This conclusion is buttressed by the fact that the All-Risks policy for the other seventeen aircraft in the Hortman fleet, which contains the same standard provisions as the policy for the Navajo, specifically permits the aircraft to be used for rental and other commercial purposes. See, Purposes of Use section, Policy AHL-030738. Thus, the disputed language could not have been intended to exclude coverage when the plane was subject to a bailment or lease because such usage of the aircraft was expressly authorized by this other provision in the policy, and it would be anomalous to construe the policy so as to prohibit in one section what it specifically sanctions in another. Moreover, although the policies differ in that the All-Risks policy for the Navajo did not permit rental to third parties, the patent inconsistency in the other policy underscores the fact that exclusion 8(f) was not intended to exclude coverage while any of the aircraft were subject to a bailment or lease unless this intention was expressed in the Purposes of Use section of the policy.
The exclusion would also conflict with the Open Pilot Warranty Clause under Royal's interpretation. This clause specifies the minimum qualifications a pilot must have in order to operate the Navajo under the terms of the coverage. It clearly contemplates operation of the Navajo in bailment situations, as it indicates that third parties may operate the aircraft as long as the pilot meets or exceeds the specified qualifications. If the exclusion is read as Royal urges, the Open Pilot Warranty clause would have little meaning, because just about any operation of the aircraft by a qualified pilot who met the warranty clause but who was not an employee of Hortman would constitute a common law bailment. If the clause was meant to restrict operation of the aircraft to employees of Hortman, it should say so.
On the other hand, if coverage is only excluded in situations where the aircraft is subject to a "bailment lease," the language of exclusion 8(f) would not only be internally consistent, but the provision would complement rather than conflict with these other provisions in the policy. Under this interpretation, both the Purposes of Use section and the Pilot Warranty Clause would be given full effect rather than gutted by the exclusion.
Finally the evidence showed that it was the custom of the industry to pay claims under All-Risk coverage in many bailment situations. It is well established that evidence of customary practice in the particular insurance industry is probative of the intent of the parties to an insurance contract. Harbor Insurance Co. v. Lewis, 562 F. Supp. 800 (E.D. Pa. 1983). Various underwriters for the plaintiff have admitted that it was their policy to pay hull losses in situations where aircraft were damaged while subject to bailments under the language used in the All-Risks policy.
Even John Tigert, an aviation insurance specialist and plaintiff's principal witness, conceded that a properly qualified pilot who was not employed by Hortman but who was demonstrating an aircraft on Hortman's behalf, would be within the All-Risks coverage if the aircraft was damaged or lost in flight. (N.T. 253-256). Tigert's ultimate conclusion that the loss of the Navajo was not covered because the plane was subject to a bailment loses much of its force in light of this admission, as the parties are in agreement that Vincent was "acting for Hortman" in conducting the flight demonstration. (J.S.F. 22)
The defendants have also introduced copies of aviation policies issued by three other companies containing language similar to that used in the All-Risks policy that help shed light on industry practice. Two of those policies -- those issued by Avemco Insurance Co. and the United States Aircraft Insurance Group -- exclude any loss while the aircraft is subject to a "bailment lease, conditional sale, mortgage, or other encumbrance." The third policy, that issued by the United States Aircraft Insurance Group, excludes coverage while the aircraft is subject to any "lien, conditional sale, mortgage or other encumbrance." While this evidence is less probative of the intent of the parties with regard to the All-Risks policy, it does lend some support to the defendants' claim that it was the intent of the parties to exclude coverage in situations where the Navajo was subject to an encumbrance and that the comma was therefore included by mistake. Although the defendants do not offer a satisfactory explanation for the placement of the comma,
and it is normally true that any ambiguity resulting from the deliberate choice of language will be most strictly construed against the party that drafted the contract, In re F.H. McGraw & Co., 473 F.2d 465 (3d Cir.), cert. denied, 414 U.S. 1022, 38 L. Ed. 2d 312, 94 S. Ct. 443 (1973), application of this rule in this situation would be improper given the strong evidence supporting an interpretation to the contrary. Moreover, although punctuation is often used as an aid in contract interpretation, it should not be permitted to control a meaning which is evident from a consideration of the policy as a whole.
Accordingly, both the language of the exclusion and a consideration of the entire policy convinces me that exclusion 8(f) was intended to exclude coverage in situations where the aircraft was subject to a "bailment lease" or other type of financial encumbrance. As such, the loss of the Navajo was covered by the All-Risks policy and Royal correctly paid the sum of $227,500.00 in settlement of the claim brought against the parties under the terms of the policy.
