FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
TRISHAN AIR, INC.; KERRY
ACQUISITIONS, LLC,
Plaintiffs-Appellants,
No. 09-55317
v.
D.C. No.
FEDERAL INSURANCE COMPANY; 2:07-cv-06204-
STARR AVIATION AGENCY, INC.; THE RGK-FMO
BUCKNER COMPANY, INC.; DAVID
OPINION
WITTWER; ARLINGTON/ROE &
COMPANY, INC.,
Defendants-Appellees.
Appeal from the United States District Court
for the Central District of California
R. Gary Klausner, District Judge, Presiding
Argued and Submitted
June 11, 2010—Pasadena, California
Filed February 16, 2011
Before: Alfred T. Goodwin, Johnnie B. Rawlinson,
Circuit Judges, and Mark W. Bennett, District Judge.*
Opinion by Judge Rawlinson
*The Honorable Mark W. Bennett, U.S. District Judge for the Northern
District of Iowa, sitting by designation.
2613
2616 TRISHAN AIR v. FEDERAL INSURANCE CO.
COUNSEL
David A. Shaneyfelt (argued), Finley T. Harckham, Dennis J.
Artese, and Ann M. Piazza, Anderson Kill & Olick, Ventura,
California, and New York, New York, and Louis Franecke,
Franecke Law Group, San Rafael, California, for appellants
Trishan Air, Inc. and Kerry Acquisitions, LLC.
Ralph S. LaMontagne, Jr., LaMontagne & Terhar LLP, Los
Angeles, California, for appellee Federal Insurance Co.
OPINION
RAWLINSON, Circuit Judge:
Appellants Trishan Air, Inc. and Kerry Acquisitions, LLC
(collectively Trishan) purchased an aviation insurance policy
from Appellee Federal Insurance Co. (Federal). After an acci-
dent involving one of Trishan’s corporate jets, Trishan filed
a claim with Federal. Federal denied coverage because the co-
pilot had not undergone the training mandated by the policy’s
pilot warranty. We affirm the district court’s summary judg-
ment in favor of Federal due to Trishan’s failure to raise a
material issue of fact regarding strict compliance with the
pilot warranty, breach of the implied covenant of good faith
and fair dealing, or bad faith. In addition, Trishan’s claim for
coverage under Coverage 29 of the policy was not properly
raised in the district court.
TRISHAN AIR v. FEDERAL INSURANCE CO. 2617
I. BACKGROUND
Trishan retained David Wittwer (Wittwer) and the Buckner
Company to procure the renewal of Trishan’s aviation insur-
ance policy covering a Dassault Falcon 900 B aircraft. Tri-
shan’s chief pilot informed Wittwer that Trishan sought a
renewal policy that provided for second-in-command pilots’
compliance only with the training requirements of 14 C.F.R.
§ 61.55.1
Arlington/Roe & Company (A/R) acted as the insurance
broker for Trishan. Accordingly, Wittwer contacted Connie
French (French) of A/R “to obtain a quote for the replacement
policy from Starr Aviation.”2 Sam Seybert (Seybert), Starr
Aviation’s underwriter, determined that he could not provide
a pilot warranty limited to the basic requirements listed in 14
C.F.R. § 61.55. As a result, Seybert transmitted a quotation to
French that included a pilot warranty requiring pilots to com-
plete ground and flight courses, including simulator training,
for the make and model of the covered aircraft. In a subse-
quent email to French, Seybert clarified that the pilot warranty
covered second-in-command pilots (SICs).3 French forwarded
this information to Wittwer, who understood that, “under the
Starr Aviation proposal, the schooling requirements and simu-
lator requirements would apply to back-up SICs.”
Wittwer subsequently requested a binder for the policy.
The binder included a pilot warranty endorsement that pro-
vided:
It is required that the aircraft is operated by a two
1
This regulation contains basic qualifications for second-in-command
pilots. See 14 C.F.R. § 61.55.
2
Starr Aviation served as Federal’s program manager for policy under-
writing.
3
We utilize the terms “second-in-command” and “co-pilot” interchange-
ably in this opinion.
2618 TRISHAN AIR v. FEDERAL INSURANCE CO.
pilot crew at all times that has been approved by the
named insureds [sic] chief pilot.
It is further required that such pilot(s) must have suc-
cessfully completed a ground and flight recur-
rent/initial training course for the make and model
operated within the past 18 months. Any such course
must incorporate the use of a motion-based simulator
specifically designed for the insured make and
model/make and model series.
The policy contained a nearly identical pilot warranty and
Exclusion F, which excluded coverage consistent with the
pilot warranty provisions.4
Scott Michael (Michael), Trishan’s chief pilot, was in com-
mand of the covered aircraft during the accident. Michael was
unaware at the time of the accident that the Federal policy
contained “commercial flight school and simulator training
requirements” for second-in-command pilots. According to
Michael, he would “have never, and would never, permit any
pilot to operate any aircraft if that pilot did not meet both the
applicable minimum requirements under federal regulations
and any further training requirements set forth in the insur-
ance policy covering the aircraft.”
