NATIONAL INSURANCE UNDERWRITERS, Plaintiff and Respondent, v. Maurice CARTER et al., Defendants and Appellants.
On July 12, 1969, a private airplane crashed at the end of the runway at the Compton airport. Two of the plane's occupants, Ann and Robert Schroeder, were killed, one Edward Schroeder another occupant was injured and a home owned by Maurice and Della Carter was damaged.
At the time of the accident, the plane was owned by Francis and Bernice Thelen, neither of whom were aboard. The pilot was one Everett Pavitt, who admittedly was using the aircraft with permission of the Thelens.
Two actions, one for wrongful death and injury and one for property damage were instituted against the Thelens and Pavitt by the parents of the Schroeder victims, the Carters and their subrogating insurers.
National Insurance Underwriters Corporation (National) who had issued a policy of liability under the policy and contended that it was not obligated to provide a defense in the action nor to pay any judgments that might be awarded.
National instituted the present action in declaratory relief to determine its liability, if any, under the policy and named as defendants here the various plaintiffs in the underlying tort cases. The trial court granted a motion for summary judgment in favor of National holding that National was not obligated under its policy of insurance to pay any judgments or provide a defense in the actions based on this accident. This appeal followed.
The policy in question contains exclusionary clauses which if given full effect would eliminate any coverage under the circumstances of the accident. The first exclusion is as follows:
‘Pilots: This policy applies when the aircraft is in flight: (a) only while being operated by the pilot(s) named or designated below, (Pilots) F. H.Thelen, Bernice F. Thelen . . .’ (Emphasis added.)
In another section of the policy it is declared that the insurer is obligated ‘To pay on behalf of the insured . . . damages because of . . . bodily injury . . . including death . . . sustained by any person, excluding any passenger.’ (Emphasis added.)
Passenger is later defined as ‘. . . any person in, on or entering the aircraft for the purpose of riding or flying therein, or alighting therefrom following a ride, flight or attempted flight therein.’
Appellants contend that the policy must be interpreted to cover the accident in question for the reasons that (1) an insuring clause in the policy specifically provides for coverage in the case of ‘permissive use’ and that this conflict between the insuring clause and the exclusion clause must be resolved against the insurer, (2) the combined effect of the rule of Wildman v. Government Employees' Ins. Co., 48 Cal.2d 31, 307 P.2d 359; the Uniform Aircraft Financial Responsibility Act (The Act); Pub.Util.Code §§ 24230–24410, and a clause in the policy which refers to that act, is to render the exclusion clauses inoperable, and (3) that if the act permits the excluding of coverage for ‘guests' then under the doctrine of Brown v. Merlo, 8 Cal.3d 855, 106 Cal.Rptr. 388, 506 P.2d 212, such provision is unconstitutional.
Taking appellants' contentions in order we first conclude that the policy itself is not susceptible of the interpretation that coverage is extended to a situation where the plane is piloted by other than those specifically named in the policy whether with or without the permission of the named isured.
True, the policy recites in its opening paragraphs that as ‘used in Part I’ of the policy the ‘unqualified’ word ‘insured’ includes ‘any person while using or riding in the aircraft’ with permission of the named insured. But that general statement of definition which would cover both pilots and passengers must yield to the specific and unambiguous limitation to be found in a later part of the policy which specifically limits coverage to flights wherein the named insured is piloting the aircraft. (Burr v. Western States Life Ins. Co., 211 Cal. 568, 296 P. 273; Continental Cas. Co. v. Phoenix Constr. Co., 46 Cal.2d 423, 296 P.2d 801.)
The exclusion clause removes from the coverage, activities which might otherwise come within the scope of the insured activity, (2 Richards on Insurance, § 208, pp. 713–714) and the insured must reasonably have expected that the clear exclusion would control. It appears quite proper and logical that an insurer, given the high risks involved in airplane flight and the high degree of skill required in piloting an aircraft, would seek to limit the persons whose skill it undertook to insure. In aircraft insurance it is obvious that premium rates would vary more markedly in relation to the number of possible pilots of the aircraft, than would be the case in automobile insurance as regards other drivers. Here it is patent that the Thelens bought and paid for a limited form of coverage with no reasonable expectation that the coverage would extend to the situation of their permitting a variety of other persons to pilot their aircraft.
In Wildman, supra, the California Supreme Court held that an exclusion of coverage for permissive use by other than the named insured in a policy of automobile liability insurance was invalid as being against public policy. It was there held that provisions of the Financial Responsibility Law as contained in the vehicle code were a part of every policy of automobile insurance.
Vehicle Code section 415 (now Vehicle Code section 16450) at the time of Wildman specifically required that any policy of automobile liability insurance contain coverage for permissive use of the automobile by others. This section coupled with former Vehicle Code section 402 (now section 17150) fixing liability on the owner of an automobile for the negligence of a permitted user formed the basis of the public policy which the Wildman court declared to be violated by the policy exclusion. Coverage for ‘permissive user’ is now required to be included in any automobile liability insurance policy by virtue of Insurance Code section 11580.1, enacted in 1970.
We now turn to the provision of the Public Utilities Code to determine whether a similar legislative intent or public policy can be discerned as regards aircraft liability insurance.
Public Utilities Code section 21404 provides that an owner of an aircraft is liable for the negligent operation of an aircraft by someone using or operating it with permission of the owner. That liability is limited by Public Utilities Code section 21404.1 to $15,000 for death of one person, $30,000 for one accident, and $5,000 for property damage in cases not involving the relationship of principal and agent or master and servant. The liability of the operator or pilot is covered by ordinary tort principles and the liability is unlimited.
