JADAIR INTERNATIONAL, INC., Plaintiff-Appellant, v. AMERICAN NATIONAL PROPERTY & CASUALTY COMPANY, Defendant-Appellee.
No. 22-3053
United States Court of Appeals For the Seventh Circuit
ARGUED MAY 25, 2023 — DECIDED AUGUST 9, 2023
Before EASTERBROOK, ROVNER, and LEE, Circuit Judges.
LEE, Circuit Judge. David Schmutzler was the owner and president of Jadair International, Inc. (“Jadair“). He was also a pilot with decades of experience. On Jadair‘s behalf, Schmutzler secured an aircraft insurance policy from the American National Property & Casualty Company (“American National“), covering a Cessna airplane owned by Jadair. Tragically, the Cessna crashed in May 2020, killing Schmutzler, who was piloting the plane. Jadair filed a claim on the policy. American National denied coverage because Schmutzler did not have a current and valid medical certificate from the Federal Aviation Administration (“FAA“) at the time of the accident. Jadair sued American National in federal court for payments due under the policy. The district court granted American National‘s motions for summary and declaratory judgment, holding that the policy unambiguously excludes coverage for any accident involving the Cessna where the pilot lacks a current FAA medical certificate. We affirm.
I. BACKGROUND
A. Insurance Policy and Accident
Schmutzler applied to American National for an insurance policy on the Cessna, FAA registration number N1JA, in 2019. The application listed Schmutzler as the Cessna‘s only authorized pilot.
American National issued the policy to Jadair on June 27, 2019. We will summarize briefly the provisions of the policy most relevant to this case.
First, Item Nine of the policy‘s Coverage Identification Page states:
The Aircraft must be operated in flight only by a person having the minimum qualifications shown below. The pilot must have a current and valid (1) medical certificate, (2) flight review and (3) pilot certificate with necessary ratings, each as required by the FAA for each flight. THERE IS NO COVERAGE IF THE PILOT DOES NOT MEET THESE REQUIREMENTS.
AS ENDORSED
This boilerplate provision is subject to the following Endorsement:
After the policy was bound and during the coverage period, on May 15, 2020, the Cessna crashed, killing Schmutzler, who was piloting the craft. It is undisputed that Schmutzler lacked a current and valid FAA medical certificate at the time of the accident (his previous certificate had expired). It also is undisputed that the accident was not caused by any health condition of Schmutzler‘s. It seems that the Cessna suffered a mechanical failure.
Jadair filed a claim on the policy. American National denied it, stating that the
B. Proceedings Below
Jadair sued American National in federal court, seeking a declaratory judgment that the accident was covered under the policy. American National counterclaimed for a declaratory judgment that the accident was not covered, and the parties filed cross-motions for summary judgment. The district court entered summary and declaratory judgment for American National, holding that the policy did not cover the accident because Schmutzler lacked a current and valid FAA medical certificate and the policy states that such a certificate is a requirement for coverage. Jadair Int‘l, Inc. v. Am. Nat‘l Prop. & Cas. Co., 635 F. Supp. 3d 667, 685 (E.D. Wis. 2022).2 Jadair now appeals.
II. DISCUSSION
Jadair raises multiple arguments on appeal. Principally, it contends that the policy, and more specifically the Endorsement, exempts Schmutzler from any medical-certificate requirement and, therefore, the district court erred when it held that Schmutzler‘s failure to comply with this requirement was a basis to deny coverage. Jadair also argues that, even if the medical-certificate requirement applies to Schmutzler, Wisconsin law requires American National to prove that Schmutzler‘s violation of the requirement increased American National‘s risk of loss or contributed to the accident. See
As we are sitting in diversity,3 we apply state substantive law and federal procedural law to resolve these issues. Santa‘s Best Craft, LLC v. St. Paul Fire & Marine Ins. Co., 611 F.3d 339, 345 (7th Cir. 2010). With respect to the former, the parties agree that Wisconsin substantive law governs. Jadair Int‘l, 635 F. Supp. 3d at 674-75.
As to the latter, this appeal comes to us from the district court‘s grant of summary and declaratory judgment for American National. A court “shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
We will treat the district court‘s grants of summary judgment and declaratory judgment together, since the parties do not differentiate between them, and both turn on the same questions of law.4 We review the district court‘s judgment de novo. REXA, Inc. v. Chester, 42 F.4th 652, 662 (7th Cir. 2022); Vanliner Ins. Co. v. Sampat, 320 F.3d 709, 711-12 (7th Cir. 2003).