Dennis Piermarini (Piermarini) served as the second-in-
command for the aircraft during the accident. Piermarini had
“45 years and 15,000 hours of flight experience with 13,000
hours in jet aircraft.” He also “flew as co-pilot in the Falcon
900 as second-in-command for approximately five round-trip
flights and a total of approximately nine hours of flight time.”
Piermarini maintained that, if he had performed the simulator
training, he “would have learned no new information or train-
4
The only difference between the binder’s pilot warranty and the policy
is the absence of the word “and” between “ground” and “flight” in the pol-
icy’s warranty.
TRISHAN AIR v. FEDERAL INSURANCE CO. 2619
ing that would have either alerted [him] to any condition or
contributed to any of the actions that [he] took . . .”
According to Michael’s expert witness report, Piermarini
received “approximately 8-10 hours of static cockpit simula-
tion of procedures, emergency procedures, placement of plac-
ards, markings, instrumentation and other operations of the
aircraft.” Michael stated that this training was “very similar to
simulator training, and in some cases better . . .” After con-
ducting “[a] check ride flight,” Michael believed that Pier-
marini “was well versed and procedurally accurate in all
particulars of the Falcons systems.” Piermarini also “flew in
the jump seat as an observer on several flight legs . . .”
Michael opined that Piermarini’s failure to undergo simulator
training would not have affected Piermarini’s qualifications to
operate the aircraft.
In his declaration, Charles Tatum (Tatum), Trishan’s
expert, stated that the accident would not have been prevented
if the pilots had undergone simulator or ground training. In
his expert report, Tatum opined that Piermarini’s “8-10 hours
of static cockpit training [was] very similar to simulator train-
ing and in some cases better . . .” Tatum concluded that “a full
motion simulator course” would not have altered Piermarini’s
qualifications “in the slightest.”
According to Seybert, “Starr Aviation consider[ed] simula-
tor training to be critical — particularly for purposes of emer-
gency training, as there are a number of emergency
procedures that can easily be practiced in a flight simulator
that cannot be safely practiced in an actual aircraft.” (empha-
sis in the original). Seybert also stated that Piermarini “would
not have been approved as a pilot [because] he had only flown
a total of about 25 hours in the preceding four years . . .”
Federal denied coverage for the accident because Pier-
marini “never attended any formal course relative to any Fal-
2620 TRISHAN AIR v. FEDERAL INSURANCE CO.
con aircraft” in violation of the pilot warranty and Exclusion
F (emphasis in the original).
In its first amended complaint, Trishan alleged claims for
breach of contract; tortious breach of the implied covenant of
good faith and fair dealing; reformation; and declaratory judg-
ment based on Federal’s denial of coverage.5 The district
court held that Federal’s denial of coverage comported with
California law, as Trishan did not strictly comply with the
pilot warranty. The district court granted summary judgment
in favor of Federal, and Trishan filed a timely notice of
appeal.
II. STANDARDS OF REVIEW
“We review the district court’s grant of summary judgment
de novo.” Hesse v. Sprint Corp., 598 F.3d 581, 586-87 (9th
Cir. 2010) (citation omitted).
“Construction of a contractual insurance policy provision is
a question of law and therefore subject to de novo review.”
Assurance Co. of America v. Wall & Assocs. LLC of Olympia,
379 F.3d 557, 560 (9th Cir. 2004) (citation omitted).
“We review de novo a district court’s interpretation of law,
including state law.” Office Depot Inc. v. Zuccarini, 596 F.3d
696, 699 (9th Cir. 2010) (citation omitted). “When interpret-
ing state law, federal courts are bound by decisions of the
state’s highest court.” Assurance Co. of America, 379 F.3d at
560 (citation and alteration omitted). “In the absence of such
a decision, a federal court must predict how the highest state
court would decide the issue using intermediate appellate
court decisions, decisions from other jurisdictions, statutes,
treatises, and restatements as guidance.” Id. (citation omitted).
5
Trishan alleged additional claims against Wittwer, the Buckner Com-
pany, Starr Aviation, and A/R that are not at issue in this appeal. Trishan
also did not oppose summary judgment on its reformation claim.
TRISHAN AIR v. FEDERAL INSURANCE CO. 2621
III. DISCUSSION
A. Substantial Compliance With The Pilot Warranty
Trishan asserts that summary judgment was improper
because, under California law, it was not required to strictly
comply with the pilot warranty to receive coverage.6
[1] There is a notable paucity of recent California Supreme
Court precedent concerning an insured’s strict compliance
with insurance warranties. However, the California Supreme
Court has held that strict compliance may be required. In
McKenzie v. Scottish Union & Nat’l Ins. Co., 112 Cal. 548
(1896), the California Supreme Court determined that the
insured’s failure to employ a watchman at a sawmill as
required by a warranty precluded coverage for damage caused
by a fire. The California Supreme Court observed:
By a warranty the insured stipulates for the absolute
truth of the statement made, and the strict compli-
ance with some promised line of conduct, upon pen-
alty of forfeiture of his right to recover in case of
loss should the statement prove untrue, or the course
of conduct promised be unfulfilled. A warranty is an
agreement in the nature of a condition precedent,
and, like that, must be strictly complied with. . . . If
the warranty be a statement of facts, it must be liter-
ally true; if a stipulation that a certain act shall or
shall not be done, it must be literally performed.
