffs have complained primarily about Piper's activities in the design and manufacture of the Cheyenne leased to DOT, INA argues that coverage under schedule G must be denied.
The language relied on cannot support the semantic weight INA would have it bear. In our judgment
[ 70 Pa. Commw. Page 596]
"interest" in this context means interest and not capacity. Particularly persuasive in this regard is the function of "interest" and "insurable interest" within the technical argot of insurance policies. Were it not the owner and lessor of DOT's aircraft, Piper would have no interest insurable by means of DOT's aircraft liability policy. The phrase, then, serves merely to identify Piper and the propriety of its inclusion among the beneficiaries of this insurance contract.
Moreover, the purpose of the "but only" limiting language is not, as INA asserts, to exclude interests of Piper in the Cheyenne other than that of owner and lessor but, instead, is to exclude Piper's interests, of whatever nature, in aircraft other than this Cheyenne. As is revealed by the "Schedule of Aircraft" contained in the policy, by this same contract instrument INA contracted in 1976 to insure two other Piper aircraft in the hands of DOT -- a Piper Navajo and a Piper Comanche. Neither of these aircraft is, or, apparently, was intended to be, included within the operation of endorsement 12 executed a year later. In the absence of the endorsement language emphasized above, however, it would be entirely ambiguous as to whether the endorsement extended to Piper the various schedules of coverage there listed with respect to the Navajo and the Comanche aircraft. Inclusion of the phrase "but only as respects their interest as owner/lessor of Piper Cheyenne N-631 Pt." eliminates the ambiguity and serves to clearly express the parties' intention that the Navajo and the Comanche not be the subject of this endorsement. The phrase accomplishes no limitation with respect to the liability coverage available to Piper in the case of an accident involving the Cheyenne aircraft specifically identified and we must conclude that the whole of the coverage specified in schedule G, including the duty of INA to conduct a defense, is here available to Piper.
[ 70 Pa. Commw. Page 597]
In conclusion, endorsement 12 unambiguously extends to Piper the whole of the coverage specified in schedule G insofar as liability arises from an accident involving the specified Cheyenne aircraft. We therefore deny the respondent's Motion for Summary Judgment, grant the petitioner's Motion and enter judgment for the petitioner.
And Now, this 29th day of December, 1982, the motion for summary judgment of the Petitioner Piper Aircraft Corporation is hereby granted and the motion for summary judgment of the Respondent Insurance Company of North America is hereby denied and judgment is hereby entered in favor of the Petitioner and against the Respondent.
Motion for summary judgment of petitioner granted and judgment entered in its favor.