North American Specialty Ins. Co. v. Sutton CA2/7 ( 2014 )

Filed 11/17/14 North American Specialty Ins. Co. v. Sutton CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
NORTH AMERICAN SPECIALTY B249882
INSURANCE COMPANY,
(Los Angeles County
Plaintiff and Respondent, Super. Ct. No. PC052179)
v.
SUSAN SUTTON, et al.,
Defendants and Appellants.
APPEAL from a judgment of the Superior Court of Los Angeles County,
John P. Farrell, Judge. Affirmed.
Katzman, Lampert & McClune, John D. McClune and Patrick J. Gallagher
(pro hac vice); Kreindler & Kreindler, Stuart R. Fraenkel and Nicole C. Andersen for
Defendants and Appellants.
The Morse Law Group and Jonathan S. Morse for Plaintiff and Respondent.
______________________________________
INTRODUCTION
After a small plane crash resulted in the deaths of the two passengers on board, a
dispute arose between the personal representatives of the estates of these decedents (the
decedents’ parents) and the insurance company that had issued the policy in effect at the
time. According to the insurer, the policy provided liability coverage for claims arising
out of the accident—subject to a limit of $100,000 per passenger and an aggregate
liability limit of $1 million. The claimants contended the $100,000 per passenger limit
did not apply to their wrongful death claims which were subject only to the liability limit
of $1 million. After stipulating to certain facts, the insurer and the personal
representatives of the estates filed cross-motions for summary judgment based on their
conflicting constructions of the policy language. The trial court agreed with the insurer’s
interpretation of the policy and entered judgment in its favor. The personal
representatives appeal. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
1. The Aircraft Insurance Policy.
North American Specialty Insurance Company (North American) issued an
aircraft policy to Dale Smet in 2010.
On the Declarations page of the Policy, “Liability Coverages” were set out as
follows: “A) Bodily Injury (Excluding Occupants) and B) Damage to Property and C)
Bodily Injury to Passengers (Excluding Crew). Combined Single Limit $1[ million]
Each Occurrence but C) Limited to $100,000 Each Passenger, Each Occurrence.” The
Declarations page further stated: “The limit of [North American]’s liability against each
such coverage shall be as stated herein, subject to all terms of this Policy having
reference thereto.”
On the first page of the Policy itself, the insuring agreement provided that, subject
to the policy’s limits, North American would pay on behalf of its insured “all sums which
the Insured shall become legally obligated to pay as compensation for damage because of
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A) Bodily Injury sustained by any person, excluding all occupants of the aircraft,
and excluding claims which originate from any injury to occupants of the
aircraft, such as loss of care or services, or negligent infliction of emotional
distress; [(Coverage A)]
B) Damage to property;
C) Bodily Injury sustained by any passenger, excluding the pilot and crew and all
persons working upon the aircraft; [(Coverage C)]
Caused by an occurrence arising out of the ownership, or use of the aircraft set out in the
Policy. . . .” (Policy emphasis omitted.)
2. The Complaint and Cross-Complaint for Declaratory Relief.
In December 2011, North American filed a complaint for declaratory relief,
naming as defendants Susan Sutton (individually and as personal representative of her
daughter Rachel Ann Sutton’s estate), Judy Heikkenen (individually and as personal
representative of her daughter Carla Heikkenen’s estate) and Roger Heikkenen (Carla
Heikkenen’s father).
According to the complaint, on October 21, 2010, Dale Smet piloted a Cirrus
model SR-22 airplane, carrying Rachel Ann Sutton and Carla Heikkenen as passengers,
when the plane crashed in Agua Dulce, resulting in the deaths of all three individuals on
board.1 At the time of this accident, North American insured the aircraft pursuant to the
insurance policy attached as an exhibit to the complaint. Thereafter, Susan Sutton and
Judy Heikkenen, as personal representatives of their respective daughters’ estates, filed
creditors’ claims against the pilot Smet’s estate—each in the amount of $10 million.
North American further alleged it had entered into a settlement agreement with
Susan Sutton, Judy Heikkenen and Roger Heikkenen (without conceding the liability of
North American’s insured), and paid Sutton and Judy Heikkenen, as personal
representatives of their daughters’ estates, $100,000 each, with any further liability under
1 According to the record, Smet (the pilot) was Rachel Sutton’s father.
3
North American’s policy to be determined through the declaratory relief action. The
settlement agreement was also attached as an exhibit to North American’s complaint.