Id. at 555 (citation omitted). Although the California Supreme
Court articulated that “there was neither a literal nor a sub-
stantial compliance with the terms of the warranty,” id. at
556, it appears that the California Supreme Court’s decision
6
Causation is not at issue in this appeal, as Trishan and Federal stipu-
lated that Federal was not required to demonstrate a causal connection
between the accident and any breach of the pilot warranty or Exclusion F.
2622 TRISHAN AIR v. FEDERAL INSURANCE CO.
was premised on the insured’s failure to strictly comply with
the warranty. See id. at 559-60 (“As the evidence of plaintiff
all showed affirmatively a nonfulfillment of the warranty, the
court in the present instance should have granted defendant’s
motion for a nonsuit; and the verdict of the jury on precisely
the same evidence was contrary to law.”);7 see also Hogins v.
Supreme Council of the Champions of the Red Cross, 76 Cal.
109, 112 (1888) (holding that failure to strictly comply with
a warranty precluded coverage because “[t]he warranty is an
agreement in the nature of a condition precedent, and like that
must be strictly complied with. . . . The same principles apply
to all kinds of insurance.”) (citation omitted); Wells, Fargo &
Co. v. Pacific Ins. Co., 44 Cal. 397, 412 (1872) (“The very
meaning of a warranty is, to preclude all question whether it
has been substantially complied with; it must be literally.”)
(citation omitted) (emphasis in the original).8
[2] California Courts of Appeal have also articulated the
necessity of strict compliance with warranties. See Chase v.
Nat’l Indem. Co., 129 Cal.App.2d 853, 858 (1954) (“A state-
ment in an insurance policy importing an intention to do or
not to do a thing which materially affects the risk is a war-
7
Trishan maintains that the California Supreme Court’s citation to
Sierra Milling, Smelting, & Mining Co. v. Hartford Fire Ins. Co., 76 Cal.
235 (1888), in McKenzie demonstrates the sufficiency of substantial com-
pliance with warranties. However, in McKenzie, the California Supreme
Court cited to Sierra Milling regarding whether negligent performance of
a warranty affects coverage. See McKenzie, 112 Cal. at 559; see also
Sierra Milling, 76 Cal. at 237-38. In any event, the California Supreme
Court has cited McKenzie for the general concept that failure to comply
with an unambiguous warranty precludes coverage. See Holz Rubber Co.,
Inc. v. American Star Ins. Co., 14 Cal.3d 45, 59 n.12 (1975).
8
Because this precedent is controlling, certification to the California
Supreme Court is not required. See Cal. R. of Court 8.548(a) (“On request
of the United States Supreme Court, a United States Court of Appeals, or
the court of last resort of any state, territory, or commonwealth, the
Supreme Court may decide a question of California law if: (1) The deci-
sion could determine the outcome of a matter pending in the requesting
court; and (2) There is no controlling precedent.”).
TRISHAN AIR v. FEDERAL INSURANCE CO. 2623
ranty that such act or omission will take place. . . . Generally
speaking, compliance with the terms of a warranty is a condi-
tion precedent to a right of recovery.”) (citations omitted); De
Campos v. State Comp. Ins. Fund, 122 Cal.App.2d 519, 530
(1954) (holding that the insured’s failure to comply with an
affirmative warranty precluded reimbursement because
“[c]ompliance with the terms of this warranty [was] a condi-
tion precedent to a right of recovery insofar as this particular
risk [was] concerned. Noncompliance defeat[ed] recovery.”)
(citation omitted); Finkbohner v. Glens Falls Ins. Co. of Glens
Falls, New York, 6 Cal.App. 379, 387 (1907). Thus, Califor-
nia courts have recognized that insurance warranties require
strict compliance to invoke coverage.
[3] Trishan’s argument is premised on the warranty being
a mere condition of the insurance policy, thus requiring only
substantial compliance. This argument ignores the dichotomy
between conditions relating to basic coverage, such as notice
provisions, and conditions, like the pilot warranty, that are “an
element of the fundamental risk insured.” Root v. Am. Equity
Specialty Ins. Co., 130 Cal.App.4th 926, 943 (2005). “There
are well-established differences between insuring clauses,
exclusions, and conditions that should not be amalgamated
into one binary question: coverage yes or no under an ‘if . . .
then’ analysis.” Id. at 942 (citation omitted) (emphasis in the
original).
[4] Contrary to such variations in insurance provisions,
Trishan seeks universal application of the substantial compli-
ance doctrine untethered from the type of warranty at issue.
However, strict compliance with pilot warranties serves as a
necessary corollary of aviation insurance policies. “Federal
courts uniformly enforce [pilot warranties] . . . and for good
reason. Pilot qualifications and experience are obviously fac-
tors bearing directly on the risk the insurer is underwriting.”