With that, we turn to Jadair‘s arguments.
A. Whether the Policy Covers Jadair‘s Claim
To interpret insurance policies, Wisconsin courts employ the standard rules of contract construction. Strauss v. Chubb Indem. Ins. Co., 771 F.3d 1026, 1030 (7th Cir. 2014) (citing Marotz v. Hallman, 734 N.W.2d 411, 421 (Wis. 2007)). The goal of contract construction is to effectuate the intent of the contracting parties. Wadzinski v. Auto-Owners Ins. Co., 818 N.W.2d 819, 824 (Wis. 2012). To accomplish this goal, we will read the American National policy in accordance with its ordinary meaning, as that meaning would be understood “by a reasonable person in the position of the insured” (here, Jadair). Am. Fam. Mut. Ins. Co. v. Am. Girl, Inc., 673 N.W.2d 65, 73 (Wis. 2004).
If the relevant policy language is unambiguous, we will enforce it as written. Johnson Controls, Inc. v. London Market, 784 N.W.2d 579, 586 (Wis. 2010). If the policy language is ambiguous, Wisconsin law generally requires us to construe it in favor of the insured. Inter-Ins. Exch. of Chi. Motor Club v. Westchester Fire Ins. Co., 130 N.W.2d 185, 188 (Wis. 1964). But, before we do, we can try to resolve such ambiguities by relying on extrinsic evidence to cast light on the parties’ intent. Town Bank, 793 N.W.2d at 484.
In applying the law to the facts of this case, we employ the three-step framework laid out by the Wisconsin Supreme Court in American Girl. At the first step, “we examine the facts of the insured‘s claim to determine whether the policy‘s insuring agreement makes an initial grant of coverage.” Am. Girl, 673 N.W.2d at 73. If there is an initial grant of coverage, we will proceed to the second step, where we “examine the various exclusions [in the policy] to see whether any of them preclude coverage of the present claim.” Id. If a particular exclusion seems to preclude coverage, we will move to the third step, where we “look to see whether any exception to that exclusion reinstates coverage.” Id.
There is no dispute as to step one: the Cessna was the subject of American National‘s policy, and the policy makes an
Item Nine of the policy‘s Coverage Identification Page states that the Cessna must be operated by a pilot with a current and valid FAA medical certificate. It then explicitly states that “THERE IS NO COVERAGE” if the pilot lacks such a certificate. As Jadair rightly conceded at oral argument, this provision is an exclusion under Wisconsin law because it precludes coverage of an otherwise insured loss where the pilot of the Cessna does not have FAA medical certification. Progressive N. Ins. Co. v. Hall, 709 N.W.2d 46, 52 (Wis. 2006) (stating that an exclusion is “a provision that eliminates coverage under a particular policy where, were it not for the exclusion, coverage would have existed“). And, because Schmutzler undisputedly lacked a current and valid FAA medical certificate at the time of the accident, this exclusion precludes coverage of Jadair‘s claim.
But, as Jadair sees it, the road does not end there. According to Jadair, the Endorsement to Item Nine creates an exception to Item Nine‘s medical-certificate exclusion. And this exception, Jadair argues, reinstates coverage of the present claim.
Under Wisconsin law, an endorsement “may add to, modify, or supplant” the provisions of an insurance policy. Romero v. W. Bend Mut. Ins. Co., 885 N.W.2d 591, 596 (Wis. Ct. App. 2016).6 As a general rule, an endorsement is to be read along with the remainder of the policy. Id. An endorsement will not be read to “abrogate[], waive[], limit[], or modif[y]” any provision of an insurance policy unless (1) the endorsement expressly states that its provisions are “substituted for those in the body of the policy” or (2) the endorsement and the policy irreconcilably conflict with one another. Westchester Fire, 130 N.W.2d at 188 (quoting John Appleman, Insurance Law and Practice § 7538 (1943)). Because neither circumstance presents itself here, the Endorsement leaves Item Nine‘s medical-certificate exclusion undisturbed.
