O'Connor v. Proprietors Insurance Co.

NEIGHBORS, Justice,

dissenting:

I respectfully dissent and would hold that an insurer who disclaims liability under an exclusionary clause in an aircraft policy must prove a causal connection between the exclusion and the loss.

I.

The policy in this case contains an exclusion clause with the potential for broad application: “This policy does not apply: ... (k) ... to loss occurring while the aircraft is (1) operated in violation of the terms of its Federal Aviation Airworthiness Certificate or Operational Record....”

Courts from other jurisdictions presented with similar clauses have described the voluminous Federal Aviation Administration Regulations governing aviation as “labyrinthine,” “very detailed,” and “so comprehensive that it may be virtually impossible to have a crash without a violation of at least one of those regulations.” See Southwestern Life Insurance Co. v. Rowsey, 514 S.W.2d 802, 806 (Tex.Civ.App. 1974); Roach v. Churchman, 431 F.2d 849, 853 (8th Cir.1970); Thompson v. Ezzell, 61 Wash.2d 685, 379 P.2d 983, 988 (1963).

Lee Kreindler states in his treatise, Aviation Accident Law:

[T]he language of some of ... [these exclusionary clauses] is so broad that virtually any accident would give rise to a disclaimer of liability on the part of the insurance company. Thus, those clauses relating to a violation of a Federal Aviation regulation, call into play the hundreds of specific air regulations relating to every phase of aviation. I can state from personal experience that when accidents happen, the attitude of the insurance company is sometimes to look, first, for elements that will provide the basis for a disclaimer, rather than to consider *287general questions of liability. While, no doubt, the insurance companies argue that they must limit their risks so as to be able to compute and charge premiums for given risks, in actual practice these disclaimers of liability can be and are misused by insurance companies to avoid liability.

1 L.S. Kreindler, Aviation Accident Law § 4.11[1], at 4-33 (rev. ed. 1980).

In this case, the sole basis for denying coverage under the exclusionary clause is the fact that the 100-hour inspection on September 22, 1978, was not designated as an annual inspection and was performed by an PAA certified airframe and powerplant mechanic rather than an aircraft inspector. The parties stipulated that the two inspections are identical in scope and detail although two different classes of persons are authorized by the regulations to perform them. The parties also agree that there is no evidence the crash landing of the petitioners’ plane was caused by or resulted from this violation of the PAA regulation governing aircraft certification.

The majority concludes that the insurance company is not liable because this violation, although there is no evidence that it caused the accident, excluded the insureds from any coverage. The court justifies this result by finding that “the PAA regulation violated relates so directly to the safe operation of the plane that the violation could have contributed to or prevented discovery of an unsafe condition that may have caused the accident.” 696 P.2d at 285.

The majority assumes that there are some PAA regulations which are not safety related, and places the burden of proving the absence of a relationship between the regulation and safety on the insured. However, a cursory examination of the regulations leads me to conclude that all of the regulations pertaining to the aircraft and its operation are promulgated by the Federal Aviation Administrator under subchap-ter VI, “Safety Regulations of Civil Aeronautics,” of the Federal Aviation Program. 49 U.S.C. §§ 1421-1432 (1982). The court does not provide any guidance on the issue of how direct the correlation between the FAA regulation and safety must be before violation of the regulation precludes the insured’s recovery. It is not clear from the opinion whether an incidental relationship to safety will suffice, or whether the regulation must be primarily or substantially safety related. Therefore, the safety component of the court’s holding adds little to the court’s analysis. In my view, a rule which encourages litigation over the issue of whether and to what degree a particular regulation is safety related is not useful. Under the rule adopted by the court, the trial judges of this state will be required to decide whether a particular federal regulation is primarily directed to the safe operation of an airplane or is designed to accomplish some other purpose. Nor, as suggested by the majority, should the insured be required to prove a negative by establishing that the violation did not cause the accident. We are not told how a party to a lawsuit might go about proving that the violation of an FAA regulation was not causally related to an aircraft accident.

Furthermore, by placing the burden of proving that a regulation is not safety related on the insured, the majority has characterized this question as an issue of fact. In my view, this determination is a question of law. The result reached by the majority is contrary to traditional theories of judicial process. 2 Am.Jur.2d Administrative Law § 656 (1962)(“The interpretation of a statute or regulation involves a question of law, and statutory construction is the function of the courts_”).

What is involved in this case is resolution of the broad policy question: Whether the insured or the carrier should bear the burden of loss when the cause of an air crash cannot be determined and there has been a violation of an FAA regulation. The majority sides with the carrier by grafting an illusory “safety” distinction on the exclusionary clause. However, the better reasoned cases hold that the insurer, in order to take advantage of such a clause in the policy, must plead and prove a causal connection between the exclusion and the loss *288claimed. See American States Insurance Co. v. Byerly Aviation, Inc., 456 F.Supp. 967 (S.D.Ill.1978); South Carolina Insurance Co. v. Collins, 269 S.C. 282, 237 S.E.2d 358 (1977); Fireman’s Fund Insurance Co. v. McDaniel, 187 F.Supp. 614 (N.D.Miss.1960), aff'd on other grounds, 289 F.2d 926 (5th Cir.1961); Pickett v. Woods, 404 So.2d 1152 (Fla.Dist.Ct.App. 1981), review denied, 412 So.2d 465 (Fla. 1982).1

Public policy requires that insurance carriers who write aviation policies establish causation when they disclaim liability on the basis that the insured violated government regulations. Given the myriad of such regulations, many of which are highly technical, and all of which are in some way related to aviation safety, when the violation does not contribute to the loss it is unconscionable to allow the carrier to avoid liability. Puckett v. U.S. Fire Insurance Co., 678 S.W.2d 936 (Tex.1984).

Requiring the insurer to show a causal connection between the exclusion and the loss is also consistent with the law construing clauses in accident policies excluding coverage when the insured has violated the law. See generally 6A J. Appleman, Insurance Law and Practice § 511 (1972) (“The majority rule is to the effect that there must be a causative connection shown between the violation of law and the injury received; and, in the absence of a showing that such violation was the direct and proximate cause of the injury, recovery would not be denied.”).

This court, by creating a new, unprecedented rule for aviation insurance cases, has deprived this plaintiff of an opportunity to establish that the regulation is not related to safety. Therefore, the court should remand the case to the trial court so that the parties may litigate their dispute in light of this decision. However, I would reverse the court of appeals’ decision.

. An alternative not yet suggested would be to adopt a rule that a carrier could avoid liability for an otherwise insured loss if it establishes that its risk of loss was significantly increased by the insured’s violation of an FAA regulation. Since the insurance company presumably would have in its possession the facts and evidence necessary to establish that its risk was increased, it should bear the burden of proof. Under this analysis, the insured would not be permitted to recover under the policy where his conduct created a significant risk to the carrier for which no premium was paid. I believe this approach is preferable to that suggested by the majority. However, there is no precedent for either of these ad hoc approaches. While they may be attractive, I believe it is preferable to adopt a bright-line rule by which aircraft owners and their insurance carriers can conduct their relationship.