Old Republic Ins. Co. v. Gormley, 77 F. Supp. 2d 705, 707
(D. Md. 1999) (citations omitted). As exemplified by Nat’l
Ins. Underwriters v. Carter, 17 Cal.3d 380 (1976), Trishan’s
2624 TRISHAN AIR v. FEDERAL INSURANCE CO.
approach undermines the reasons for including pilot warran-
ties in aviation insurance policies. In Nat’l Ins. Underwriters,
the insurer denied coverage of an airplane accident because
the airplane’s owners permitted a non-covered pilot to fly the
plane. See id. at 383. An exclusion provided that the policy
was “wholly inapplicable unless the aircraft [was] piloted by
a person whose name and qualifications [were] specified in
the policy.” Id. at 386. The California Supreme Court
observed that “[a]n insurance company has the right to limit
the coverage of a policy issued by it and when it has done so,
the plain language of the limitation must be respected.” Id.
(citation omitted) (emphasis added). In upholding the insur-
er’s denial of coverage, the California Supreme Court opined:
It appears self-evident that the [insured] could not
reasonably have expected [the insurer] to afford cov-
erage without regard to the identity and qualifica-
tions of those persons entrusted with flying the
aircraft. In view of the relatively few persons quali-
fied to fly a plane, and the obvious hazard to the
occupants and to the aircraft from flights by unquali-
fied pilots, it is understandable that an insurer would
insist on knowing who the proposed pilots were,
evaluating their qualifications, and making its policy
inapplicable to accidents involving pilots not dis-
closed to, nor approved by, the insurer. In our view,
the pilot exclusion clause is unambiguous and
accords with the reasonable expectations of the
insured.
Id. (internal quotation marks omitted).9 The California
9
Trishan’s attempt to distinguish this case because it was the chief pilot
who did not comply with the warranty, as opposed to a co-pilot, is unper-
suasive. Trishan’s argument ignores the underlying premise for the Cali-
fornia Supreme Court’s ruling that an insurer has the right to assess the
qualifications of pilots who may operate the covered aircraft. See Nat’l
Ins. Underwriters,17 Cal.3d at 386 (“[I]t is understandable that an insurer
TRISHAN AIR v. FEDERAL INSURANCE CO. 2625
Supreme Court’s emphasis on the importance of pilot warran-
ties persuades us that California courts would require strict
compliance with the pilot warranty. See also Nat’l Union Fire
Ins. Co. of Pittsburg v. Miller, 192 Cal.App.3d 866, 872-73
(1987) (concluding that the denial of coverage was proper
based on a pilot warranty requiring a current medical certifi-
cate). The California Supreme Court’s approach to this issue
militates against Trishan’s position that substantial compli-
ance is universally acceptable, irrespective of the type of war-
ranty implicated. This is particularly true in view of Trishan’s
failure to cite any case in which California courts have
accepted substantial compliance with pilot warranties.10,11
would insist on knowing who the proposed pilots were, evaluating their
qualifications, and making its policy inapplicable to accidents involving
pilots not disclosed to, nor approved by, the insurer.”). Trishan’s argument
would nullify any qualifications for a co-pilot as long as the co-pilot was
not operating the controls at the time of the accident.
10
In predicting the California Supreme Court’s resolution of the pilot
warranty issue, we may also consult the decisions of other jurisdictions.
See Assurance Co. of America, 379 F.3d at 560. Other courts are in accord
that coverage may be denied because of violations of pilot warranties. See
Potter v. U.S. Specialty Ins. Co., 98 P.3d 557, 559-60 (Ariz. Ct. App.
2004) (upholding denial of coverage where pilot warranty required a cer-
tain number of “logged” hours, although the pilot may have flown a suffi-
cient number of non-logged hours); Howell v. U.S. Fire Ins. Co., 363
S.E.2d 560, 563 (Ga. Ct. App. 1987) (affirming summary judgment in
favor of insurer because insured’s pilot did not attend the flight training
school mandated by the pilot warranty); W. Food Prods. Co., Inc. v. U.S.
Fire Ins. Co., 699 P.2d 579, 584 (Kan. Ct. App. 1985) (holding that
insurer properly denied coverage because the pilot warranty was “unam-
biguous and [the court] refuse[d] to alter this plain language to forestall
its effect.”).
11
Nat’l Indem. Co. v. Demanes, 86 Cal.App.3d 155 (1978), does not
impact our analysis. In that case, the California Court of Appeal consid-
ered whether the insurer properly denied coverage for an accident involv-
ing a pilot who had an expired medical certificate. See id. at 158. The
California Court of Appeal held that the denial of coverage was improper
because the exclusion was limited to the pilots’ identities and did not
address pilot qualifications. See id. at 159. The binder also did not mention
the medical certificate. See id. at 160.
