XI. INSURANCE COVERAGE

A. Bodily Injury Includes Death -- Fatal Air Crash Not Covered By Comprehensive General Liability Insurance

1. In National Union Fire Insurance Co. v. Dawn Aeronautics, Inc. No. 93-65-JJF (D.Del. Dec. 10, 1993), decedent died when he crashed an aircraft rented from the insured's flight school.

2. The decedent's estate noticed a claim to the insured and the insurer and the insured filed a declaratory relief action.

3. The insurer denied coverage under the insurer's comprehensive general liability insurance because the policy excluded bodily injury arising out of the ownership, maintenance, or use of the airplane.

4. The insured argued that the bodily injury exclusion does not apply since the policy did not specifically define bodily injury to include death.

5. The court rejected the insured's argument calling it illogical and contrary to a plain reading of the insurance contract.

B. Insured's Conversion Of Aircraft Results In Denial Of Claim

1. In National Union Fire Insurance v. Care Flight Ambulance, 18 F.3d 323 (5th Cir.), cert. denied., 115 S.Ct. 293 (1994), lessee sublet aircraft in violation of lease agreement. The aircraft was subsequently seized by the Colombian government for an airspace violation. The lessor's insurer paid for the loss of the airplane and then filed a subrogation action against the lessee's insurer.

2. The court held that the lessee was not covered by insurance because the unauthorized sublease resulted in a conversion of the aircraft. Accordingly, the policy's breach of warranty endorsement which excluded losses from conversion barred coverage.

C. Pollution Exclusions Found Ambiguous And Subjective

1. In Smith v. Hughes Aircraft Co., 22 F.3d 1432 (9th Cir. 1993), Hughes Aircraft was sued by thousands of Tucson residents for claims arising from Hughes' alleged groundwater contamination. Hughes settled these claims in 1991 and sought indemnification from its insurance policy.

2. Under the terms of the policy in effect from 1956-1971, the court ruled that the insurer would have to prove that Hughes actually knew that its disposal of the solvent trichloroethylene was harmful or that harm from the disposal was substantially certain or highly likely to result. Thus, Hughes subjective knowledge was at issue and summary judgment on the exclusion contained in the 1956-1971 policy was inappropriate.

3. The policy in effect from 1971-1985 contained the standard aviation form AVN 46A pollution exclusion. Hughes argued that the exclusion applied only to aviation risks and not hazardous waste disposal. The court found the language ambiguous and reversed the lower court's finding of summary judgment on behalf of the insurer.

D. A Hot Air Balloon Is An Aircraft

1. In Coleman v. Charlesworth, 623 N.E.2d 1366 (Ill. 1993), the insured offered commercial sightseeing flights in hot air balloons. To protect his business he purchased aviation premises and products liability insurance for his business. During a flight a hot air balloon crashed into power lines resulting in passengers being injured and killed.

2. The court found that the aviation premises insurance did not apply to the crash because the policy only covered bodily injury or property damage "in or about the premises" and the crash occurred after the balloon had left the balloon port.

3. Although the aviation premises policy did cover bodily injury or property damage elsewhere, the policy excluded injuries which were caused by aircraft owned, used or operated by the insured. The court held that the hot air balloon was an aircraft and that the exclusion applied.

4. The court also found that the product's liability insurance did not apply because the policy only covered injury or damage arising from a good or product and the offering of a balloon ride is a service.