Norris v. Insurance Co. of North America

PARKER, Judge. The sole question brought forward on this appeal is whether the court erred in granting defendant’s motion for a directed verdict. Plaintiffs contend that their evidence, when taken as true and when considered in the light most favorable to them, was sufficient to require submission of this case to the jury. We agree. Defendant contends the directed verdict in its favor was properly entered on the grounds, first, that plaintiffs’ evidence was insufficient to show any contract of insurance was in effect at the time of the accident, and, second, if plaintiffs’ evidence was sufficient to show the insurance was in effect, it did not insure the airplane which crashed. We first examine the contention that plaintiffs’ evidence was insufficient to show a valid contract of insurance was in effect at the time of the accident. The written policy, which bore the designation “Aircraft Policy ANM 17 97 05,” was on a printed form of defendant IN A. The printed attestation clause which immediately precedes the facsimile signatures of the President and of the Secretary-Treasurer is as follows: “In Witness Whereof, the company has caused this policy to be executed and attested, but this policy shall not be valid unless countersigned on the declarations page by a duly authorized agent of the company.” No countersignature of any authorized agent appears on the declarations page of the printed policy. There was evidence that Murray M. White was an authorized agent of INA and that the policy was in his possession when the fatal crash occurred on 13 December 1971. White testified that he forwarded the policy to Knit-Away on 7 January 1972 with a covering letter which bore his authorized signature, that the policy was not signed by him “through oversight,” and that it was his “intention to forward a signed insurance policy.” There is authority to the effect that “as countersigning is an evidence of delivery, it seems that a delivery by letter would be sufficient.” 1 Couch, Insurance 2d, § 8:17, p. 367. *99 There is also authority that “when the countersignature though made is delayed, the insurer is liable for the loss sustained prior to countersignature,” 1 Couch, Insurance 2d, § 8:14, p. 365; Annot., 22 A.L.R. 2d 984, 987 (1952) ; see Pruitt v. Insurance Co., 241 N.C. 725, 86 S.E. 2d 401 (1955). We do not, however, base our decision here upon a determination that the policy, as a completed document, was effective as of the date of the crash. In our opinion there was ample evidence to support a jury finding that a legally effective “binder” for the insurance was in existence on that date. “In insurance parlance, a ‘binder’ is insurer’s bare acknowledgment of its contract to protect the insured against casualty of a specified kind until a formal policy can be issued, or until insurer gives notice of its election to terminate. The binder may be oral or in writing.” Moore v. Electric Co., 264 N.C. 667, 673, 142 S.E. 2d 659, 664 (1965). Here, there was evidence that on 22 November 1971 the Treasurer of Knit-Away called Múrray White, who was an agent authorized to bind the defendant, INA, and told him to bind coverage effective 24 November 1971. There was evidence that White in turn instructed INA to bind coverage as of that date. There was also evidence that the particular type and amount of coverage had been discussed previously between officials of Knit-Away and White and between White and Chapoton, the underwriter employed by INA. That Chapoton considered the coverage bound is shown by the fact that he went forward with the preparation of the policy on the INA form customarily used by it for writing policies of aircraft insurance and that he mailed this to White even before receiving the signed application. We hold the evidence sufficient to support a jury finding that a legally effective “binder” or temporary contract of insurance was in effect when the fatal crash occurred. Where, as here, there is no standard form of aircraft insurance prescribed by statute, and in the absence of an express agreement to the contrary, the terms and provisions of such temporary contract of insurance are those of the policy ordinarily used by the insurance company to cover similar risks. 43 Am. Jur. 2d, Insurance, § 219, p. 280. This was the form sent by Chapoton to White and which, after the crash, White forwarded to Knit-Away. Even though not countersigned “on the declarations page,” it was competent in evidence to show the terms and provisions of the temporary contract of insurance or “binder.” *100 Defendant contends that any binder for insurance was conditioned upon Knit-Away accepting delivery of the insured aircraft on 24 November 1971, that the evidence shows that it did not accept delivery on that date or at any time thereafter, and that for. these reasons no binder became effective. We do not agree. While the aircraft was not delivered on 24 November 1971, there was evidence from which the jury could find that it was unconditionally delivered by the seller, Air Service, and accepted by Knit-Away on 7 December 1971. On that date the pilot for Knit-Away flew the plane away from the seller’s premises at Greensboro with all equipment called for in the purchase order installed in the plane