2626 TRISHAN AIR v. FEDERAL INSURANCE CO.
Trishan relies on the substantial compliance doctrine uti-
lized in cases involving statutory requirements. However, this
precedent is inapposite. For example, in Costa v. Superior Ct.,
128 P.3d 675, 696-97 (Cal. 2006), the California Supreme
Court held that inadvertent irregularities in the filing of an ini-
tiative petition did not warrant removal of the initiative mea-
sure from the ballot. The California Supreme Court’s
reasoning stemmed from the informational purpose of the ini-
tiative process, thus minimizing the need for strict compli-
ance. See id. at 690 (“The requirements of both the
Constitution and the statute are intended to and do give infor-
mation to the electors who are asked to sign the initiative peti-
tions. If that be accomplished in any given case, little more
can be asked than that a substantial compliance with the law
and the Constitution be had, and that such compliance does
no violence to a reasonable construction of the technical
requirements of the law.”) (citation and footnote reference
omitted) (emphasis in the original). Although the California
Supreme Court did not require “actual compliance” with the
statutory mandates, “each objective or purpose of a statute
must be achieved in order to satisfy the substantial compli-
ance standard[.]” Id. at 693 n.24. Accordingly, “inadvertent,
good-faith human error” did not justify exclusion of the initia-
tive from the ballot “when it is apparent that the technical
defect in question, as a realistic matter, did not adversely
affect the integrity of the electoral process or frustrate the pur-
poses underlying the relevant constitutional or statutory
requirements.” Id. at 700.
The present appeal does not involve compliance with the
informational purposes of a statutory scheme despite “inad-
vertent, good-faith human error.” Id. Instead, Trishan’s failure
to comply with any aspect of the required training for co-
pilots completely undermined Federal’s ability to negotiate
and implement the terms of its policies. If adopted, the practi-
cal effect of Trishan’s proposition would be significant, as it
would permit an insured to universally assert that only substi-
tute performance, based on the insured’s subjective selection,
TRISHAN AIR v. FEDERAL INSURANCE CO. 2627
would be necessary to receive coverage. This approach nulli-
fies any specific requirement that an insurer has in assuming
the covered risk, and generates uncertainty on the insurer’s
part regarding compliance. See Everett v. State Farm Gen.
Ins. Co., 162 Cal.App.4th 649, 656 (2008), as modified (“It is,
of course, well established that an insurer has a right to limit
the policy coverage in plain and understandable language, and
is at liberty to limit the character and extent of the risk it
undertakes to assume.”) (internal quotation marks omitted).
As it negotiates the policy’s terms, an insurer would be unable
to discern what substitutes equated to the required conditions.12
To adopt this approach, we would have to rewrite the insur-
ance policy in contravention of California law. See Supervalu,
Inc. v. Wexford Underwriting Managers, Inc., 175
Cal.App.4th 64, 76 (2009), as modified (“[T]he parties agreed
to the policy language and we have no power to rewrite it.”);
see also Kwok v. Transnation Title Ins. Co., 170 Cal.App.4th
1562, 1571 (2009) (“We do not rewrite any provision of any
contract, including an insurance policy, for any purpose.”)
(citation, alterations, and internal quotation marks omitted).
[5] Our decision in Nat’l Union Fire Ins. Co. of Pittsburgh
v. California Cotton Credit Corp., 76 F.2d 279 (9th Cir. 1935)
does not compel a contrary conclusion. In that case, we con-
sidered whether the insured complied with a promissory war-
ranty requiring the keeping of certain records concerning the
12
The concern is evident in this case, as Federal specifically clarified to
Trishan’s agent that co-pilots must receive simulator training. Such clarifi-
cation would be meaningless under Trishan’s approach, as its own subjec-
tive considerations regarding potential substitutes would be controlling
irrespective of Federal’s specific requirements. Additionally, the insurer’s
premium considerations are affected, as an insured would likely negotiate
a premium based on the risk the insurer is willing to assume in view of
the pilot warranty. See, e.g., Aviation Charters, Inc. v. Avemco Ins. Co.,
784 A.2d 712, 714 (N.J. Sup. Ct. 2001) (observing that the insurer’s
requirement of a certain number of logged hours by the pilot and the cor-
responding exclusion “directly affect the risk the insurer assumes and
upon which premiums are established.”) (citation omitted).
2628 TRISHAN AIR v. FEDERAL INSURANCE CO.
insured’s cotton crops. See id. at 282-83. Without extensive
analysis, we broadly observed that “[p]rovisions requiring the
keeping of records and their production upon request for
inspection by the insurer are promissory warranties. Substan-
tial compliance with a promissory warranty is sufficient.” Id.
at 283 (citations omitted). We did not resolve this issue under
California law, relying instead on federal cases such as Nat’l
Surety Co. v. Earl Park State Bank, 63 F.2d 825 (7th Cir.