Susan Sutton and Judy Heikkenen, individually and as personal representatives of
their daughters’ estates, filed an answer and cross-complaint. (Unless otherwise specified
hereafter, we refer to Susan Sutton and Judy Heikkenen collectively as “Claimants.”) In
their pleading, Claimants acknowledged it was their contention the $100,000 per
passenger liability limit in the policy was inapplicable to the claims of non-passenger
survivors for wrongful death arising out of the accident, and further asserted the liability
limit under the policy is $1 million per occurrence or, in the alternative, $100,000 for
each non-passenger survivor of the Claimants’ decedents.2
North American filed an answer to the Claimants’ cross-complaint.
3. The Summary Judgment Motions and Stipulated Facts.
Both sides then filed opposing motions for summary judgment (followed by
opposition and reply memoranda). North American argued that the Claimants were
entitled to recover under “Coverage C” for “Passenger Bodily Injury” which was subject
to the $100,000 per passenger limit. The Claimants maintained that they had suffered
their own bodily injuries as “non-passenger survivors.” As a result, the Claimants
argued, they were entitled to recover under “Coverage A” for “Bodily Injury (Excluding
Occupants)”—subject only to the $1 million per occurrence policy limit. As supporting
evidence, both separate statements of material fact cited to portions of North American’s
Policy as well as the following stipulated facts:
“1. On October 21, 2010, and prior thereto, Ovation Management, Inc. was the
registered owner of that Cirrus SR22 aircraft, Federal Aviation Registration Number
N427MC (the ‘Aircraft’).
“2. On or about January 7, 2010[,] North American . . . through its designated
agent, London Aviation Underwriters, Inc. (‘LAU’)[,] issued and delivered to Ovation
2 According to the Claimants’ answer and cross-complaint, Judy Heikkenen and
Roger Heikkenen are divorced, and each of the decedents had additional surviving heirs.
4
Management, Inc. and Dale Smet a Sixty Day Binder of Aircraft Insurance bearing an
assigned policy number BZ100009886-00 (the ‘Binder’). A genuine copy of the Binder
is attached as the last two pages of Exhibit A attached to plaintiff’s complaint in this
action.
“3. On or about January 21, 2011[sic, 2010,] LAU received an Application for
Aviation Policy from Ovation Management, Inc. and an Application for Aviation Policy
from Dale Smet (collectively the ‘Applications’).
“4. On or about February 1, 2010[, North American], through its designated agent
LAU, issued and delivered to Ovation Management, Inc. and Dale Smet a Policy of
Aircraft Insurance, Policy No. BZ100009886-00 (the ‘Policy’) consisting of the
Declarations and those Forms as listed on the ‘Forms Attached’ page following the
Declarations. Exhibit A attached to plaintiff’s complaint in this action, excluding the last
three pages, is a genuine copy of the Policy. No changes or endorsements to the Policy
were issued thereafter, and the Policy as issued remained in effect through and including
the time of the Accident of October 21, 2010 as referenced herein.
“5. On October 21, 2010[,] Dale J. Smet, also known as Dale Smet, met the
Special Conditions set forth in the Policy as a requirement to obtain liability coverage,
including passenger liability, while he was piloting the Aircraft.
“6. On October 21, 2010[,] the Aircraft, while being piloted by Dale Smet,
crashed onto the property of Yves and Marie Richarz in Agua Dulce, California, hereafter
the ‘Accident’.
“7. At the time of the Accident[,] Carla Heikk[e]nen and Rachel Ann Sutton were
passengers aboard the Aircraft.
“8. Dale Smet, Carla Heikk[e]nen and Rachel Ann Sutton received fatal injuries
as a result of the Accident. There were no other occupants aboard the Aircraft at the time
of the Accident.
5
“9. Roger Heikk[e]nen and Judy Heikk[e]nen are the natural parents of Carla
Heikk[e]nen. Judy Heikk[e]nen is the Personal Representative of the Estate of Carla
Heikk[e]nen.
“10. Susan Sutton is the natural mother of Rachel Ann Sutton and the Personal
Representative of the Estate of Rachel Ann Sutton.
“11. Dale Smet was the natural father of Rachel Ann Sutton.
“12. Neither Susan Sutton nor Judy Heikk[e]nen nor Roger Heikk[e]nen were in
the state of California when the Accident occurred.
“13. Susan Sutton, Judy Heikk[e]nen and Roger Heikk[e]nen first learned about
the Accident after it had occurred.
“14. In December 2011[, North American] entered into a written agreement (the
‘Agreement’) with Judy Heikk[e]nen, individually and as Personal Representative of the
Estate of Carla Heikk[e]nen, and Susan Sutton, individually and as Personal
Representative of the Estate of Rachel Ann Sutton. A genuine copy of the Agreement is
attached to the Complaint in this action as Exhibit B.