and with no restrictions placed upon his usé of the aircraft by the seller. From this the jury could find that a final unconditional delivery of the plane had been made by the seller and accepted by Knit-Away, the lessee from the purchaser, at least as of 7 December 1971. We find nothing in the conduct of the parties as shown by the evidence in the record before us to support defendant’s contention that any insurance binder could become effective, if at all, only on condition that delivery of the plane be accepted by Knit-Away exactly on 24 November 1971. On the contrary, the more reasonable interpretation of the conduct of the parties is that the prospective insureds, Bruce as owner and Knit-Away as lessee, wanted insurance coverage, and INA agreed to provide such coverage, from the instant the plane was delivered by the seller, and that although all parties expected this to occur on 24 November 1971, they were not making delivery as of that exact date a condition precedent to any binder for insurance ever becoming effectivé. Defendant contends that the binder was not effective because there was no meeting of the minds of the parties as to the amount of the admitted liability coverage. In this connection the parties stipulated that on- or about 1 December 1971 Brenda Coggins, an employee of Murray M. White, Inc., told Chapoton of INA in a telephone conversation that the amount of the. admitted liability coverage should be $50,000.00 per seat. The policy No. ANM 17 97 05 as prepared and mailed by Chapoton before he received the written application showed that amount. There was ample evidence, however, that White, an authorized agent representing INA, at all times had a clear understanding with the officials of Knit-Away that the coverage was to be in the amount of $100,000.00 per seat, and the application dated 2 December 1971 which was prepared by White, agent for INA, *101 and signed by Parker, agent for Knit-Away, showed $100,000.00 per seat coverage. White had authority to bind IN A, and all of the evidence shows that he and the officials of the insured, Knit-Away, were in complete agreement as to the amount of the coverage. In addition, White testified that as soon as he received the written policy on 10 December 1971, three days before the crash, he notified IN A of the mistake in the amount of the admitted liability coverage shown in the policy and on the day of the crash Chapoton confirmed to him there was “no problem” as to the. amount of coverage and that “you have got the $100,000.00.” Viewing the evidence in the light most favorable to the plaintiffs, as we are bound to do in reviewing the trial judge’s Order which granted defendant’s motion for a directed verdict, it is clear that .the jury could legitimately find from the evidence that there was a meeting of the minds of the parties before the crash that the amount of the admitted liability' coverage was to be $100,0.00.00 per seat. Finally defendant contends there was no valid contract of insurance in effect because the named insureds, Bruce and Knit-. Away, did not have an insurable interest in the aircraft identified in the policy, No. N9280Q, at the time of the crash. In support of this contention defendant points to the evidence that no bill of sale for the aircraft was executed by the seller, Air Service, and the aircraft was never registered in the name of Bruce or Knit-Away with the Federal Aviation Agency. However, in the present case we are concerned only with liability insurance coverage, and “[t]he insurable interest in such cases is to be found in the interest that the insured has in the safety of those persons who may maintain, or the freedom from damage to property which may become the basis of, suits against him in case of their injury or destruction.” 3 Couch, Insurance 2d, § 24:159, p. 273; Annot., 1 A.L.R. 3d 1193 (1965). Thus, “[a]n insurable interest in the property covered by liability insurance is usually not required, in the same sense as in property insurance, since the risk insured against is not based on ownership of property, but upon loss and injury caused by its use for which the insured might be liable.” 7 Appleman, Insurance Law and Practice, § 4253, p. 11. In general, therefore, the trend of modern court decisions is to hold that for purposes of vehicular liability insurance “no legal or equitable interest in the insured vehicle as property is necessary, but it is enough that the insured may be held liable for damages incident to its operation and use.” Annot., 1 A.L.R. 3d 1193, § 3, p. 1197 (1965). *102 Defendant points to the following language in Item 8 of the Declarations of Policy No. ANM 17 97 05: “Item 8. (a) Except with respect to bailment, lease, conditional sale, mortgages, or other encumbrance the named insured is the sole owner of the aircraft; . . immediately below which appears: “Exception, if any, to (a) or (b) none.” Defendant contends this language in the Declarations imposes a contractual requirement that ownership of the aircraft must be vested in the insureds as a condition precedent to imposing any liability upon the insurer, citing Younts v. Insurance Co., 281 N.C. 582, 189 S.E. 2d 137 (1972). That case is distinguishable. In Younts, which involved an automobile liability policy, the policy provided that the insurance company should pay on behalf of the insured all sums which the insured should become legally obligated to pay arising out of the ownership, maintenance or use of the “owned automobile.” 