1933). See Nat’l Union, 76 F.2d at 283. In Nat’l Surety, the
Seventh Circuit considered whether the insured complied with
the recordkeeping requirements of a warranty in a burglary
insurance policy. See Nat’l Surety, 63 F.2d at 825-26. The
Seventh Circuit opined that substantial compliance with
recordkeeping requirements is sufficient. See id. at 827. Nota-
bly, Nat’l Union and Nat’l Surety do not address warranties
involving the actual risk upon which the insurer makes its
coverage decisions. Thus, it does not follow that application
of the substantial compliance doctrine regarding recordkeep-
ing implicates compliance with warranties premised on the
underlying risk. Given the California Supreme Court’s
approach to pilot warranties, our decision in Nat’l Union does
not control the outcome of this appeal. We conclude that sub-
stantial compliance is insufficient to satisfy pilot warranties
under California law. See McKenzie, 112 Cal. at 555; see also
Nat’l Ins. Underwriters, 17 Cal.3d at 386; Nat’l Union Fire
Ins., 192 Cal.App.3d at 872-73.13
13
Relying on BankAmerica Pension Plan v. McMath, 206 F.3d 821 (9th
Cir. 2000), Trishan asserts that we have recognized the California
Supreme Court’s application of the substantial compliance doctrine in the
insurance context. In McMath, we considered whether a beneficiary sub-
stantially complied with the requirements of a 401(k) pension plan. See
McMath, 206 F.3d at 830-31. We observed that “[t]he Supreme Court of
California has articulated the state’s substantial compliance doctrine in
insurance contracts[.]” Id. at 830. “Where the insured makes every reason-
able effort under the circumstances, complying as far as he is able with the
rules, and there is a clear manifestation of intent to make the change,
which the insured has put into execution as best he can, equity should
regard the change as effected.” Id. (citation omitted). We concluded that
the beneficiary did not substantially comply with the plan’s requirements
TRISHAN AIR v. FEDERAL INSURANCE CO. 2629
[6] Even if the substantial compliance doctrine applied,
summary judgment was nevertheless proper because Trishan
did not comply with any aspect of the pilot warranty for co-
pilots. A common analytical thread runs through the substan-
tial compliance cases cited by Trishan: the insured’s non-
compliance was typically minor and the insured complied
with at least some of the specific requirements at issue. See,
e.g., McCormick v. Sentinel Life Ins. Co., 153 Cal.App.3d
1030, 1039, 1045-46 (1984) (holding that the insured’s “fail-
ure to supply a single item of information on the claim form”
raised a question of fact); Nat’l Union, 76 F.2d at 283 (noting
that the insured complied with the warranty except in “one
instance, through an oversight” the specified records were not
timely completed.). California courts have rejected substantial
compliance arguments where the insured completely failed to
comply with a warranty or condition. See Abdelhamid v. Fire
Ins. Exchange, 182 Cal.App.4th 990, 1000 (2010) (“The defi-
ciencies in [the insured’s] proof of loss were a far cry from
minor defects and no reasonable trier of fact could conclude
she substantially performed her obligations or complied with
the condition of her insurance contract requiring her to pro-
vide a proof of loss with supporting documentation.”) (cita-
tion omitted); S & M Lamp Co. v. Lubermens Mut. Cas. Co.,
199 Cal.App.2d 446, 453 (1962), as modified (holding that
because there was no compliance, the insurer was not required
to provide coverage, as “[t]he court [was] not free to rewrite
the contract or to indulge in any forced construction of its lan-
guage.”) (citation omitted).14
because he “was careless when he failed to sign the beneficiary designa-
tion form.” Id. at 831. Although McMath does not expressly resolve
whether substantial compliance is sufficient for pilot warranties, its lan-
guage undermines Trishan’s argument, as Trishan did not “make[ ] every
reasonable effort” to comply with the pilot warranty. Id. Instead, Trishan
failed to comply with the required training for co-pilots in any respect.
14
Significantly, California does not treat all such provisions universally
in terms of prejudice to the insurer. If the insured fails to comply with a
2630 TRISHAN AIR v. FEDERAL INSURANCE CO.
[7] Trishan elides the fact that it did not comply with the
pilot warranty’s training requirements for co-pilots in any
fashion. Instead, Trishan asserts that the pilot’s alternative
training served as a substitute for the simulator training.15
However, a complete failure to comply is not analogous to
minor deficiencies. See Aviation Charters, 784 A.2d at 714
(“Unlike the notice of claim . . . that was intended to aid the
insurance carrier in investigating, settling, and defending
claims, the unambiguous exclusionary clause and the
Approved Pilot Endorsement involved in this appeal define
the coverage provided.”) (citations and internal quotation
marks omitted). Thus, Trishan’s complete failure to comply
with the pilot warranty precludes coverage even under the
substantial compliance doctrine. See, e.g., Abdelhamid, 182
Cal.App.4th at 1000; S & M Lamp Co., 199 Cal.App.2d at
453.
Trishan also maintains that the pilot warranty cannot serve
as an express warranty because of its ambiguity. Trishan’s
argument is premised on the pilot warranty’s usage of the
notice provision or cooperation clause, the insurer must demonstrate that
it was prejudiced by the non-compliance. See Belz v. Clarendon Am. Ins.