“15. Pursuant to the terms of the Agreement (Exhibit B)[, North American] has
paid $100,000 to Judy Heikk[e]nen as Personal Representative of the Estate of Carla
Heikkenen and $100,000 to Susan Sutton as Personal Representative of the Estate of
Rachel Ann Sutton.
“16. An actual controversy exists between [North American] on the one hand and
Susan Sutton, Judy Heikk[e]nen and Roger Heikk[e]nen on the other hand concerning
their rights and responsibilities under the Policy. Briefly summarized, by way of
description and without prejudice to other legal arguments, [North American] contends
that the Policy provides liability coverage for the claims arising out of the Accident
subject to a liability limit of [$1 million] per occurrence with a sub[-]limit of [$100,000]
per passenger; . . . Judy Heikk[e]nen, Roger Heikk[e]nen and Susan Sutton dispute this as
to the passenger sub[-]limit, and contend that the Policy’s each passenger sub[-]limit does
not apply to their claims arising from wrongful death, and that there is coverage in the
6
amount of [$1 million] per occurrence or, in the alternative, [$100,000] per occurrence
for each non-passenger survivor.”3
4. The Trial Court’s Decision.
After considering the parties’ papers and oral argument, the trial court (John P.
Farrell) granted North American’s motion for summary judgment, denied the Claimants’
summary judgment motion and entered declaratory judgment, “binding on all parties
herein, as well as their successors, heirs and assigns, and establishing the following:
“The . . . Policy issued by North American . . . which is at issue in this action,
policy number BZ10009886-00 (the ‘Policy’) provides liability coverage for the aircraft
accident of October 21, 2010 (the ‘Accident’) subject to a liability limit of $1[ million]
each occurrence and a sub[-]limit of $100,000 each passenger each occurrence.
“The liability sub[-]limit of $100,000 each passenger each occurrence set forth in
the Policy limits the amounts payable by [North American] for the death of Carla
Heikkenen to $100,000, regardless of the identity or number of claimants. That amount
has been paid to Judy Heikkenen, as Personal Representative of the Estate of Carla
Heikkenen, and [North American] has no obligation to make any further payments to any
person or entity on account of the death of Carla Heikkenen.
“The liability sub[-]limit of $100,000 each passenger each occurrence set forth in
the Policy limits the amounts payable by [North American] for the death of Rachel Sutton
to $100,000, regardless of the identity or number of claimants. That amount has been
paid to Susan Sutton, as Personal Representative of the Estate of Rachel Sutton, and
[North American] has no obligation to make any further payments to any person or entity
on account of the death of Rachel Sutton. . . .”
The Claimants appeal.
3 In addition (without citing any supporting evidence), the Claimants asserted as
undisputed material fact that Rachel Ann Sutton and Carla Heikkenen were residents of
and had domiciles in Michigan. (The Claimants are represented by out-of-state counsel
located in Michigan as well as local (Los Angeles) counsel.)
7
DISCUSSION
1. Standard of Review.
A motion for summary judgment is properly granted only when “all the papers
submitted show that there is no triable issue as to any material fact and that the moving
party is entitled to judgment as a matter of law.” (Code Civ. Proc., § 437c, subd. (c).)
We review the trial court’s grant of summary judgment de novo. (Monticello Ins. Co. v.
Essex Ins. Co. (2008) 162 Cal.App.4th 1376, 1385.) The interpretation of an insurance
policy, like other contracts, is a question of law to be determined by the court. (Haynes v.
Farmers Ins. Exchange (2004) 32 Cal.4th 1198, 1204 (Haynes); Waller v. Truck Ins.
Exch. Ins. (1995) 11 Cal.4th 1, 18 (Waller).)
2. The Trial Court Properly Granted North American’s Motion for Summary
Judgment as the Claimants’ Recovery Is Confined to Coverage C and Subject to
its $100,000 per Passenger Limit.
The Claimants argue the trial court erred in granting North American’s summary
judgment motion because the court was presented with conflicting interpretations of the
Policy but failed to resolve the resulting ambiguity against the insurer such that they were
entitled to the full $1 million policy limit. In the Claimants’ view, the Policy was
ambiguous because North American never defined the term “bodily injury”—the “most
critical term in its liability coverage”— in the Policy’s definitions section, but in the
Policy’s exclusionary language, “identified only certain types of derivative mental
anguish damages excluded as bodily injury, meaning other forms of mental anguish
damages are not excluded.[4] The term, ‘bodily injury’ is easily read or defined to
4 In the Claimants’ view, because the policy language of Coverage A “exclud[es]
only bodily injury ‘claims which originate from any injury to occupants of the aircraft,
such as loss of care or services or negligent infliction of emotional distress[, t]his
language clarifies that mental anguish is considered a bodily injury.” (Original
emphasis.) Citing Employers Cas. Ins. Co. v. Foust (1972) 29 Cal.App.3d 382, 387
(Foust), the Claimants urge “That the policy only excludes two such claims (‘loss of care
or services’ and ‘negligent infliction of emotional distress’) should not foreclose other
8
include mental anguish other than those specifically listed. At the very worst, there is an
ambiguity.” We disagree.
