On Christmas Day, 2008, a VANS R/V 7A Aircraft impacted terrain near Greensboro, North Carolina, killing the pilot and seriously injuring his wife.

VMC meteorological conditions prevailed at the time and there does not appear to have been any mechanical anomalies with the accident aircraft.  It was destroyed in the accident sequence.  By all eyewitness accounts, including that of the survivor, the event appears to have been nothing more than a classic arrival stall on the base to final turn.  That is to say, pilot error caused the accident.

The PIC had earlier reported to ATC a hot cylinder, cancelled his IFR flight plan, and advised ATC that he was proceeding to the nearest airport for a precautionary landing.  Sadly, the aircraft failed to make the runway and crashed about one quarter mile short of it.  The surviving spouse spent the next four (4) months in a trauma unit and suffers to this day from her injuries.

Ordinarily, such an incident would prompt a rather quick investigation by the aircraft's insurer and settlement of claims made by the spouse and the estate of the decedent pilot.  Not this time.

The Pilot

While the accident aircraft was a fine example of the R/V 7A design and meticulously maintained by the PIC/Owner, he took a less rigorous view of his obligations under the Federal Aviation Regulations.  Indeed, at the time of the accident, the PIC's third-class medical certificate was expired by almost two (2) months; he had not had a biannual flight review in the proceeding Twenty-Four (24) months; the accident aircraft was out of annual; and it was well over its maximum gross take-off weight.

To make matters worse, the airman had been extensively examined and treated for hypertension over the preceding ten (10) years.   Consistent with his other regulatory behavior, he had indicated "none" of this on his FAA Form 8500-8 or the Application for his Third Class Medical Certificate - then expired at the time of the accident.  In fact, the airman specifically indicated in box 18.g. of the Form that he had "no" heart or vascular trouble.  He as well indicated in box 17.b. of the Form that he was not using any medication.  Whether this was an oversight or deliberate is and will remain a mystery and reasonable minds will differ as to the appropriate conclusion.  But one thing is clear - this airman well knew that he had a troublesome heart and that he was in violation of numerous Federal Aviation Regulations at the time of the accident.

Following the accident, the local medical examiner performed an autopsy upon the deceased airman.  Although numerous blunt force injuries caused the PIC's death, the post-mortem revealed that the he suffered from advanced heart disease and noted the presence of Atenolol in his blood - a commonly prescribed hypertension medication.  Although there existed no objective evidence that the airman suffered a heart attack during the accident flight or was otherwise experiencing any heart anomalies at the time, the medical examiner made the baffling and gratuitous remark at the conclusion of his report that "acute disrhythmia or myocardial infarction may have been a contributing cause in the accident."  Needless to say, the insurer had significant reservations about paying the claim of the surviving spouse and with good reason.

The Insurance

The surviving spouse, on her own behalf and on behalf of the estate of the airman, made a claim under the policy of aviation insurance purchased by him.  The policy contained three (3) basic forms of coverage - hull insurance, liability to others, and medical expenses.  Regardless of coverage, all policies of insurance often contain "exclusions" to the coverage offered.   This airman's policy was no exception.  It specifically excluded coverage if the pilot did not have (1) a valid medical certificate; (2) a legally required flight review; (3) or if the aircraft did not have a valid and current condition inspection at the time of the accident.  In terms of behavior that would cause an insurer to invoke its exclusions, this accident pilot had achieved near-perfection.

Shortly after making her claims against the policy, the surviving spouse received a "reservation of rights" letter from the insurer.  Not surprisingly, the insurer noted the various discrepancies with the accident pilot's records and cited the numerous of policy exclusions that it believed were applicable.

The Law

An insurance policy is nothing more than a contract.  As such, its making, interpretation, and enforcement are ordinarily governed by state substantive law.  And on that point, there exists a significant split of authority on the applicability of policy exclusions.

The first view is typified by the Supreme Court of New Mexico in Security Mut. Casualty Co. v. O'Brien, 99 N.M. 638 (1983).  In O'Brien, the insurer denied coverage after its insured aircraft suffered an in-flight collision with another aircraft.  The insurer's post-accident investigation revealed that its insured aircraft was out of annual.  The policy in question excluded coverage unless the insured aircraft's "airworthiness certificate was in full force and effect" at the time of the loss.  O'Brien, 99 N.M. at 639.  The insurer took the view that an annual inspection was necessary to ensure that the aircraft's airworthiness certificate was in "full force and effect."  Because it was not, the insurer argued, the policy exclusion applied and it had no liability to the insured.

Quoting Glades Flying Club v. Americas Aviation & M. Ins. Co., 235 So.2d 18 (Fla.App.1970), the court stated that "an aircraft insurance policy may validly condition liability coverage on compliance with a governmental regulation and, while non-compliance with such a regulation continues, the insurance is suspended as if it had never been in force."  99 N.M. at 640.

The Court further observed that "the policy behind such exclusions is clear and unambiguous. The exclusions encourage aircraft owners to obtain annual inspections of their aircraft in order to be certified by the F.A.A. under current applicable Federal Aviation Regulations. These regulations prohibit an aircraft owner from flying his aircraft unless an annual safety inspection is performed. ... The subject insurance polic[y] clearly den[ies] coverage when an aircraft is not validly and currently certificated ... Because no annual inspection was performed on [the insured] aircraft, the [airworthiness] certificate lapsed and the policy exclusion was properly invoked. To hold otherwise, we would have to rewrite the regulations or the insurance policy. This we will not do."  Id. (Internal citations omitted.).  And indeed it did not, finding in favor of the insurer.

