In October 2010 an Alberta master made a perverse decision regarding the interpretation of an aviation insurance policy (for further details please see "Aviation insurance policy gets narrow interpretation"). This decision has now been overturned on appeal.(1)
On August 19 2006 Nicholas Gudzinski was killed when he crashed his Cessna Cardinal. At the time of the accident he held a private pilot's licence, but his medical certificate had expired. His wife, as executor of his estate, sought recovery for damages to the aircraft from the insurer, Allianz Global Risks US Insurance Company.
Allianz denied coverage on the basis that Gudzinski did not have the requisite authority to operate the aircraft on the fateful day because his medical certificate was invalid. The policy wording provided that "insurance applies [where the insured] has the required licence or endorsements to fly [the] aircraft".
On a motion, the plaintiff's counsel managed to persuade an Alberta master to apply the contra proferentem rule (ie, that any ambiguity in the contract will be construed against the party that drafted the contract) and conclude that the loss was covered. The policy wording, it was said, required the insured to hold a licence; it did not specify that the medical certificate must be valid. Allianz appealed.
On appeal, Allianz was permitted to lead new evidence of the wording that appears on the face of a Canadian private pilot's licence. In particular, this language states that "[t]his licence is valid only for the period specified in the Medical Certificate… which must accompany this licence".
In addition, Allianz was allowed to lead new evidence that the following language appears on an aviation medical certificate in Canada: "This certificate is part of a Personnel Permit or Licence issued under the Canadian Aviation Regulations. It constitutes medical validation and must be carried with the Permit or Licence it validates."
At the appeal, Allianz argued that the insurance policy must be interpreted within its "factual matrix", in the context of the circumstances in which the contract was entered into. Its position was that there was no ambiguity in the insurance contract and, as a result, the doctrine of contra proferentem did not apply.
In effect, Allianz's submissions were focused on the fact that the policy wording 'required licence… to fly"' should be interpreted as "licence to fly required by law", and that without the valid medical certificate Gudzinksi was unable to operate the aircraft legally.
Allianz also argued that it was absurd and contrary to public policy to find that Gudzinksi should be insured for illegal activity, relying on the dicta from Consolidated Bathurst Export Ltd v Mutual Boiler & Machinery Insurance Company ( 1 SCR 888), in which the Supreme Court of Canada held that:
"the courts should be loath to support a construction which would either enable the insurer to pocket the premium without risk or the insured to achieve a recovery which could neither be sensibly sought, nor anticipated at the time of the contract."
The estate's argument was a simple one. Its position was that the insurance policy required only that the insured have a licence - and in this case he did. There was an attempt to make the distinction between having a licence and having the ability to exercise the licence. In this regard the estate argued, albeit unconvincingly, that the insurer's main concern was that the insured should have the knowledge and ability to fly. The insurer was not so concerned that the insured should be able to exercise continuously the privileges of his licence.
The appellate court was not persuaded. It concluded that the wording on the licence and the medical certificate (which was not available to the master) was unambiguously an integral link to the private pilot's licence.
Justice Browne noted that "it stretches the bounds of common sense to find that an invalid licence is still a licence and that insurance coverage is valid".
He went on to note that Gudzinski had been a pilot since 1993 and the owner of an aircraft for some time. In addition, he had obtained medical certificates in the past. Therefore, he held that it was appropriate to presume some basic knowledge of the requirements of the relevant regulations.
In the end, the court found that the master hearing the original motion had erred in law and, as a result, the appeal was allowed.
For further information on this topic please contact Carlos P Martins at Bersenas Jacobsen Chouest Thomson Blackburn LLP by telephone (+1 416 982 3800), fax (+1 416 982 3801) or email ([email protected]om).
(1) Gudzinski Estate v Allianz Global Risks US Insurance Company, 2011 ABQB 283.