Because I have determined that the loss of the Navajo was covered by the All-Risks policy, it is unnecessary to determine whether a breach of warranty endorsement was issued by Global in favor of Piper. Nevertheless, even if a BOW endorsement attached to the Navajo by virtue of Global's telex to Piper dated May 6, 1981, payment could not have been made under this endorsement because it specifically excludes coverage if the aircraft has been converted while in the possession of a person other than the named insured, and the facts establish that the aircraft was converted by Vincent.
Under Pennsylvania law, a conversion has been defined as the "deprivation of another's right of property in, or use or possession of, a chattel, or other interferences therewith, without the owner's consent and without lawful justification." Welded Tube Co. of America v. Phoenix Steel Corp., 512 F.2d 342 (3d Cir. 1975); Baker v. Rangos, 229 Pa. Super 333, 324 A.2d 498 (1974). It is undisputed that Vincent was given permission to take the Navajo to Tennessee for a few days in order to conduct a flight demonstration. (J.S.F. 21). It is also undisputed that the Navajo never arrived in Tennessee, but was sighted in Miami, Florida on July 23, 1981, and neither Vincent nor the Navajo has been located since. (J.S.F. 2). Where, as here, it is established that the property in question was delivered for a particular purpose, and for a limited period of time, and it was then used by the holder in an inconsistent manner and was never returned, a conversion is established as a matter of law. See, e.g., Knuth v. Erie-Crawford Dairy Co-Operative, 463 F.2d 470, cert. denied, 410 U.S. 913, 35 L. Ed. 2d 278, 93 S. Ct. 966, on remand, 58 F.R.D. 646, aff'd 487 F.2d 1394 (3d Cir. 1972); Gottesfeld v. Mechanics & Traders Ins. Co., 196 Pa. Super. 109, 173 A.2d 763 (1961).
Royal argues that a finding of conversion is precluded because there is no proof that Vincent intentionally exercised wrongful dominion or control over the Navajo given the pattern of prior dealings between Vincent and Hortman, and there was no evidence of continued usage after the plane was lost. This argument is without merit. The fact that Vincent had rented the aircraft from Hortman on prior occasions and he had always returned the aircraft on these occasions does not establish that Vincent had permission to fly the Navajo to Miami in the situation at hand. It is undisputed that there was no discussion between Mrs. Hortman and Vincent regarding the use of the aircraft for any purpose other than the flight demonstration in Tennessee, and that there was no charge to Vincent or remuneration to Hortman in connection with the flight. (J.S.F. 23, 24).
Moreover, the fact that neither Vincent nor the Navajo has ever been located and that it is uncertain whether the plane was destroyed or Vincent continued to use it after its disappearance does not preclude a finding of conversion, because the conversion occurred simply by virtue of the fact that the aircraft was taken to Miami without the owner's consent and never returned to the owner, thus depriving Hortman of its possessory rights in the plane. Even if Vincent intended to take the plane to Tennessee after he left Miami and it was somehow lost en route, a conversion has been made out because his use of the plane was inconsistent with the purpose for which he was given the aircraft.
In sum, even if a BOW endorsement was found to exist, no payment would have been required under the endorsement because of the conversion by Vincent, and any payment under the provision would be deemed that of a volunteer. See, e.g., Rocco v. Johns-Manville Corp., 754 F.2d 110 (3d Cir. 1985); Michigan Millers Mutual Ins. Co. v. U.S. Fidelity & Guaranty, 306 Pa. Super. 88, 452 A.2d 16 (1982).
Accordingly, I arrive at the following
CONCLUSIONS OF LAW
1. Jurisdiction of this court is invoked pursuant to 28 U.S.C. § 1332 due to the diversity of citizenship of the parties.
2. Pennsylvania law applies to the issues being litigated between plaintiff and defendant in this matter. Melville v. American Home Assurance Co., 584 F.2d 1306 (3d Cir. 1978).
3. In this insurance coverage dispute, the burden is upon the party seeking to avoid coverage to prove that the loss does not come within the policy issued by that insurer; in this instance, plaintiff Royal Insurance has the burden of proving by a preponderance of the evidence that the underlying claim by Hortman did not come within the All-Risks coverage provided under policy AHL-030221. Weissman v. Prashker, 405 Pa. 226, 175 A.2d 63 (1960).
4. As I have determined, for the reasons stated above, that the loss of the Navajo was covered by the policy, plaintiff Royal Insurance has failed to carry its burden of proving that the underlying claim by Hortman Aviation did not come within the All-Risks coverage.
AND NOW, this 27th day of MARCH, 1986, upon consideration of the evidence introduced at trial and based upon the foregoing findings of fact and conclusions of law, it is
that JUDGMENT is hereby entered in favor of the defendants Global Aviation Insurance Managers, Inc., Ideal Mutual Insurance Co., and Corroon and Black Corp. and against the plaintiff Royal Insurance Co. (U.K.) Ltd.