281 N.C. at 585. Stressing this provision, our Supreme Court held that the policy in that case was a contract between the insurance company and the owner of the vehicle involved and that since the person against whom plaintiff had obtained judgment was not the owner, plaintiff could not recover from the insurance company. In the policy before us in the present case, the defendant insurance company agreed to pay under Coverage G of the policy all sums which the insured should become legally obligated to pay arising out of the ownership, maintenance or use of the aircraft “as described in this 'policy.” (Emphasis added.) Thus, the language in which the effective insuring agreement is expressed in the policy before us does not limit the agreement to one between the insurer on the one hand and the owner of the vehicle insured on the other, at least insofar as the liability insurance provided by Coverage G is concerned. In our opinion Item 8(a) of the Declarations quoted above is relevant to the insurance provided by Coverages A, B and C in the policy, which provided insurance against physical damage to the insured plane itself. For that type of coverage, ownership of the insured property is relevant to show an insurable interest. For the reasons stated above, ownership is not as relevant to establish an insurable interest in the case of liability insurance coverage. Furthermore, if it be conceded arguendo that ownership in the named insureds of the aircraft described in the policy *103 was a condition to any obligation on the part of defendant insurance company even insofar as liability insurance coverage is concerned, there was in this case sufficient evidence from which the jury could find that the insureds, Bruce as lessor and Knit-Away as lessee, had become the owners of the aircraft described in the policy at the time the crash occurred. As above noted, there was evidence that by 7 December 1971 the seller, Air Service, had fully completed all work called for in the purchase order and that on that date it unconditionally delivered the plane to Knit-Away’s pilot, who then took the plane and flew it away from the seller’s premises. G.S. 25-2-401 (2) contains the following: “(2) Unless otherwise explicitly agreed title passes to the buyer at the time and place at which the seller completes his performance with reference to the physical delivery of the goods, despite any reservation of a security interest and even though a document of title is to be delivered at a different time or place. ...” Execution of a bill of sale by the seller and recordation of ownership with the Federal Aviation Agency as provided for in Title 49 U.S.C. § 1403(a) was not essential to transfer of ownership. See Annot., 22 A.L.R. 3d 1270 (1968). Subsection (c) of 49 U.S.C. § 1403 expressly provides that “[n]o conveyance or instrument the recording of which is provided for by subsection (a) of this section shall be valid in respect of such aircraft . . . against any person other than the person by whom the conveyance or other instrument is made or given, his heir or devisee, or any person having actual notice thereof. . . .” The clear implication of this language is that the conveyance, even though not recorded, is valid as against the person making the conveyance and against any person having actual notice thereof. Moreover, although 49 U.S.C. § 1403 is controlling over state laws as to the manner in which recordation of conveyances and encumbrances on aircraft are to be made, state law is to be applied in determining the inherent validity of such conveyances and encumbrances. See cases cited in Annot., 22 A.L.R. 3d 1270, § 4, p. 1277, et seq. In this State a bill of sale or other document is not necessary to transfer of title to personal property, at least absent some statute, such as our motor vehicle law, applicable to the particular type of property involved. We have no statute applicable particularly to aircraft, and we find G.S. 25-2-401 (2) above cited, which is applicable to sales of “goods” generally, to be here controlling. *104 Defendant’s argument that the insureds, Bruce and Knit-Away, were not the owners of the aircraft described in the policy because it was not “registered” in the name of either as required by 49 U.S.C. § 1401 is not persuasive. Subsection (f) of § 1401 expressly provides that “ [r] egistration shall not be evidence of ownership of aircraft in any proceeding in which such ownership by a particular person is, or may be, in issue.” Moreover, whether the purchased aircraft could, or could hot, be lawfully operated prior to its registration by its owner as provided in Title 49 U.S.C. § 1401(a) simply has no bearing on the question of defendant’s liability under its contract of insurance. Nothing in that contract, as evidenced by the Policy ANM 17 97 05, excludes liability on the part of the insurer for any unlawful operation by reason of failure to comply with the registration requirements of 49 U.S.C. § 1401. Additionally, we point out that the newly purchased plane was not the plane which crashed and was