The Aircraft Financial Responsibility Act provides for the reporting of accidents followed by a determination by the Department of Aeronautics of the amount of security needed to satisfy any judgment that may be recovered. (Pub.Util.Code §§ 24300–24302, 24325.) Failure to comply with the requirements of giving notice and posting security constitutes a misdemeanor. (Pub.Util.Code §§ 24326, 24357, 24400–24402.)
The requirement of security does not apply to an owner or operator if at the time of the accident there was in force a policy of liability insurance. (Pub.Util.Code, § 24327(d) and (e).) The policy to be effective must meet minimum requirements set forth in Public Utilities Code section 24350, which provides in part:
‘A policy or bond is not effective under Article 2 unless:
‘. . .
‘(b) If the accident results in bodily injury to or death of a person not a passenger, the policy or bond provides coverage of not less fifty thousand dollars ($50,000) because of bodily injury to or death of one person in any accident and one hundred thousand dollars ($100,000) because of bodily injury to or death of two or more persons in any one accident.
‘(c) If the accident results in damage to or destruction of property, the policy or bond provides coverage of not less than fifty thousand dollars ($50,000) because of damage to or destruction of property in any one accident with the exception of the following property which is exempted from the security required under this part: property owned, rented, occupied or used by, or in the care, custody or control of the owner or operator or carried in or on the aircraft.’
The Act is designed to encourage owners and operators to insure themselves against liability and like the Motor Vehicle Financial Responsibility Act does not directly address the actions of insurance carriers who provide such insurance. Absent any clear public policy such as was found to exist in Wildman, the carriers may limit their exposure by contract with the insured. It appears to us that the Act is aimed-at encouraging insurance coverage for liability that may arise from the direct negligence of the owner or operator and is not concerned with the limited vicarious liability of an owner under Public Utilities Code section 21404.
Wildman was decided in 1957. Public Utilities Code section 21404 has been on the books since 1953. The Uniform Aircraft Financial Responsibility Act was enacted in 1968 and contains no mention of any requirement that a liability policy cover permissive use by other than the named insured. In short, there is no statute applicable to aircraft which is comparable to Vehicle Code section 16450. As late as 1970, when the Legislature enacted Insurance Code section 11580.1, it maintained its silence as to such coverage in aircraft liability insurance.
This silence becomes significant in view of the Legislature's demonstrated attention to the subject of policy exclusion in aircraft insurance in enacting Insurance Code section 11584. That section specifically prohibits certain exclusions in aircraft liability insurance, none of which are germane to this case. That section also specifically provides that it does not prohibit specific exclusions ‘establishing limitations on the use of the aircraft.’
Thus, even were we to hold, as was done in Wildman, that the provisions of the Act are a part of every aircraft liability insurance policy, the exclusions under consideration here would still be effective since the Act does not proscribe them. The Act therefore evidences no public policy comparable to the provision of the Vehicle Code dealt with in Wildman. Insurer and insured are free to contract for coverage on any terms not specifically prohibited by statute. (See also Bequette v. National Insurance Underwriters, Inc., 9 Cir., 429 F.2d 896; Electron Machine Corp. v. American Mercury Insurance Co., 5 Cir., 297 F.2d 212.)
The exclusion clause which limited coverage only to times when the named insured was piloting the aircraft conclusively bars Notional's liability. Appellants' arguments are even less persuasive as to exclusion of coverage for injury or death to passengers.
The policy here limited use of the aircraft to ‘business and pleasure’ and that term is specifically defined to exclude carrying passengers for hire. Further, the policy in excluding passengers defines passenger, as does Public Utilities Code section 24238, as ‘any person riding’ in the aircraft without regard to whether they paid for such privilege. Thus it is clear that the policy provided no coverage for injury to or death of any occupant of the aircraft, paying or non-paying.
The Act does not require liability insurance coverage for either paying or non-paying passengers. Public Utilities Code section 24350 set out above only requires coverage in specific amounts for injury or death to a person ‘not a passenger,’ and as noted ‘passenger’ is defined in the same terms as used in the policy.
Further, Public Utilities Code section 24351(c) specifically provides that a policy of insurance need not cover ‘a guest, or any other person, riding in or upon any aircraft without giving compensation.’ Appellants contend that since the decision in Brown v. Merlo, supra, 8 Cal.3d 855, 106 Cal.Rptr. 388, 506 P.2d 212, declared the so-called ‘guest statute’ unconstitutional that the same fate must befall those provisions of the Act which admittedly permit the exclusion at issue here. We disagree.
Appellants' argument if followed would in effect place guests in a more favorable status than paying passengers since the Act permits the exclusion of both. More importantly, however, Brown v. Merlo, supra, dealt with limiting a guest's right to bring an action against a negligent tort feasor.
It was stated in Brown v. Merlo, at page 866, 106 Cal.Rptr. at page 396, 506 P.2d at page 220: ‘The claimed invidiousness of the guest statute lies not in the fact that it draws some distinction between paying and non-paying passengers, but rather in the fact that it penalizes guests by wholly depriving them of protection against negligent injury.’ (Emphasis added.)
The Act does not wholly deprive guests on aircraft of protection. Their cause of action against a negligent owner or operator of an aircraft stands unimpaired. Equally unimpaired is the owner or operator's ability to purchase all insurance coverage he desires. We find no public policy, legislative intent, or equitable consideration that requires us to force an insurance carrier into assuming a liability for which it did not contract and was not paid.
The judgment is affirmed.
COMPTON, Associate Justice.
FLEMING, Acting P. J., and BEACH, J., concur.