Appellate Court of Illinois, First District

In Knezovich v. Hallmark Ins. Co., -- N.E.2d --, 2012 WL 3191964 (Ill. App. Aug. 3, 2012), the Appellate Court of Illinois, First District, concluded that a renter pilot exclusion barred coverage for the estate of a student pilot who had rented an aircraft for a solo flight.

The underlying claim arose from wrongful death lawsuits filed in the wake of a fatal midair collision of two aircraft. The first aircraft was a Cessna operated by a student pilot who had rented the aircraft from Franklin Aviation, Inc. for a solo flight without passengers or an instructor. The second aircraft was a Cirrus operated by a pilot accompanied by one passenger. Franklin Aviation’s insurer, Hallmark Insurance Co., initially sought a declaratory judgment in Wyoming that it had no duty to defend and indemnify the estate of the student. However, it dismissed that action in favor of an Illinois action brought by the estate of the passenger.

The policy Hallmark issued to Franklin Aviation included a “Who Is Not Protected’ section providing that the policy did not cover a “renter pilot with respect to any occurrence arising out of the operation of the aircraft by a renter pilot.” However, a separate section of the policy also provided that it did not cover “[p]roperty damage or bodily injury if the aircraft is being operated in flight by a Student Pilot with passengers unless a passenger is a pilot acting as pilot in command.”

The passenger’s estate argued that the two provisions were ambiguous when read together because the student could be classified as either as a renter pilot, who would be excluded under the “Who Is Not Protected” section, or a student pilot without passengers, who one could infer is covered from reading the exclusion of coverage only for student pilots with passengers. Both sides moved for summary judgment on the issue of coverage. The trial court agreed with the passenger that the policy was ambiguous and that the student’s estate was owed defense and indemnity. Hallmark appealed.

The court held that the policy was not ambiguous and there was no coverage for the student-renter. According to the court, the provisions excluding renter pilots from the scope of who is an insured, and the provision excluding coverage for loss resulting from student pilots flying with passengers did not conflict because they addressed two separate issues. The provision concerning rental pilots concerned who is an insured, and the provision concerning student pilots with passengers concerned what risk is insured. Since the two provisions addressed different subjects, there was no ambiguity or conflict between the provisions and the renter pilot exclusion barred coverage for the estate of the student-renter.