not being then operated. Evidence that following the'crash Bruce, the purchaser, agreed with Air Service, the seller, to forfeit his $5,000.00 down payment and to allow Air Service to sell the plane No. N9280Q to another is not controlling on the question of ownership of the plane at the time of the crash. Bruce testifiéd that after the crash “there was a great reluctancy to fly by most employees of Knit-Away,” and for that reason he met with the President of Air Service in January 1972 and agreed for them to sell the airplane. This evidence confirmed, rather than negatived, the prior ownership in Bruce at the time of the crash. We hold plaintiffs’ evidence sufficient to show a valid contract of insurance in effect at the time of the crash. We now examine defendant’s contention that the evidence failed to show that the aircraft which crashed was a “Substitute Aircraft” within the meaning of that contract. There was evidence that the plane which crashed, N4877J, was the same model and type and of no greater seating capacity than the plane, N9280Q, described in the policy. There was evidence that it was certificated by the Federal Aviation Agency and that it was not owned by the named insured. Thus, from the evidence the jury could find that N4877J was “another fixed wing aircraft” of the type to meet the requirements of paragraph Í0 of the policy conditions for being a “Substitute Aircraft.” There was evidence from which the jury could find that prior to the crash of N4877J, plane N9280Q- had been placed *105 in “normal use” by the insureds. The policy provided that the purposes for which the plane described therein was to be used was “Industrial Aid,” which was defined in the policy as “personal, pleasure, family and business uses, and transportation of executives, employees, guests and customers, excluding any operation for which a charge is made.” As heretofore noted, there was evidence that on 7 December 1971 Marshall Parker, an employee of the named insured, Knit-Away, accepted unconditional delivery of N9280Q and flew away in it from the seller’s premises at Greensboro. Clearly, that flight alone involved transportation of an employee, one of the uses within the policy definition of “Industrial Aid” use. If the defendant insurance company desired the words “normal use” as contained in paragraph 10 of the policy to have a more restricted meaning than the broad definition of “Industrial Aid” use, which was the stated purpose for which the insured aircraft was to be used as set forth in the policy, then clearly it was incumbent upon the insurance company, which drafted the policy, to make that more restricted meaning clear. It is an established rule of construction that an insurance policy prepared by the insurer is to be construed most liberally in favor of the insured, and in case of ambiguity a construction will not be adopted that will defeat recovery if the policy is susceptible of a meaning that will permit recovery. 43 Am. Jur. 2d, Insurance, § 271, p. 329, et seq. There was also evidence from which the jury could find that at the time of the crash, the plane N9280Q had been “withdrawn from normal use” because of its “repair” or “servicing” within the meaning of paragraph 10 of the policy. Our Supreme Court stated in Insurance Co. v. Insurance Co., 279 N.C. 240, 182 S.E. 2d 571 (1971), speaking concerning a substitution provision in a policy of automobile liability insurance, that such a provision should be construed liberally in favor of the insured if any construction is necessary and that the terms of such a provision should be given their everyday man-in-the-street understood meaning. The evidence in the present case shows that by 9 December 1971 N9280Q was returned to Air Service so that a radio master switch could be installed and a circuit altered in order to allow a boom mike of a different type than that for which it was originally designed to be operable. These operations constituted “repair” and “servicing” within the everyday man-in-the-street understood meaning of those terms. That these operations had been completed on Friday, 10 December 1971, *106 and that Richard Austin, an employee of Air Service had checked them out and had notified Marshall Parker on Sunday afternoon, 12 December 1971, that the work had been satisfactorily completed, does not require a holding that the plane N9280Q was, as of the moment of such notification, no longer “withdrawn from normal use.” The more reasonable construction of paragraph 10 is that the insureds should have a reasonable period of time after being notified that repair and servicing of their plane had been completed within which to pick it up and that in the meantime the plane which they were using in its place was still being “temporarily used as the substitute for such aircraft” within the meaning of paragraph 10. We hold that plaintiffs’ evidence was sufficient to support a jury finding that at the time the crash of N4877J occurred on the morning of 13 December 1971, it was being temporarily used as a “Substitute Aircraft” for the plane described in the policy within the meaning of paragraph 10 of the policy. Accordingly, the judgment appealed from which allowed defendant’s motion for a directed verdict is Reversed. Judges Hedrick and Clark concur.