Fulfillment of a Warranty Must Be Proved by Person Making Insurance Claim
Insurance warranties are material promises made by an insured that are essential to the effective use of an insurance policy. Failure to fulfill the warranty is a breach of a material condition precedent to the right to the benefits promised by the policy of insurance.
In Rocky Wright, Individually and as Trustee, etc. v. the Estate of Walter Johnson, Star Insurance Company, Real Party in Interest, E068412, Court of Appeal of the State of California Fourth Appellate District Division Two (April 8, 2019) an attempt to collect from the insurer of a decedent failed because of the failure of the plaintiff to prove that the decedent had fulfilled the warranty before crashing an airplane into the plaintiff’s property.
In September 2011, Walter Johnson, deceased, was piloting a Cessna P210 model aircraft over Tehachapi in Kern County when the plane crashed, killing Johnson and his passenger, and igniting a fire which spread to plaintiff and appellant, Rocky Wright’s, real property. The fire destroyed personal properties, fixtures and growing crops (timber) on Wright’s real property. Wright sued Johnson’s estate, seeking to recover at least $1.75 million in damages to Wright’s real and personal properties from Johnson’s aircraft liability insurance carrier and real party in interest and respondent, Star Insurance Company (Star), pursuant to Probate Code section 550.
The trial court entered summary judgment in favor of Star on Wright’s first amended complaint for negligence per se and trespass on the ground Wright could not prove an essential element of his insurance claim against Star, namely, that Johnson had complied with the “pilot warranty endorsement” or “PWE” of his aircraft liability insurance policy with Star.
Wright appealed, claiming the trial court erroneously placed the burden on Wright to show that Johnson had complied with the Annual MFG School Requirement, rather than placing the burden on Star to show that Johnson had not complied with the Annual MFG School Requirement and therefore, that Wright’s damages claims against Johnson were not covered by the policy.
Proving that Johnson had completed the PWE’s Annual MFG School Requirement was an essential element of Wright’s insurance claim against Star. At trial Wright would have had the burden of proving that Johnson had completed the requirement. Star had the initial burden of showing Wright could not prove Johnson had completed the requirement. Star met this burden. Star’s proof shifted the burden to Wright to show Johnson had met the requirement or to raise a triable issue whether Johnson had met the requirement.
The Aircraft Insurance Policy (Issued by Star to Johnson)
In November 2010, Star issued an “aircraft insurance policy” to The Walter Johnson Family Trust, as the named insured. The policy included liability coverage for the Cessna for a one-year period, including on September 4, 2011, the date the plane crashed in Tehachapi and its pilot Johnson and his passenger were killed. Johnson resided in and the flight originated from San Bernardino County.
The policy’s pilot warranty endorsement, or PWE, included an “Annual MFG School Requirement” which required any pilot of the Cessna, including Johnson, to have “completed the aircraft manufacturer’s approved ground and flight training school, or its equivalent as approved by the Aviation Managers, in the insured make and model aircraft within the preceding 12 months of the intended flight.”
Wright’s Operative First Amended Complaint
Probate Code section 550 allows a plaintiff to sue the estate of a deceased person, without naming the estate’s personal representative, in order “to establish the decedent’s liability for which the decedent was protected by insurance.”
Wright sued by a first amended complaint (the FAC) against Johnson’s estate, pursuant to Probate Code section 550, seeking to establish Johnson’s liability, and Star’s liability under its aircraft liability insurance policy with Johnson, for damages Wright incurred as a result of the September 4, 2011, plane crash. The FAC seeks $1.5 million in damages to Wright’s growing crops, $250,000 in damages for Wright’s lost profits and lost use of his property, and additional damages according to proof.
Star’s Motion for Summary Judgment/Adjudication and the Trial Court’s Ruling
Star moved for summary judgment on the FAC, or summary adjudication of each cause of action, on two grounds: (1) Johnson had not complied with the requirements of the policy’s pilot warranty endorsement or PWE, and (2) coverage for the crash was excluded pursuant to “Exclusion 1” of the policy, which excludes coverage when the flight is “for any unlawful purpose.”
Star presented undisputed evidence that, on October 13, 2010. On November 9, 2010, Johnson accepted Star’s terms by requesting that the policy be issued on November 10. On November 30, Falcon submitted an insurance application, signed by Johnson, which included an acknowledgement that the policy was subject to “Minimum Pilot Requirements” and also contained “Special Pilot Requirements: Annual Ground & Flight Training.” In response to Star’s motion, Wright offered no evidence that Johnson, who was piloting the Cessna on September 4, 2011, had completed the PWE requirements.
Star showed Wright admitted in written discovery responses that Wright had no evidence that Johnson or his passenger had complied with the PWE.
The court of appeal concluded that the trial court properly placed the burden on Wright to prove Johnson had completed the Annual MFG School Requirement, Wright did not do so, and summary judgment was properly entered in favor of Star.
Placing the burden of proof on the insured to “establish coverage” under the insurance policy, or to show that the terms of an insurance “coverage provision” have been met, conforms with an insured’s general duty to establish coverage where it would otherwise not exist. Wright had the burden of proof at trial of showing that Johnson had complied with the PWE’s Annual MFG School Requirement.
Johnson’s failure to comply with the PWE’s Annual MFG School Requirement was not an affirmative defense to coverage or an exclusion to coverage. Star did not have the initial burden of showing, in moving for summary judgment, that Johnson did not comply with the PWE’s Annual MFG School Requirement. Rather, the PWE’s Annual MFG School Requirement was a warranty provision in Johnson’s insurance contract with Star, and a condition precedent to Star’s agreement to cover Johnson for the September 4, 2011, flight, and Johnson was required to fulfill this warranty provision as a condition precedent to having Wright’s damages claims covered under Star’s insurance policy with Johnson.
Strict compliance with pilot warranties serves as a necessary corollary of aviation insurance policies. Pilot qualifications and experience are obviously factors bearing directly on the risk the insurer is underwriting. Thus Star included compliance with the PWE, and its Annual MFG School Requirement, as a condition of Star’s agreement to cover Johnson’s liability to Wright for Wright’s negligence claims against Johnson.
The judgment was affirmed, and Star recovered its costs on appeal.
Insurance warranties are ancient forms that require, for a policy to provide the benefits promised, that the insured fulfill a material promise by the insured, that is the basis of the risk taken by the insurer. Failure to prove strict compliance with the pilot warranty deprives the insured – and in this case the person suing his estate – of coverage. In that regard California Insurance Code Section 449 provides: “A breach of warranty without fraud merely exonerates an insurer from the time that it occurs, or where the warranty is broken in its inception, prevents the policy from attaching to the risk.” Since there was no evidence that Johnson attended the course the policy never attached to the risk.
© 2019 – Barry Zalma
This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States. The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and firstname.lastname@example.org.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Over the last 51 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.
Passover Seder for Americans
Passover is one of the many holidays Jewish people celebrate to help them remember the importance of G_d in their lives. We see the animals, the oceans, the rivers, the mountains, the rain, sun, the planets, the stars, and the people and wonder how did all these wonderful things come into being?
All Jewish fathers are required to teach their children, at least once a year at the Passover holiday, about the exodus from slavery in Egypt. For American Jews who have difficulty understanding Hebrew and complicated books describing the Exodus, my wife and I wrote this book to use for our own Seder where each member of the family reads part of the book.