A. “Clear and Explicit” Policy Language Governs.
“The fundamental rules of contract interpretation are based on the premise that the
interpretation of a contract must give effect to the ‘mutual intention’ of the parties.
‘Under statutory rules of contract interpretation, the mutual intention of the parties at the
time the contract is formed governs interpretation. (Civ. Code, § 1636.) Such intent is to
be inferred, if possible, solely from the written provisions of the contract. (Id., § 1639.)
The “clear and explicit” meaning of these provisions, interpreted in their “ordinary and
popular sense,” unless “used by the parties in a technical sense or a special meaning is
given to them by usage” (id., § 1644), controls judicial interpretation. (Id., § 1638.)’”
(Waller, supra, 11 Cal.4th at p. 18; Powerine Oil Co., Inc. v. Superior Court (2005) 37
Cal.4th 377, 390, citations and internal quotations omitted [“If contractual language is
clear and explicit, it governs”].)
“A policy provision will be considered ambiguous when it is capable of two or
more constructions, both of which are reasonable. [Citation.] But language in a contract
must be interpreted as a whole, and in the circumstances of the case, and cannot be found
to be ambiguous in the abstract. [Citation.] Courts will not strain to create an ambiguity
where none exists.” (Waller, supra, 11 Cal.4th at pp. 18-19.) “‘An insurance company
has the right to limit coverage of a policy issued by it and when it had done so, the plain
language of the limitation must be respected.’” (National Insurance Underwriters v.
Carter (1976) 17 Cal.3d 380, 386, citation omitted.)
B. Coverage A Does Not Apply to these Claims.
Looking to the plain language of the Policy itself, Coverage A (subject only to the
$1 million Policy limit) applies to “all sums which the Insured shall become legally
obligated to pay as compensation for damage because of [¶] Bodily Injury sustained by
claims.” (Emphasis omitted.) As we explain in the text, the Claimants have simply
misread Foust, and it contradicts rather than supports their argument.
9
any person, excluding all occupants of the aircraft, and excluding claims which originate
from any injury to occupants of the aircraft, such as loss of care or services, or negligent
infliction of emotional distress . . . [c]aused by an occurrence arising out of the
ownership, or use of the aircraft set out in the Policy. . . .” (Italics added.) Coverage C
(subject to the $100,000 per passenger limit) applies to “all sums which the Insured shall
become legally obligated to pay as compensation for damage because of . . . Bodily
Injury sustained by any passenger, excluding the pilot and crew and all persons working
upon the aircraft[ c]aused by an occurrence arising out of the ownership, or use of the
aircraft set out in the Policy. . . .” (Italics added.)
Given this policy language, the question of whether the Claimants were entitled to
the full $1 million policy limit as they contend turns on whether Coverage A (subject
only to the $1 million limit) or Coverage C (subject to the $100,000 per passenger sub-
limit) applies, rather than any possible ambiguity in the meaning of the term “bodily
injury.” As our Supreme Court stated in Bay Cities Paving & Grading v. Lawyers’
Mutual Ins. Co. (1993) 5 Cal.4th 854 (Bay Cities), “Of course, in an appropriate case, the
absence of a policy definition, though perhaps not dispositive, might weigh, even
strongly, in favor of finding an ambiguity, for example, when the term in question has no
generally accepted meaning outside the context of the policy itself. The absence from a
policy of a definition of a word or phrase does not by itself, however, necessarily create
an ambiguity. [¶] The proper and settled approach is more refined.” (Id. at p. 867,
original italics; ibid. [“There cannot be an ambiguity per se, i.e. an ambiguity unrelated to
an application”].)
In this policy, the obvious distinction between Coverage A and Coverage C is not
whether bodily injury is covered; both categories of coverage refer to bodily injury.