First, the Endorsement does not expressly substitute its provisions for those found in Item Nine. Jadair relies heavily on the line at the top of the Endorsement page, which states that the Endorsement “CHANGES [THE] POLICY.” But the Endorsement goes on to say that it “completes or changes” Item Nine. The word “completes” indicates that the Endorsement may be read as adding to, rather than displacing, Item Nine‘s provisions. Indeed, that is the most sensible way to read the Endorsement, since, as we will explain next, the terms of the Endorsement are perfectly consistent with those of Item Nine.
Second, there is no irreconcilable conflict between Item Nine‘s medical-certificate exclusion and any provision of the Endorsement. To understand Jadair‘s arguments to the contrary, we must examine the language of Item Nine and the Endorsement in some detail. Item Nine lists three things that any pilot of the Cessna “must have,” including: (1) a current and
These additional requirements (which we will call the “endorsement-specific requirements“) indicate that the pilot of the Cessna must have a certain amount of flight experience or “[o]therwise” be David Schmutzler. Of course, Schmutzler satisfied the latter condition.
Jadair argues that the Endorsement abrogated Item Nine‘s medical-certificate exclusion by omitting Item Nine‘s express provision that “THERE IS NO COVERAGE” if the pilot of the Cessna lacks a medical certificate. We disagree. While it is true that the Endorsement does not repeat Item Nine‘s explicit statement that coverage is excluded if the Cessna‘s pilot does not have a medical certificate, nothing in the Endorsement is inconsistent with that statement either. Indeed, the Endorsement still says (like Item Nine itself) that the pilot “must have” a current and valid medical certificate. Because there is no conflict between Item Nine and the Endorsement, we read the latter as supplementing—not supplanting—the former. Westchester Fire, 130 N.W.2d at 188.
This reading is reinforced by the Endorsement‘s statement that it “completes or changes” Item Nine (emphasis added). As such, we are untroubled by the Endorsement‘s failure to expressly exclude coverage when the pilot of the Cessna lacks a current and valid medical certificate. That express exclusion is found in Item Nine, which remains operative. See Romero, 885 N.W.2d at 596 (stating that an endorsement is to be “read along with” the rest of the insurance policy).
Jadair also contends that the endorsement-specific requirements displace the medical-certificate requirement and all other pilot requirements in Item Nine. In support, Jadair points to the language “Otherwise, David Schmutzler” and argues that this effectively exempts him from all pilot requirements (because, after all, he was David Schmutzler), including the need to have a medical certificate. But this is a strained reading of the Endorsement.
The Endorsement states that “[t]here is no coverage if the pilot does not meet” the endorsement-specific requirements. But it does not follow from that statement that there is coverage whenever the pilot does meet only the endorsement-specific requirements.
The best way to read the endorsement-specific requirements is to interpret them as additional requirements that the pilot of the Cessna must meet under the policy, on top of the medical-certificate requirement in the Endorsement and Item Nine. Thus, even though Schmutzler satisfied the endorsement-specific requirements, he was still bound by Item Nine and the Endorsement‘s medical-certificate requirement, and he failed to satisfy it. The consequence of that failure, as Item Nine states, is exclusion of coverage for the accident. Nothing in the Endorsement changes that.
In sum, we find that American National‘s policy unambiguously excludes coverage for any accident, like this one, where the pilot lacks a valid and current FAA medical certificate. But even if the policy were ambiguous on its face, we would interpret it as we have. It is true that ambiguous provisions in an insurance policy are generally to be construed in favor of the insured. Westchester Fire, 130 N.W.2d at 188. However, extrinsic evidence may be used to clarify an ambiguous insurance policy, and Wisconsin courts will not distort a policy to cover risks that the insurer did not contemplate and for which it has not been paid. Coppins v. Allstate Indem. Co., 857 N.W.2d 896, 904 (Wis. Ct. App. 2014).
Here, even if the policy‘s medical-certificate requirement were ambiguous, Schmutzler‘s insurance application resolves the ambiguity. Schmutzler listed himself on the application as the one authorized pilot of the Cessna and indicated that he had an FAA medical certificate. Schmutzler initialed a section called “Minimum Pilot Requirements,” which clearly states that “there is no coverage” under the policy unless the Cessna‘s pilot is both “designated” on the application and has “the certificates ... indicated” and is “properly qualified for the flight involved.” Thus, the application makes clear that any pilot flying the Cessna, including Schmutzler, must have an FAA medical certificate, and no reasonable jury would find otherwise on the present record. See Bos. Five Cents Sav. Bank v. Sec‘y of Dep‘t of Hous. & Urb. Dev., 768 F.2d 5, 8 (1st Cir. 1985) (stating that the interpretation of an ambiguous contract may be taken away from the jury where the extrinsic evidence is “so one-sided that no reasonable person could decide the contrary“).