For his part, the insured in O'Brien unsuccessfully urged a different view - a view shared by jurisdictions such as South Carolina.  So called "causal connection" states, their courts take the position that in order to invoke an exclusion and avoid liability under a policy of insurance, the insurer must show that there exists a causal connection between the resulting loss and the policy exclusion claimed by the insurer.

In South Carolina Ins. Co. v. Collins, 269 S.C. 282 (1977), for example, the insured crashed his Piper aircraft killing himself and seriously injuring a passenger.  The policy of insurance in question required the accident pilot to have, among other things, a valid FAA-issued medical certificate in order for coverage to be effective.  He did not. The insured's Third Class Medical Certificate was expired at the time of the accident.  On that basis alone, the insurer denied the claims of the decedent pilot's estate and those of the injured passenger. The parties agreed, however, that the accident pilot's lack of a valid medical certificate did not in any way contribute to the loss.

After a protracted legal battle, South Carolina's highest court sided with the insured stating that "when the parties made the contract of insurance, they were not inserting a mere arbitrary provision, but that it was the purpose of the insurance company to relieve itself of liability from accidents caused by the excluded condition. And there is no more reason that the parties to the contract of insurance would arbitrarily exclude liability under a certain condition than they would arbitrarily exclude liability in the commission of a certain act."   Collins, 269 S.C. at 291. (Emphasis added.).  In other words, the Court took the view that in order for an insurer to escape liability under a given exclusion, the risk of loss contemplated by the exclusion and not assumed by the insurer must have played a role in the loss before the insurer can invoke the exclusion and escape liability. 

While the South Carolina court did not articulate any public policy reasons for its decision, the Supreme Court of Texas noted in a similar case that  "[i]t is well established that insurance policies are [to be] strictly construed in favor of the insured in order to avoid exclusion of coverage. That rule does not apply, however, when the term in question is susceptible of only one reasonable construction.  Such is the case here. The insurance policy says in plain language that "there is no coverage under the policy if the aircraft . . . airworthiness certificate is not in full force and effect." When there is no ambiguity, it is the court's duty to give the words used their plain meaning.  This policy did not require a causal connection between the breach of the policy and the accident." Puckett v. U.S. Fire Insurance Co., 678 S.W.2d 936, 938 (1984)(Internal citations omitted.).

Seemingly poised to rule against the insured, the Texas Court went on to say that "[t]he question remains, however, whether the clause as interpreted violates the public policy of this state. [The insured] contends that allowing an insurance company to avoid liability when the breach of contract in no way contributes to the loss is unconscionable and ought not be permitted. We agree.  Here, the accident was caused by something - pilot error - unquestionably covered by the policy. It would be against public policy to allow the insurance company in that situation to avoid liability by way of a breach that amounts to nothing more than a technicality. If we held otherwise it would actually be to the insurer's advantage that the insured failed to renew the airworthiness certificate. In such event, the insurer would collect a premium but would have no exposure to risk because the policy would no longer be effective."  Id. Because the insurer did  not argue that the accident pilot's lack of a valid medical certificate in any way contributed to the accident, the Court ruled in favor of the insured on the public policy grounds articulated in its opinion.

The Outcome

Did the insurer deny coverage in the case of the Christmas crash?  In light of the fact that the insured seemingly violated the Federal Aviation Regulations and the terms of his insurance policy by the numbers, one would reasonably conclude "no."  This is especially so in light of the fact that there appeared to be, at some level, a causal connection between the loss and the absence of a valid medical certificate - the latter of which was a specific prerequisite for coverage under the policy.  Recall that there was at least some evidence, albeit thin, that the insured's condition may have contributed to the accident and to the loss.

Despite a spirited, but respectful, back and forth between counsel for the insured and for the insurer, full coverage was provided and the surviving spouse received the benefits of the policy.  These were not insubstantial and quite necessary for the financial security of the insured's family.

Naturally, the question "why" is begged.  The insurer did not provide an answer and the insured did not ask.  A confidential settlement agreement ensued and the parties went their separate ways.  While the surviving spouse will continue to suffer the consequences this accident for the remainder of her life, the conduct of this insurer gave her one less hill to climb of the many she still must.

The Lessons

No aviation accident fails to teach.  As for this one, several lessons can be gleaned and most are not new.  But like many good lessons, they bear repeating from time to time.

First, airmen and airmen's counsel alike must understand aviation insurance policies, how they work and the law applicable to them.  It makes little sense to purchase and represent insurance products that you do not understand.

Second, securing annual inspections, medical certificates and the like should not be viewed as mere nuisances, but as necessities.  This accident pilot's dearth of concern for the FARs and for the most fundamental obligations of aircraft ownership and operation left his family in a financially precarious situation.  His reasons for doing so are incomprehensible and likely indefensible.

Third, counsel for the insured should not by shy about pursuing a claim with the insurer, even if certain policy exclusions seem undeniably applicable.  Sometimes the courts can give back what the policy purports takes away.   Do not assume that a claim is doomed simply because the insured has not complied with the letter of the policy.  Doing so may leave a great deal of money on the table.

Finally, contrary to all the legally justifiable reasons, the insurer may indeed pay an otherwise deniable claim.   Compassion still exists in our society.  You just have to look for it and give it an opportunity to reveal itself.  Ours is a cynical profession and can lead us to be cynical about others, affecting both our judgment and attitude to the detriment of our clients and to our souls. 

Cynicism is a disease.  Fight it.  And in so doing, you just may bear witness to a miracle.