Co., 158 Cal.App.4th 615, 625 (2007). However, if the insured violates a
non-payment provision by “making voluntary payments without the insur-
er’s consent” before tender of the claim, id. at 626, no prejudice is neces-
sary because such provisions serve as “a condition precedent to the
insured’s right to be indemnified . . .” Id. at 627 (citations omitted)
(emphasis in the original). Such distinctions undermine Trishan’s premise
that the substantial compliance doctrine is universally applicable to all
conditions.
15
Trishan erroneously relies on Cal-Air Conditioning, Inc. v. Auburn
Union Sch. Dist., 21 Cal.App.4th 655 (1993), in support of its proposition
that substitute performance is valid. In that case, the California Court of
Appeal did not address compliance with an insurance warranty. Instead,
substantial compliance was sufficient for statutory requirements relating to
a bidding process for contractors. See id. at 668-69 (concluding that tele-
phonic communication satisfied the statute’s provisions requiring written
notice).
TRISHAN AIR v. FEDERAL INSURANCE CO. 2631
term “pilot(s)” as opposed to “pilots.” Trishan asserts that it
complied with the warranty, because “pilot(s)” could be read
as only requiring the chief pilot to undergo the simulator
training.
“Policy language is ambiguous if it is susceptible of more
than one reasonable interpretation in the context of the policy
as a whole.” Legacy Vulcan Corp. v. Superior Ct., 185
Cal.App.4th 677, 688 (2010) (citation reference omitted).
“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.” Carolina Cas. Ins. Co. v. L.M.
Ross Law Group, LLP, 184 Cal.App.4th 196, 206 (2010)
(citation omitted). Within the context of the policy, the pilot
warranty contemplates that all pilots operating the aircraft
must undergo the specified training, irrespective of its usage
of the parenthetical. See State Farm Gen. Ins. Co. v. JT’s
Frames, Inc., 181 Cal.App.4th 429, 444 (2010) (“[A]n
abstract ambiguity based on a semantically permissible inter-
pretation of a word or phrase cannot create coverage where
none would otherwise exist.”); see also City of Carlsbad v.
Ins. Co. of the State of Penn., 180 Cal.App.4th 176, 182
(2009) (“[J]ust because language could be more precise or
explicit does not mean it is ambiguous.”) (citation omitted).
[8] Additionally, the parties’ negotiations reflect that co-
pilots were covered by the warranty. “In determining whether
policy language is ambiguous, we consider not only the face
of the contract but also any extrinsic evidence that supports a
reasonable interpretation.” GGIS Ins. Servs., Inc. v. Superior
Ct., 168 Cal.App.4th 1493, 1507 (2008) (citation omitted).
The record reflects that Federal explicitly conveyed to Tri-
shan’s representatives that co-pilots must receive the simula-
tor training. Thus, Trishan’s argument premised on the
warranty’s alleged ambiguity is unavailing.16
16
Trishan asserts that, because the pilot warranty lacks “precatory lan-
guage warning that express compliance is required,” substantial compli-
2632 TRISHAN AIR v. FEDERAL INSURANCE CO.
[9] The district court, therefore, properly granted summary
judgment because no material issue of fact was raised regard-
ing Trishan’s lack of compliance with the pilot warranty.17
B. Trishan’s Claims for Breach of the Implied Cove-
nant of Good Faith and Fair Dealing And For Bad
Faith
[10] “California law recognizes in every contract, includ-
ing insurance policies, an implied covenant of good faith and
fair dealing.” Brehm v. 21st Century Ins. Co., 166
Cal.App.4th 1225, 1235 (2008), as modified (citations omit-
ted). “In the insurance context the implied covenant requires
the insurer to refrain from injuring its insured’s right to
receive the benefits of the insurance agreement.” Id. (citation
omitted). “As a general rule . . . there can be no breach of the
implied covenant of good faith and fair dealing if no benefits
are due under the policy[.]” Id. Summary judgment on Tri-
shan’s claim was proper because Trishan’s failure to comply
ance is justified. However, the pilot warranty expressly establishes the
requirements for coverage. “This provision patently is in the nature of a
condition precedent to coverage, not an exclusion from coverage.” N. Am.
Capacity Ins. Co. v. Claremont Liability Ins. Co., 177 Cal.App.4th 272,
289 (2009) (emphasis in the original). “A condition precedent refers to an
act, condition or event that must occur before the insurance contract
becomes effective or binding on the parties.” Id. (citation and alteration
omitted) (emphasis in the original). Additionally, the pilot warranty is
incorporated as an exclusion, which explicitly provides that “[t]he insur-
ance provided by the Policy shall not apply . . . to any insured while the
aircraft is in-flight if piloted by other than the pilot or pilots designated
under item 4 of the Declarations[.]” Item four of the declarations refer-
ences the pilot warranty “As Endorsed.”
17
Trishan also contends that its claim for physical damage loss survives
summary judgment. Because this argument depends entirely on the sub-
stantial compliance doctrine, summary judgment was proper for this claim
as well. The same is true for Trishan’s argument concerning Exclusion F.