B. Whether Wis. Stat. § 631.11(3) Applies
Jadair next contends that, even if the medical-certificate exclusion applies to its claim, the claim must be covered under
No failure of a condition prior to a loss and no breach of a promissory warranty constitutes grounds for rescission of, or affects an insurer‘s obligations under, an insurance policy unless it exists at the time of the loss and either increases the risk at the time of the loss or contributes to the loss.
The problem with Jadair‘s argument is that
But the policy‘s medical-certificate requirement is not a condition subsequent. Rather, as we explained above, it is an exclusion of coverage in cases where the requirement is not satisfied.
Wisconsin courts have long recognized the difference between exclusions and conditions subsequent. While conditions subsequent (and warranties) provide for the avoidance of liability for a covered loss if they are breached, exclusions declare that there never was coverage for a particular loss in the first place. Bortz v. Merrimac Mut. Ins. Co., 286 N.W.2d 16, 19-21 (Wis. Ct. App. 1979); see also McCoy v. Nw. Mut. Relief Ass‘n, 66 N.W. 697, 699 (Wis. 1896) (holding that conditions are subject to waiver and estoppel while exclusions are not); Maxwell v. Hartford Union High Sch. Dist., 814 N.W.2d 484, 491-92 (Wis. 2012) (same). As we have seen, the policy‘s medical-certificate requirement operates as an exclusion: it “‘limits the scope of coverage,’ ‘tak[es] out ... events otherwise included within the defined scope of coverage,’ and ‘expressly refuse[s] to assume a specific hazard or risk.‘” Kutchera v. State Farm Fire & Cas. Co., 560 F. Supp. 3d 1242, 1248 (W.D. Wis. 2021) (quoting Bortz, 286 N.W.2d at 19-21). Because the medical-certificate requirement is an exclusion and not a condition subsequent,
C. Jadair‘s Motion to Certify a Question to the Wisconsin Supreme Court
Finally, Jadair moves to certify the following question to the Wisconsin Supreme Court:
Does
Wis. Stat. § 631.11(3) require that the insurer prove a causal connection under an aircraft insurance policy between the accident and the failure of the insured to comply with federal aviation safety-related regulations?
“Our rules permit us to certify state-law questions to a state supreme court when the answer will control the outcome of a case and the state court accepts such certifications.” Cothron v. White Castle Sys., Inc., 20 F.4th 1156, 1165 (7th Cir. 2021) (citing 7th Cir. R. 52(a)). But just because we can certify a question does not mean that we should. Unneeded certification orders waste the time of the litigants who appear before us. They also burden our esteemed colleagues in the state supreme courts and endanger the important purposes of federalism. See Cassirer v. Thyssen-Bornemisza Collection Found., 69 F.4th 554, 587 (9th Cir. 2023) (Bea, J., dissenting) (stating that unwarranted certification requests “deplete our reservoir of comity” with the state supreme courts). So we will only certify a state-law question when doing so is particularly necessary.
In determining whether a particular question warrants certification, we consider several factors. Most importantly, “we must find ourselves ‘genuinely uncertain’ about the answer to the state-law question before considering certification.” Cothron, 20 F.4th at 1166 (quoting In re Hernandez, 918 F.3d 563, 570 (7th Cir. 2019)). The question this case raises does not meet that test, and so we will not waste the Wisconsin Supreme Court‘s time with it.
Jadair essentially asks the Wisconsin Supreme Court to determine the scope of
factually identical to this case, we are “confident in proceeding under the guidance” that it provides. Bernstein v. Bankert, 733 F.3d 190, 221 (7th Cir. 2013). Accordingly, Jadair‘s motion to certify its question is denied.
III. CONCLUSION
For the reasons stated above, the judgment of the district court is AFFIRMED, and Jadair‘s motion to certify a question to the Wisconsin Supreme Court is DENIED.