Instead, the distinction set out by the Policy language itself is whether bodily injury is
sustained by “any passenger” (Coverage C) or “any person, excluding all occupants of
the aircraft” (and excluding claims which originate from any injury to occupants of the
10
aircraft) (Coverage A).5 In other words, the Policy provides coverage for “all sums
which the Insured shall become legally obligated to pay as compensation for damage
because of . . . Bodily Injury . . . [ c]aused by an occurrence arising out of the ownership,
or use of the aircraft set out in the Policy. . .” for both categories of persons but, for
purposes of establishing the applicable limit of coverage, the Policy distinguishes
between bodily injury sustained by anyone inside (or entering or exiting) the aircraft and
such injury sustained by anyone outside the aircraft. Stated another way, subject only to
the $1 million policy limit, Coverage A provides bodily injury coverage for “any person”
but excludes from that coverage “all occupants of the aircraft, and exclud[es] claims
which originate from any injury to occupants of the aircraft”; then, subject to a $100,000
per passenger sub-limit, Coverage C provides limited coverage for some but not all of the
occupants excluded under Coverage A (passengers, but not the pilot or crew).
According to the plain policy language, not only is “compensation for damage
because of . . . Bodily Injury sustained by . . . all occupants of the aircraft” expressly
excluded from Coverage A, but so too are all “claims which originate from any injury to
occupants of the aircraft, such as loss of care or services, or negligent infliction of
emotional distress. . . .” (Italics added.) In arguing that “[i]t is clear and indisputable that
the non-passenger survivors [Claimants] suffered bodily injuries” as “non-passenger
survivors” they specifically acknowledge they suffered damages “as a result of the
death[s] of their decedents.” (Italics added.) Consequently, in interpreting this policy
provision, and giving its words their ordinary meaning (Haynes, supra, 32 Cal.4th at p.
1204), we can only conclude that, regardless of whether the mental anguish the Claimants
suffered is properly characterized as “bodily injury,” because the Claimants’
“claims . . . originate from . . . injury to occupants of the aircraft,” they are necessarily
excluded from Coverage A. (Powerine, supra, 37 Cal.4th at pp. 390-391 [neither
5 The Policy defines “passenger” to mean “any person in or entering the aircraft for
the purpose of riding therein or alighting therefrom following a flight or attempted flight
therein.” (Italics added.)
11
disagreement concerning the meaning of a phrase nor the fact a word or phrase isolated
from its context is susceptible of more than one meaning makes a term in an insurance
policy ambiguous]; Bay Cities, supra, 5 Cal.4th at p. 868, original italics [“The proper
question is whether the word is ambiguous in the context of this policy and the
circumstances of this case”].)
Citing Employers Cas. Ins. Co. v. Foust (1972) 29 Cal.App.3d 382, 387 (Foust),
the Claimants argue the Policy “states only that claims ‘such as’ loss of care or services
and negligent infliction of emotional distress that derive from an occupant are excluded.
That the policy only excludes two such claims (‘loss of care or services and negligent
infliction of emotional distress’) should not foreclose other claims.” This is so, they say,
because “Under well recognized rules of construction, the inclusion of some items but not
all is not the exclusion of those not mentioned.” (Ibid.) The Claimants misconstrue the
application of this principle to the language of the Policy presented in this case as it
defeats, rather than supports, their argument.
In Foust, supra, 29 Cal.App.3d 382, the court construed the following policy
language: “‘The limit of bodily injury liability stated in the declarations [$25,000/$
50,000] as applicable to “each person” is the limit of the company’s liability for all
damages, including damages for care and loss of services, arising out of bodily injury
sustained by one person as the result of any one occurrence.” (Id. at p. 387, italics
added.) In this context, the Foust court observed: “The quoted language permits and
includes within damages resulting from bodily injury those damages for care and loss of
services. That language . . . shows that any other item of damages which might result
from bodily injury is not excluded merely because of express mention of two such items.
Under well recognized rules of construction, the inclusion of some items but not all is not
the exclusion of those not mentioned.”6 (Ibid.)
6 Also relevant to this case given the Claimants’ reliance on Foust as support for the
inclusion of emotional distress within the meaning of “bodily injury,” the Foust court
stated: “[T]he language [also] demonstrates that the policy includes within the scope of
12
In this case, in the context of policy language “excluding claims which originate
from any injury to occupants of the aircraft, such as loss of care or services, or negligent
infliction of emotional distress,” the “inclusion of some items but not all” (Foust, supra,
29 Cal.App.3d at p. 387) as examples of “claims which originate from any injury to
occupants of the aircraft” is “not the exclusion of those not mentioned” (ibid.) from the
excluded claims—meaning other claims not specifically mentioned are still included
within the scope of excluded claims as long as they are “claims which originate from any
injury to occupants of the aircraft.”7 (Italics added.) The words “such as” simply
provide notice of a non-exhaustive list of examples. (Ibid.; and see United Servs. Auto
Ass’n v. Warner (1976) 64 Cal.App.3d 957, 962, italics added [construing the words “all
damages, including damages for care and loss of services, arising out of bodily injury
sustained by one person” “it is apparent that the phrase is inclusive rather than
exclusive”]; Bay Cities, supra, 5 Cal.4th at p. 867 [“reliance on common understanding
of language is bedrock”; “[e]qually important are the requirements of reasonableness and
context”].) “‘[W]here the policy is clear and unequivocal, the only thing the insured may
“reasonably expect’”’ is the coverage afforded by the plain language of the mutually
agreed-upon terms.’ (Croskey et al., Cal. Practice Guide: Insurance Litigation (The
Rutter Group 2009) ¶ 4:12, p. 4-3 (rev. # 1, 2009); see VTN Consolidated, Inc. v.
