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ROYAL INS. CO. v. IDEAL MUT. INS. CO.

March 31, 1986

ROYAL INSURANCE CO. (U.K.) LTD.,
v.
Ideal Mutual Insurance Company and GLOBAL AVIATION Insurance Managers, INC. and Corroon and Black Corporation



The opinion of the court was delivered by: MCGLYNN

 McGLYNN, J.

 This action arises out of a dispute between a reinsurer and a primary insurer over the terms of an aviation insurance policy. In March of 1981, Hortman Aviation sought to obtain coverage for a Piper Navajo aircraft it had recently purchased. Hortman contacted Global Aviation Insurance Managers, Inc., which was authorized to place aviation insurance on aircraft using a policy issued by Ideal Mutual Insurance Co. Because the value of the Navajo exceeded the treaty limits under which Global was authorized to place coverage, Global arranged a facultative placement of the coverage with Royal in the London insurance market. Thereafter, Global issued an All-Risks policy for the Navajo that was 100% reinsured by Royal in the London market.

 Hortman subsequently reported the loss to Global. In the fall of 1981, Royal initiated an action for a declaratory judgment to determine the rights and liabilities of the parties under the All-Risks policy for the Navajo. Before judgment was entered, the parties agreed to settle the claim for the sum of $227,500.00. Royal paid the claim in October of 1983.

 Royal now maintains that the loss of the Navajo was not covered by the All-Risks policy that it had reinsured and seeks reimbursement of the $227,500.00 from Global and Ideal. The matter was tried to the court sitting without a jury. After consideration of the evidence and the briefs and arguments of counsel, the court makes the following

 FINDINGS OF FACT

 1. Royal Insurance Co. (U.K.) Ltd. ("Royal") is a company engaged in the business of underwriting insurance policies with its registered office located at New Hall Place, Liverpool, England, and is a citizen of England.

 2. Defendant Ideal Mutual Insurance Company ("Ideal") is a New York corporation with its principal place of business at 260 Madison Avenue, New York, New York.

 3. Global Aviation Insurance Managers, Inc. ("Global") is a corporation organized and existing under the laws of the State of Texas with its principal place of business at 3000 Promenade Center, Richardson, Texas, and is a wholly owned subsidiary of the Corroon and Black Corporation with its principal place of business at Wall Street Plaza, New York, New York.

 4. In March of 1981, Hortman Aviation, Inc. ("Hortman"), was an aviation fixed base operator which owned and operated aircraft, including the rental of aircraft to others, with its principal place of operations based at the Three M Airport, Bristol, Pennsylvania.

 5. In March of 1981, Hortman owned and/or operated a fleet of approximately 18 aircraft, which included a 1980 Piper Navajo Aircraft ("the Navajo"), model PA-31-350, FAA registration #N3546U.

 6. In March of 1981, Hortman sought to obtain hull and liability insurance for all 18 of its aircraft, which insurance was placed with Global by Mr. Charles Billella, Hortman's insurance broker, through the services of Mr. Russ Levin, a cooperating broker.

 7. Global is not an insurance company, but was authorized pursuant to a treaty with certain aviation underwriters to place aviation insurance on aircraft using a policy issued by Ideal, subject to certain limitations on coverage.

 8. In 1981, the Treaty Insurance limits that existed between the aviation underwriters and Global included a maximum hull insurance on any one aircraft of $250,000.

 9. As of March, 1981, the declared value of the Piper Navajo aircraft owned by Hortman was $297,000, which was in excess of the Treaty's hull limit.

 10. In order for Global to provide hull insurance to Hortman on the Navajo, it was necessary for Global to arrange a facultative (special) placement of that coverage with Royal.

 11. When Mr. Levin, the intermediate broker, contacted Global, he requested a commercial type aviation All-Risks policy for the Hortman fleet with a blanket breach of warranty endorsement.

 12. Mr. Levin understood this request for a blanket breach of warranty endorsement to apply to all eighteen (18) aircraft operated on behalf of Hortman; however, there was no separate discussion regarding a specific breach of warranty endorsement for the Piper Navajo.

 13. Thereafter, Global issued two insurance policies to Hortman which bore policy numbers AHL-030738 and AHL-030221.

 15. Policy AHL-030221 provided facultative insurance coverage, so that the policy was 100% reinsured in the London insurance market, and provided hull insurance only for the Piper Navajo aircraft.

 16. Policy AHL-030221 did not include a breach of warranty endorsement ("BOW").

 17. Global did not request a BOW endorsement on the Navajo as part of the facultative ...


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