In Trishan Air, Inc. et al. v. Federal Insurance Co., et al., 635 F.3d 422 (9th Cir. 2011), the Court addresses whether or not an insured, in this case a Part 91 Operator, can invoke the doctrine of substantial compliance with a pilot training warranty provision in the insurance policy to receive coverage.
Background
On June 10, 2007, a Dassault Falcon 900 jet was set to depart Santa Barbara Municipal Airport for Tampa International Airport. The aircraft had 2 crew members and 13 passengers. Due to a miscalculation in the gross takeoff weight by the second in command (SIC) pilot, the V-speeds were erroneous. As an accompanying error, the stabilizer trim was more than 2 degrees outside the recommended setting for takeoff. Upon reaching Vr, the captain pulled back on the yoke with no response. The captain released the back pressure and the aircraft sped up past the 130-knot mark and the captain again pulled back on the yoke again with no response. Power was reduced and maximum braking was applied. Nonetheless, the airplane departed the end of the runway and impacted a berm. The accident did not result in any fatalities but the aircraft received significant damage.
Prior to the accident, Trishan Air Inc. (Trishan) purchased an insurance policy from Federal Insurance company (Federal) to cover its fleet of jets. At the policy quote stage, Trishan requested that the insurance policy provide coverage for its SIC pilots as long as they met the minimum qualifications set forth in FAR Part 61.55. Trishan was informed by the underwriter that such a policy was not possible. Instead, the underwriter submitted a quote to Trishan that encompassed a pilot training warranty whereby the SIC pilots were required to complete ground school, flight school, and accrue time in a full motion simulator for the make and model of the covered aircraft they would fly in addition to the qualifications set forth in Part 61.55. When the policy of insurance was issued, it included a pilot warranty endorsement containing the more stringent requirements.
Subsequent to the accident, Federal denied coverage for the accident because the SIC at the time of the accident never attended any formal course (ground or flight) relative to any Falcon aircraft in violation of the pilot warranty endorsement in Trishan’s policy. The District Court granted Federal’s motion for summary judgment holding that Federal’s denial of coverage comported with California law.
Court’s Analysis
On appeal, Trishan argued that it was not required to strictly comply with the pilot training warranty to receive coverage. Trishan cited McKenzie v. Scottish Union & Nat’l Ins. Co., 112 Cal. 548 (Cal. 1896) to support the contention that substantial compliance with a warranty merits coverage by the insurer. The Court discounted Trishan’s argument on the basis that compliance with a warranty in an insurance policy is a fundamental component to the risk being evaluated. The Court held that pilot qualifications and experience are obviously factors bearing directly on the risk the insurer is underwriting. Thus, if Trishan were allowed to advance the sufficient compliance argument then there would be no effect whatsoever to the warranty provision in the insurance policy requiring a certain level of proficiency to merit coverage. For emphasis, the Court opined, “If adopted, the practical effect of Trishan’s proposition would be significant, as it would permit an insured to universally assert that only substitute performance, based on the insured’s subjective selection, would be necessary to receive coverage.” In effect, Trishan’s argument sought to rewrite public policy with respect to insurance contract interpretation, which is a step the court rightfully was not willing to take.
The Court went on to demonstrate how Trishan’s actions/inactions failed to merit consideration as substantial compliance. In this instance, the SIC had not received any formal ground school, flight time instruction, or time in a Falcon 900 flight simulator. It is important to note that the captain on the accident flight was also the Chief Pilot whose job duties included making sure that all of the SICs were qualified in make and model prior to dispatch for flights. Not surprisingly, the Court concluded that Trishan had not taken any steps to make sure that the accident SIC met any provision of the pilot training warranty. The cases cited supporting Trishan’s substantial compliance argument contain one common denominator- the fact that the insureds in the referenced cases complied with at least some of the specific requirements at issue. California courts have rejected substantial compliance arguments where the insured completely failed to comply with a warranty or condition. Trishan’s struggle to use the substantial compliance argument was destined to fail, just like the takeoff roll of its Falcon 900 with the improperly trained SIC.
For more information on how the Trishan Air, Inc. case impacts your operations, contact Ronnie Gipson by email at Gipson@higagipsonllp.com or telephone at 415.692.6523.
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