bodily injury those damages for care and loss of services, thus showing the company has
adopted an expanded definition of bodily injury within the meaning of their policy. Such
a definition of bodily injury may fairly be interpreted to include accompanying emotional
distress.” (Italics added.)
7 Coverage A applies to “Bodily Injury sustained by any person, excluding all
occupants of the aircraft, and excluding claims which originate from any injury to
occupants of the aircraft, such as loss of care or services or negligent infliction of
emotional distress.” To paraphrase Foust, supra, 29 Cal.App.3d 382, “The quoted
language permits and includes within [excluded claims] those [claims which originate
from any injury to occupants of the aircraft] for [loss of care or services and negligent
infliction of emotional distress]. That language . . . shows that any other [claim] which
might [originate from any injury to an occupant of the aircraft] is not excluded merely
because of express mention of two such [claims].” (Id. at p. 387.)
13
Northbrook Ins. Co. (1979) 92 Cal.App.3d 888, 892 [155 Cal.Rptr. 172] [insurance
policy ‘must be construed from the language used and . . . where . . . its terms are plain
and unambiguous, the courts have a duty to enforce the contract as agreed upon by the
parties’].)” (Carolina Casualty Ins. Co. v. L.M. Ross Law Group, LLP (2010) 184
Cal.App.4th 196, 207 (Carolina Casualty).)
It is true, as Claimants argue, the Policy could have been written to state Coverage
A “exclud[es] claims which originate from any injury to occupants of the aircraft,
including but not limited to [instead of “such as”] loss of care or services, or negligent
infliction of emotional distress. . . .” But the fact that it was not written in precisely this
manner (or that the term “bodily injury” is not defined) does not make the provision
(Coverage A) ambiguous when read in the context of the Policy as a whole. Nothing
justifies interpreting the provision in a manner inconsistent with the plain policy
language. (Carolina Casualty, supra, 184 Cal.App.4th at p. 207.) Reading the Policy as
a whole, we have no doubt an insured would reasonably expect Coverage A to be
inapplicable under the circumstances presented here for the simple and straightforward
reason that “claims which originate from any injury to occupants of the aircraft”—as the
claims at issue here concededly do—are expressly excluded from Coverage A. We
agree with the trial court that the Policy language is clear and unequivocal. (Ibid.)
For this reason, we need not address the (primarily out-of-state) authorities the
Claimants cite to support their argument the term “bodily injury” could be construed to
include the mental anguish they suffered. (But see United Servs. Auto. Ass’n v. Lilly
(1990) 217 Cal.App.3d 1396, 1400-1401 (Lilly), construing an automobile liability policy
holder, “a policy holder would not ordinarily and reasonably understand the term ‘bodily
injury’ to include a loss of household services or earning capacity or the loss of the
‘society, comfort, care and protection’ of the deceased. For that reason we rule out any
construction of the policy which reads ‘bodily injury’ as including an injury for which the
heirs might recover in a wrongful death action”].) Even assuming bodily injury could be
14
understood to mean the mental anguish the Claimants suffered, Coverage A is still
inapplicable.
We note, however, that an additional “problem with this argument is that it
contradicts the [Claimants’] theory of coverage.” (Bank of the West, supra, 2 Cal.4th at
p. 1271.) According to the Claimants, “wrongful death law” supports their claim they are
entitled to the full $1 million policy limit because they suffered mental anguish which
should be considered “bodily injury.” Not only does the Claimants’ construction ignore
the fact the Coverage A policy language “exclude[es] claims which originate from any
injury to occupants of the aircraft”—meaning wrongful death claims are necessarily
excluded, but to the extent the Claimants strain to include “other forms of mental
anguish” within the meaning of “bodily injury” for the purpose of the $1 million policy
limit, the Claimants’ effort is further unavailing as “recovery is not available in wrongful
death actions for the grief or sorrow attendant upon the death of a loved one.” (Corder v.
