635 F.Supp.3d 667
E.D. Wis.2022Background
- Jadair owned a 1978 Cessna insured by ANPAC under Policy No. AC-01496-03 (6/18/2019–6/18/2020); David Schmutzler was the sole pilot and policyholder principal.
- Item 9 of the declarations required the pilot to have a current and valid medical certificate, a flight review, and a pilot certificate; an endorsement modified Item 9’s pilot-certificate/experience requirement and included the phrase “Otherwise, David Schmutzler.”
- Schmutzler held a special-issuance second-class medical certificate issued Aug. 2018 that expired Aug. 31, 2019; he had not regained a valid medical certificate at the May 15, 2020 crash that killed him and destroyed the aircraft.
- ANPAC investigated, reserved rights, and ultimately denied first-party coverage for physical damage and medical-expense claims based on the pilot-medical-certificate requirement.
- Jadair sued for declaratory judgment and bad faith denial of benefits; ANPAC counterclaimed for declaratory relief. The parties filed cross-motions for summary judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the endorsement excepted Schmutzler from the medical-certificate requirement | Endorsement language “Otherwise, David Schmutzler” and altered phrasing show the medical requirement was inapplicable to Schmutzler or the text is ambiguous and must be construed against ANPAC | Endorsement merely modifies pilot‑certificate/experience element; medical-certificate language remains a "must have" and Parts One/Two separately exclude failures of any Item 9 requirements | Court: endorsement did not except medical requirement; Item 9 and Parts One/Two are exclusions that incorporate the medical-certificate requirement and bar coverage for the loss |
| Whether Wis. Stat. § 631.11(3) requires ANPAC to prove that lack of medical certificate caused or increased the risk of the crash | § 631.11(3) prevents denial of benefits unless insurer proves failure increased risk or contributed to loss | Clause at issue is an exclusion (not a condition or promissory warranty), so § 631.11(3) does not apply; insurer need not prove causation | Court: § 631.11(3) does not apply because the provisions are exclusions, so ANPAC need not prove causation |
| Whether Wis. Stat. § 632.23 (prohibiting exclusions for operation in violation of air regulations) precludes ANPAC’s denial | Jadair implies public-policy limits on excluding violations of air regulations should block denial | ANPAC: § 632.23 applies to third‑party liability claims; does not bar first‑party contract exclusions for nonliability coverages | Court: § 632.23 does not apply to this first‑party physical‑damage claim; harmonization possible but statute does not control here |
| Whether Jadair stated a bad‑faith denial claim | Denial lacked justification because ANPAC could not prove causation/was wrong as a matter of law, so denial was in bad faith | ANPAC had a reasonable basis (policy exclusions) and reserved rights; wrongful denial is a prerequisite to bad‑faith claim | Court: Because denial was legally justified, bad‑faith claim fails; summary judgment for ANPAC |
Key Cases Cited
- Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (choice‑of‑law uses forum rules)
- American Family Mut. Ins. Co. v. Am. Girl, Inc., 673 N.W.2d 65 (Wis. 2004) (three‑step framework for insurance‑policy interpretation: grant, exclusion, exception)
- Bortz v. Merrimac Mut. Ins. Co., 286 N.W.2d 16 (Wis. Ct. App.) (distinguishing exclusions from conditions/warranties)
- Fox v. Catholic Knights Ins. Soc., 665 N.W.2d 181 (Wis.) (legislative history and application of Wis. Stat. § 631.11(3))
- Kutchera v. State Farm Fire & Cas. Co., 560 F. Supp. 3d 1242 (W.D. Wis.) (analysis applying § 631.11(3) and distinguishing exclusions from conditions)
- Ranger Ins. Co. v. Culberson, 454 F.2d 857 (5th Cir.) (policy‑text analysis of pilot‑qualification clauses)
- Griffin v. Old Republic Ins. Co., 133 P.3d 251 (Nev.) (authority upholding safety‑related aviation exclusions without causation requirement)