Before Judges Conley, Wecker and Lesemann. On appeal from Superior Court of New Jersey, Law Division, Mercer County, L-003270-98.
The opinion of the court was delivered by: Conley, J.A.D.
Defendant Avemco Insurance Company (Avemco), an aviation insurer, appeals summary judgment granted plaintiff Aviation Charters, Inc. (Charters), its insured. The effect of the summary judgment obligates Avemco to cover Charters' aircraft property damage loss of $52,500 despite the existence of a clear and unambiguous exclusionary clause in the insurance policy. The motion judge concluded that the exclusionary clause could not be resorted to as Avemco could not prove a causal connection between the circumstances that triggered application of the exclusion and the loss. We reverse.
The pertinent facts are not particularly complex or disputed. The property damage was sustained by one of plaintiff's aircrafts that was covered, at the time of the damage, by Avemco's policy. However, the policy contains an exclusionary clause which applies where the insured aircraft is "operated in flight by a pilot who is not approved [as defined by the policy]." The policy defines "in flight" as "the time starting when your insured aircraft moves forward for takeoff and continues until it has landed. It has landed when it has safely stopped or left the runway under control." An "approved pilot" is a pilot who has logged at least 5000 total flight hours. It is undisputed that at the time the property damage occurred, the pilot operating the aircraft had logged only 2000 total flight hours.
As to the occurrence itself, the record before the motion judge established without dispute that the damage was sustained by the aircraft after it had landed and while it was taxiing on the runway. It had neither "safely stopped" nor "left the runway under control" and, thus, under the specific definition of the policy, was still "in flight." Since the aircraft was still "in flight" and the pilot was not an "approved pilot," the exclusionary clause was applicable regardless of the cause of the damage.(*fn1)
Plaintiff presents neither ambiguity nor directly(*fn2) applicable public policy reasons, either statutory or adjudicatory, that would countenance against application of the plain terms of the policy. The legal principles that must govern our analysis under these circumstances, then, are rather well-established. Generally it is said that insurance contracts will be construed in accordance with the reasonable expectations of the average policy holder and any ambiguity must be resolved against the insurer. Gibson v. Callaghan, 158 N.J. 662, 670 (1999). In the absence of a definition of a particular term used in the policy, the term or terms will be interpreted in accordance with the "plain, ordinary meaning." Ibid.; Boddy v. Cigna Prop. & Cas. Co., 334 N.J. Super. 649, 656 (App. Div. 2000).
Where an exclusionary clause is involved, such clauses are narrowly construed; indeed it is the insurer's burden to establish the exclusion. American Motorists Ins. Co. v. L-C-A Sales Co., 155 N.J. 29, 41 (1998). But where the words of an exclusionary clause are clear and unambiguous, "a court should not engage in a strained construction to support the imposition of liability." Longobardi v. Chubb Ins. Co. of N.J., 121 N.J. 530, 537 (1990); Cobra Prod., Inc. v. Federal Ins. Co., 317 N.J. Super. 392, 400 (App. Div. 1998), certif. denied, 160 N.J. 89 (1999). Although we favor construing insurance policies so as to provide coverage, we cannot "write for the insured a better policy of insurance than the one purchased." Walker Rogge, Inc. v. Chelsea Title & Guar. Co., 116 N.J. 517, 529 (1989). Thus, while where there are several interpretations of an exclusion's meaning we would tend to favor the one for coverage, Cobra Prod. v. Federal Ins. Co., supra, 317 N.J. Super. at 401, "[t]his does not mean . . . that any far-fetched interpretation of a policy exclusion will be sufficient to create an ambiguity requiring coverage", Stafford v. T.H.E. Ins. Co., 309 N.J. Super. 97, 105 (App. Div. 1998). This is so because exclusionary clauses are presumptively valid and will be given effect if "'specific, plain, clear, prominent, and not contrary to public policy.'" Princeton Ins. Co. v. Chunmuang, 151 N.J. 80, 95 (1997) (quoting Doto v. Russo, 140 N.J. 544, 559 (1995)). See Zacarias v. Allstate Ins. Co., 330 N.J. Super. 231, 234 (App. Div. 2000); Boddy v. Cigna Property & Cas. Co., supra, 334 N.J. Super. at 658-59.
Charters makes no effort to address these principles. Neither does the dissent. Rather, in addition to referring to out-of-state "minority view cases" which Charters and the dissent claim are illustrative of the "modern trend" (to which we will shortly return), Charters and the dissent assert that Cooper v. Government Employees Ins. Co., 51 N.J. 86 (1968), supports the motion judge's determination. The court in Cooper, Charters and the dissent assert, "struck a blow for the typical insured . . . when it refused to give force to a plainly-worded clause in a motor vehicle policy." Charters and the dissent contend this "blow" extends to clear and unambiguous exclusionary clauses. We do not believe such a broad reading of Cooper is warranted.
To begin with, Cooper did not concern an exclusionary clause, much less a clear and unambiguous one. It concerned a provision governing the timeliness of a notice of claim, characterized by other courts as a "condition subsequent." Cooper, supra, 51 N.J. at 91; Avemco Ins. Co. v. Chung, 388 F. Supp. 142, 150-51 (D. Haw. 1975).
