Insurance Policy Technicalities

Fort Worth insurance law attorneys and those in Hurst, Euless, Bedford, Grapevine, and other places in Tarrant County would be helping their clients by being aware of the case discussed here.
The case is an opinion issued by the Texas Supreme Court in 1984. The style of the case is, Jo Beth Warren Puckett et al. v. U.S. Fire Insurance Co. Here are some of the relevant facts and information of the case.
The case is a declaratory judgment action. The question presented is whether an insured’s failure to have his plane inspected need be the cause of an accident in order for the insurance company to avoid liability under an aviation policy for damages resulting from that accident. The trial court held that causation was not required and rendered summary judgment for, U.S. Fire Insurance Company. The court of appeals affirmed. The Texas Supreme Court reversed the judgments of both courts and remanded the cause for trial.
On July 18, 1981, a Cessna 337 aircraft jointly owned by Robert Holt and M. Hunter Puckett, and flown by Puckett, crashed near Pampa. Puckett and two passengers were killed, and a third passenger was seriously injured. U.S. Fire sued Holt and the administrators of Puckett’s estate, seeking a determination that it was not obligated to pay any damages or defend any claim arising out of the crash. The insurer relied on a clause in the policy suspending coverage “if the aircraft … airworthiness certificate is not in full force and effect.” Under federal law in effect at the time of the accident, the certificate was effective only so long as all maintenance requirements had been met. Those requirements included an annual inspection. The parties stipulated that no such inspection had been performed. Therefore, by virtue of federal regulation, the certificate had lapsed. The parties also stipulated, however, that the failure to have the plane inspected in no way caused the accident.
Most courts addressing the question have held that causation is not required for an insurance company to avoid liability on the basis of a breach of condition in an aviation policy.
The rule is by no means unanimous, however. Several courts have held that causation is required.
One commentator in an insurance law reference book written by J. Appleman, has referred to a causation requirement as the “modern trend.” Whether this is the modern trend is debatable. This Court does believe, however, that it is the better rule to require causation. Therefore, this court held that under the facts presented here, an insurer cannot avoid liability under an aviation liability policy unless the failure to inspect is either the sole or one of several causes of the accident.
It is well established that insurance policies are strictly construed in favor of the insured in order to avoid exclusion of coverage. This 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.
The question remains, however, whether the clause as interpreted violates the public policy of this state. Puckett contended 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. The Court agreed. 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 this situation to avoid liability by way of a breach that amounts to nothing more than a technicality. If the Court 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.
Moreover, under federal law, there are hundreds of requirements that the inspection must meet in order for an airworthiness certificate to be effective. Some of these are substantial, some technical. It would be virtually impossible for an insured to know whether his certificate was valid. The legislature passed an “anti-technicality” statute covering fire insurance policies. This is found in Texas Insurance Code, Section 862.054. The Court said the legislature’s action indicates the public policy of the state, and declined to hold to the contrary in this analogous situation.
U.S. Fire urges a number of cases that it claims have decided this question in its favor. In none of those cases, however, was the issue of causation raised.
On the other hand, the case, Robinson v. Reliable Insurance Co., is clearly distinguishable. In Robinson, this Supreme Court held that if an insured in an application for life insurance misrepresents the state of his health, the insurer need not show that the condition about which the insured made the misrepresentation contributed to the insured’s death. The reasoning in Robinson was that if the insured had not misrepresented his health, the company would never have issued the policy. Thus, the policy was void from inception. Here, the policy was valid from the beginning; the only question is whether the breach alleged can be used to suspend coverage. “We hold that under the facts of this case it cannot.”
The judgments of the trial court and the court of appeals were reversed, and the cause was remanded for trial.
This is one of the situations where an experienced Insurance Law Attorney can make a big difference for the insured trying to get his situation covered.