Corder (2007) 41 Cal.4th 644, 661-666; Boeken v. Philip Morris USA, Inc. (2010) 48
Cal.4th 788, citing Krouse v. Graham (1977) 19 Cal.3d 59, 72 [“California cases have
uniformly held that damages for mental and emotional distress, including grief and
sorrow, are not recoverable in a wrongful death action”]; Mendoza v. City of West Covina
(2012) 206 Cal.App.4th 702, 720 [recovery for emotional distress—grief and sorrow—is
not allowed in wrongful death action; damages are measured by the financial benefits the
heirs were receiving at the time of death, those reasonably expected in the future and the
monetary equivalent of loss of comfort, society and protection].)
C. Neither the Application Nor the Binder Created an Ambiguity.
Citing the Application Smet completed and the initial 60-day binder, the
Claimants also argue that, at the time of contracting, a layperson is led to believe that
coverage in the amount of $1 million is provided for “bodily injury, excluding
occupants,” and the “exclusionary liability language . . . was inexistent.” Citing E.M.M.I.
Inc. v. Zurich American Ins. Co. (2004) 32 Cal.4th 465 (E.M.M.I.), the Claimants argue
15
the insurer thus led the insured to reasonably expect full coverage but then later excluded
it without attracting Smet’s attention to “the subsequently added exclusionary language.”
On the Application, beneath the heading “Liability Coverages (Combined Single
Limit)” the following text appears: “I. A) Bodily injury excluding occupants, B)
Property Damage, including C) Passenger Bodily Injury excluding Crew[.]” In a
second column across from this text, beneath the heading “Limits of Liability” the blank
lines are typed in as follows: “$ 1,000,000 Each Occurrence limited to $ 100,000
each Passenger.”
A court “faced with an argument for coverage based on assertedly ambiguous
policy language must first attempt to determine whether coverage is consistent with the
insured’s objectively reasonable expectations. In so doing, the court must interpret the
language in context, with regard to its intended function in the policy.” (Bank of the
West, supra, 2 Cal.4th at p. 1265; Atlas Assurance Co. v. McCombs Corp. (1983) 146
Cal.App.3d 135, 144 [“‘Under the objective test of contract formation, a “meeting of the
minds” is unnecessary. A party is bound, even if he misunderstood the terms of a
contract and actually had a different, undisclosed intention.’ [Citation.]”].)
According to the Claimants, at the time he submitted his Application, the insured
would have thought he was obtaining coverage limited to the amount of $100,000 per
passenger under Coverage C, while at the same time, believing, in the event his
passenger’s bodily injuries resulted in death, the policy would provide coverage up to $1
million for all of the passenger’s heirs in pursuing wrongful death claim. In this case, we
find no ambiguity created by the Application because the construction the Claimants urge
is simply not reasonable. (Bay Cities, supra, 5 Cal.4th at p. 868.) If anything, the format
(including blank spaces) and plain language of the Application only serve to emphasize
that a layperson viewing and submitting this Application for Aircraft Liability Insurance
would understand he was applying for liability coverage for bodily injuries caused to
anyone outside the aircraft he piloted, and that he had the option to either “ in clud[e]” or
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“ ex clud[e]” coverage for passengers under Coverage C, but in the event he sought
coverage for passengers, that coverage was limited to $100,000 per passenger.
On the 60-day Binder, “Liability Coverages” were set out in a manner consistent
with the Application Smet completed as follows: “A) Bodily Injury (Excluding
Occupants) and B) Damage to Property and C) Bodily Injury to Passengers (Excluding
Crew). Combined Single Limit $1[ million] Each Occurrence but C) Limited to
$100,000 Each Passenger, Each Occurrence.” Identical language appeared on the
Declarations page of the Policy itself
The Declarations page further stated: “The limit of [North American]’s liability
against each such coverage shall be as stated herein, subject to all terms of this Policy
having reference thereto.”
On the first page of the Policy, the insuring agreement expressly provided that,
subject to the policy’s limits, North American would pay on behalf of its insured “all
sums which the Insured shall become legally obligated to pay as compensation for
damage because of
A) Bodily Injury sustained by any person, excluding all occupants of the aircraft,
and excluding claims which originate from any injury to occupants of the
aircraft, such as loss of care or services, or negligent infliction of emotional
distress; [(Coverage A)]
B) Damage to property;
C) Bodily Injury sustained by any passenger, excluding the pilot and crew and all
persons working upon the aircraft; [(Coverage C)]
Caused by an occurrence arising out of the ownership, or use of the aircraft set out in the
Policy. . . .” (Policy emphasis omitted.) In that same introductory paragraph, North
American expressly stated it had entered into the insurance agreement in reliance upon
the statements made by the Insured in “the Application, a copy of which is attached to
and forms a part of this Policy (see Footnote, page 5)[.]” The referenced footnote reads
as follows:
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“FOOTNOTE
“The Insured, having made to [North American] written application, a copy of which is
attached hereto, which together with particulars and statements contained therein, it is
hereby agreed is the basis of this contract and is to be considered as incorporated herein.