The dissent sees no difference between a notice provision such as that in Cooper, which is unrelated to the scope of coverage but simply acts "to aid the insurance carrier in investigating, settling and defending claims," Zuckerman v. National Union Fire Ins. Co., 100 N.J. 304, 323 (1985), and an exclusionary clause. This distinction between the type of notice provision in Cooper, and the governing coverage provisions of an insurance policy was explained by the Court in Zuckerman v. National Union Fire Ins. Co., supra, 100 N.J. 304. There, in the context of a "claims made" policy, the Supreme Court said:
The automobile liability policy in Cooper was a classic occurrence policy that provided the insured with coverage in the event of her negligence. The notice requirement in that policy did not define the coverage provided by the policy but rather was included to aid the insurance carrier in investigating, settling, and defending claims . . . . Accordingly, the requirement of notice in an occurrence policy [such as that in Cooper] is subsidiary to the event that invokes coverage, and the conditions related to giving notice should be liberally and practically construed.
By contrast, the event that invokes coverage under a "claims made" policy is transmittal of notice of the claim to the insurance carrier. In exchange for limiting coverage only to claims made during the policy period, the carrier provides the insured with retroactive coverage for errors and omissions that took place prior to the policy period. Thus, an extension of the notice period in a "claims made" policy constitutes an unbargained-for expansion of coverage, gratis, resulting in the insurance company's exposure to a risk substantially broader than that expressly insured against in the policy. [100 N.J. at 323-24 (emphasis added).]
The court, thus, rejected the insured's claim that the insurer could not enforce the policy's provision requiring a claim to be made during the period of the policy unless it could establish "appreciable prejudice." Zuckerman, 100 N.J. at 322. In doing so, our Supreme Court limited Cooper to non-coverage provisions, i.e., those conditions relating to subsequent, non-coverage, events. Imposing a burden upon the insurer where it seeks to deny coverage based upon a non-coverage event to demonstrate prejudice, as the Court did in Cooper, imposes no particular harm to the insurer and does promote the policy against forfeiture of the coverage for which the insured paid his or her premiums.
The dissent equates application of the exclusionary clause here to nothing more than "trigger[ing] . . . forfeiture because of an immaterial noncompliance with a policy provision." This view eschews the fact that clear, unambiguous exclusionary clauses in insurance policies are coverage related clauses. They directly affect the risk the insurer assumes and upon which premiums are established. Moreover, the exclusionary provision here is not a hypertechnical notice provision. It relates to pilot qualifications and, thus, aircraft safety. Enforcement of its clear and unambiguous terms would serve to encourage compliance with those qualifications, certainly a countervailing policy consideration to the concerns of forfeiture.
Charters in its appellate brief points to Massachusetts Mut. Life Ins. Co. v. Manzo, 122 N.J. 104 (1991), as "evidence of the balance and fairness which can be produced by maintaining Cooper's focus on the expectations of the parties when the policy was being written" (emphasis in original). Manzo has no application to this case. To begin with, Manzo concerns a misrepresentation in the context of a life insurance application policy, triggering the application of N.J.S.A. 17B:24-3. See n.2, supra. But, even in the context of that statute and a claim of material misrepresentations by the insured, our Supreme Court has expressly rejected causation as a necessary element of the insurer's burden when seeking to disclaim coverage premised upon such misrepresentations. In doing so, the Court said:
The Appellate Division recognized that an insurer need show only that the misrepresentation materially affected either the acceptance of the risk or the hazard assumed. 234 N.J. Super. at 293-94. After determining that Manzo's misrepresentations did not influence Mass. Mutual's acceptance of the risk, it further concluded that the false statements did not materially affect the "hazard assumed" by Mass. Mutual. Id. at 294. Under its construction of N.J.S.A. 17B:24-3(d), "the hazard assumed . . . includes the requirement that there be a causal connection between the insured's false statements and the ultimate cause of death." Id. at 294. In so construing the statute, the court implicitly rejected, without citing, the earlier decision of another panel of the Appellate Division that "emphatically reject[ed] the . . . suggestion that there must be a causal relationship between an applicant's false statements and the cause of his death [to prevail in an action to] rescind a life policy [because of] . . . equitable fraud." Formosa [v. Equitable Life Assurance Soc'y], 166 N.J. Super. [8,] 22 [(App. Div.), certif. denied, 81 N.J. 53 (1979)].
By requiring a causal connection between the disability misrepresented and the insured's death, the decision below conflicts not only with Formosa, but also with the general rule that "in the absence of a statute establishing a different rule, there need be no causal connection between the cause of death and the misrepresentation." Couch, supra, § 37:110 at 632. This rule is accepted by a majority of jurisdictions. Couch, supra, §§ 37:87 at 102 and 37:110 at 632; Appleman, supra, § 245 at 125; R. Keaton and A. Widiss, Insurance Law, A Guide to Fundamental Principles, Legal Doctrines and Commercial Practices 572 n. 20 (West 1988) (the "clear majority rule" is that no causal connection is required); see, e.g., Shafer v. John ...