See Malcom v. Farmers New World Life Ins. Co., 4 Cal.App.4th 296, 301
(1992) (“Where, as here, an insurer has clearly limited its coverage, the
limitation’s plain language must be respected.”) (citation and footnote ref-
erence omitted); see also Nat’l Ins. Underwriters, 17 Cal.3d at 386.
TRISHAN AIR v. FEDERAL INSURANCE CO. 2633
with the pilot warranty precluded a material issue of fact
regarding coverage. See id.
[11] Trishan’s bad faith claim fails under California’s gen-
uine dispute rule. “[A]n insurer denying or delaying the pay-
ment of policy benefits due to the existence of a genuine
dispute with its insured as to the existence of coverage liabil-
ity or the amount of the insured’s coverage claim is not liable
in bad faith even though it might be liable for breach of con-
tract.” Id. at 1237 (citation and internal quotation marks omit-
ted). “The linchpin of a bad faith claim is that the denial of
coverage was unreasonable.” McCoy v. Progressive W. Ins.
Co., 171 Cal.App.4th 785, 793 (2009). “Before an insurer can
be found to have acted in bad faith for its delay or denial in
the payment of policy benefits, it must be shown that the
insurer acted unreasonably or without proper cause.” Id. (cita-
tion omitted) (emphasis in the original). Because California
law does not establish that substantial compliance with the
pilot warranty was sufficient for coverage, we conclude that
no material issue of fact was raised regarding Federal’s good
faith assertion of its coverage position. See id. (“Where there
is a genuine issue as to the insurer’s liability under the policy
for the claim asserted by the insured, there can be no bad faith
liability imposed on the insurer for advancing its side of that
dispute.”) (citation omitted) (emphasis in the original); see
also Griffin Dewatering Corp. v. N. Ins. Co. of New York, 176
Cal.App.4th 172, 204 (2009), as modified (explaining that
“the insurer’s position was rooted in the literal language of the
. . . exclusion, so the insurer was going to win if a court were
to apply the literal language of the exclusion.”).18
18
Trishan contends that the genuine dispute rule is inapplicable because
Federal failed to investigate the co-pilot’s alternative and substitute train-
ing. “The genuine dispute rule does not relieve an insurer from its obliga-
tion to thoroughly and fairly investigate, process and evaluate the
insured’s claim.” McCoy, 171 Cal.App.4th at 794 (citation omitted). How-
ever, Trishan’s argument is premised on its assertion that its co-pilot’s
experience served as a substitute for the pilot warranty’s required training.
2634 TRISHAN AIR v. FEDERAL INSURANCE CO.
C. Trishan’s Claim Premised On Coverage 29 of the
Policy
Coverage 29 of the policy provided:
If a scheduled aircraft is not used in-flight for more
than the minimum lay-up period shown in the Decla-
rations the named insured agrees to notify the Com-
pany as soon as practicable. At the end of the policy
period, the Company will return a pro-rata percent-
age credit of the applicable premium for the entire
period of the lay-up as shown under Coverage 29 in
the Declarations.
The insurance provided by Coverage 29 shall not
apply to any scheduled aircraft laid up because of
any loss or damage covered by the Policy.
(emphases omitted).
Because Trishan’s complaint did not raise this claim, it was
not properly before the district court.19 See Wasco Prods., Inc.
v. Southwall Tech., Inc., 435 F.3d 989, 992 (9th Cir. 2006)
(“The necessary factual averments are required with respect
to each material element of the underlying legal theory. Sim-
ply put, summary judgment is not a procedural second chance
to flesh out inadequate pleadings.”) (citation and alterations
As discussed, California law does not support Trishan’s contention and
Federal merely asserted its legal position regarding compliance with the
pilot warranty. See Griffin Dewatering Corp., 176 Cal.App.4th at 201 n.33
(“[T]here is no issue in this case involving a failure-to-investigate for its
own sake, that is, where coverage actually turned on facts the insurer
should have unearthed . . . From the beginning, the case . . . has turned
on a pure question of law.”).
19
Trishan raised this claim for the first time in its opposition to sum-
mary judgment.
TRISHAN AIR v. FEDERAL INSURANCE CO. 2635
omitted); see also Pickern v. Pier 1 Imports (U.S.), Inc., 457
F.3d 963, 968-69 (9th Cir. 2006).20
IV. CONCLUSION
California law requires strict compliance with a pilot war-
ranty. Trishan failed to comply with any aspect of the warran-
ty’s required training for co-pilots, and no material issue of
fact was raised regarding insurance coverage.
Because there was a genuine question of coverage at the
time the coverage determination was made, no material issue
of fact was raised concerning Trishan’s bad faith claims.
AFFIRMED.
20
Trishan asserts that this claim was properly raised because Coverage
29 was mentioned during the deposition of Federal’s claim representative.
However, in his deposition, the claim representative merely stated that he
was unfamiliar “with the criteria under which the lay-up credit would be
due to the policyholder” because it was “an underwriting issue.” The rep-
resentative also stated that there was no record that Trishan made a claim
under Coverage 29 after the completion of the policy period.