However, it should be noted that in the event of conflict between anything appearing in
the Application and the terms, conditions, exclusions, and limits(s) of indemnity
expressed in the Policy, THE TERMS, CONDITIONS, EXCLUSIONS AND LIMITS
OF INDEMNITY EXPRESSED IN THE POLICY SHALL APPLY.”8 (Bold type
omitted; remaining emphasis in original.)
“‘“[A]n insurer cannot escape its basic duty to insure by means of an exclusionary
clause that is unclear. As we have declared time and again ‘any exception to the
performance of the basic underlying obligation must be so stated as clearly to apprise the
insured of its effect.’ [Citation.] Thus, ‘the burden rests upon the insurer to phrase
exceptions and exclusions in clear and unmistakable language.’ [Citation.] The
exclusionary clause ‘must be conspicuous, plain and clear.’” [Citation.] This rule applies
with particular force when the coverage portion of the insurance policy would lead an
insured to reasonably expect coverage for the claim purportedly excluded.’ [Citation.]”
(E.M.M.I. Inc. v. Zurich American Ins. Co., supra, 32 Cal.4th at p. 471.)
For the reasons we have explained, we cannot agree with the Claimants that the
Application would lead an insured to reasonably expect coverage for the wrongful death
claims of passengers’ heirs given the plain language to the contrary. (E.M.M.I. Inc. v.
Zurich American Ins. Co., supra, 32 Cal.4th at p. 471.) Moreover, the purported
exclusion is contained in the insuring clause of the policy, on the first page of the policy,
8 On the Application, beneath the heading “Liability Coverages (Combined Single
Limit)” the following text appears: “I. A) Bodily injury excluding occupants, B)
Property Damage, including C) Passenger Bodily Injury excluding Crew[.]” In a
second column across from this text, beneath the heading “Limits of Liability” the blank
lines are typed in as follows: “$ 1,000,000 Each Occurrence limited to $ 100,000
each Passenger.”
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and the policy further makes clear that in the event of any perceived conflict between the
Application and the Policy itself, the Policy controls. (Haynes, supra, 32 Cal.4th at p.
1204 [“[A]ny such limitation must be placed and printed so that it will attract the reader’s
attention. Such a provision also must be stated precisely and understandably, in words
that are part of the working vocabulary of the average layperson”]; Atlas Assurance Co.
v. McCombs Corp. (1983) 146 Cal.App.3d 135, 144 [“An ambiguity cannot be based on a
strained and grammatically incorrect reading of the policy’s terms. [Citation.] The
alternative interpretation must be one to which the policy is reasonably susceptible”].)
Consequently, because the Claimants’ recovery is limited to Coverage C, and
recovery under Coverage C is limited to $100,000 per passenger, the trial court’s
resolution of the opposing summary judgment motions was correct. (Sarchett v. Blue
Shield of Cal. (1987) 43 Cal.3d 1, 14-15 [“When a court is reviewing claims under an
insurance policy, it must hold the insured bound by clear and conspicuous provisions in
the policy even if evidence suggests that the insured did not read or understand them”].)
To paraphrase Lilly, supra, 217 Cal.App.3d 1396, 1402, original italics: “The
[Claimants] may recover under the policy only insofar as it covers their injuries. But
their injuries are included within the policy coverage only because they are founded upon
the legal responsibility of [North American’s] insured for the wrongful death[s] of their
relative[s] resulting from the accident.” Because North American contracted to pay on
Smet’s behalf “all sums which [he, as the insured] shall become legally obligated to pay
as compensation for damage because of . . . Bodily Injury . . . Caused by . . . use of the
aircraft” he piloted, and the “[b]odily [i]njury” caused by Smet’s use of the aircraft was
the death of each Claimant’s decedent daughter—each of whom met the policy’s
definition of passenger, Coverage C and its corresponding “per passenger” limitation of
$100,000 necessarily applies--$100,000 on behalf of passenger Rachel Ann Sutton and
$100,000 on behalf of passenger Carla Heikkenen.
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DISPOSITION
The judgment is affirmed. North American is to recover its costs on appeal.
WOODS, J.
We concur:
PERLUSS, P. J. ZELON, J.
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