U.S. Specialty Insurance Co. v. Estate of John Charles Earley, 680 F. App'x 767

Background

U.S. Specialty issued an aircraft insurance policy to John Earley insuring a converted two-seat 1944 P-51D Mustang (originally single-seat) owned by Earley.
Prior owners added a rear seat with limited controls (stick, rudder pedals, throttle); many critical controls (landing gear, trim, fuel selector, prop pitch, brakes, hydraulics, starter/magnetos, fuel pump, electrical) remained accessible only from the forward seat.
On July 4, 2014, Earley (forward seat) and Michael Schlarb (rear seat instructor) took off for an instructional flight; the Mustang crashed shortly after takeoff, killing both men and destroying the aircraft.
U.S. Specialty sought a declaratory judgment that the Policy excludes coverage for claims arising from the crash, arguing (1) the Policy prohibited Earley from receiving instruction in the Mustang and (2) Earley was the pilot operating the aircraft in flight, which violated the Pilot Endorsement.
The Pilot Endorsement limited operation of the Mustang to named persons (Schlarb or Lenoch) and stated there is no coverage if the pilot does not meet requirements; “in flight” was defined but “operated” was not.
The district court granted summary judgment for U.S. Specialty, finding Earley (forward-seat occupant) was the only person who could “operate” the airplane given access to all necessary controls; the Tenth Circuit affirmed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the Policy covers claims when someone other than a named pilot "operated" the aircraft in flight	Estate: "the pilot flying the aircraft" in the endorsement means "pilot in command" (Schlarb), so coverage applies	U.S. Specialty: "operated" means who controlled the aircraft functions; only named pilots may operate, and Earley (not named) operated it	Affirmed: "operated" given ordinary meaning—control of functioning—and Earley, in forward seat with sole access to critical controls, operated the aircraft, so no coverage
Whether factual disputes (who had hands on controls) preclude summary judgment	Estate: lack of direct evidence about who touched specific controls creates a fact issue	U.S. Specialty: undisputed that Earley occupied forward seat and only forward seat had all controls needed to operate flight	Affirmed: no genuine dispute—legal conclusion based on undisputed seat/control allocation; summary judgment appropriate
Whether "pilot in command" designation controls endorsement interpretation	Estate: endorsement heading equates "pilot flying the aircraft" with FAA "pilot in command" so Schlarb (PIC) was covered	U.S. Specialty: the operative text requires the aircraft be "operated in flight only by a person shown below"—focus on "operated," not PIC label	Affirmed: heading irrelevant; operative language requires operation by named persons; PIC designation doesn’t alter coverage analysis
Whether the FAA-approved conversion/placard supports coverage for rear-seat operation	Estate: placard applies only to solo flights; rear-seat PIC can operate	U.S. Specialty: FAA approval required placard stating aircraft to be flown from forward seat only, supporting that only forward seat can operate	Affirmed: FAA approval/placard corroborates that forward seat is the only position with full operational control

Key Cases Cited

Zisumbo v. Ogden Reg'l Med. Ctr., 801 F.3d 1185 (10th Cir. 2015) (summary-judgment standard and view of evidence on appeal)
Hous. Gen. Ins. Co. v. Am. Fence Co., 115 F.3d 805 (10th Cir. 1997) (choice-of-law for insurance contract interpretation in diversity cases)
Cyprus Amax Minerals Co. v. Lexington Ins. Co., 74 P.3d 294 (Colo. 2003) (undefined insurance-policy terms given plain, ordinary meaning under Colorado law)
Compass Ins. Co. v. City of Littleton, 984 P.2d 606 (Colo. 1999) (same principle on construing undefined terms in insurance policies)
Nahno-Lopez v. Houser, 625 F.3d 1279 (10th Cir. 2010) (summary-judgment evidentiary principles on undisputed facts)