Unpublished Disposition, 865 F.2d 263 (9th Cir. 1988)

MEMORANDUM^** 

Insurance Company of North America ("INA") appeals from the judgment of the district court ordering it to defend and indemnify Claude McNeil. We reverse.

* The omnibus clause of the INA insurance policy lists who, besides the policy holder, is an additional insured for purposes of liability insurance coverage. This section provides:

Besides you, certain other people are covered for liability. They are:

* * *

* * *

Any person or organization that uses or is legally responsible for your aircraft. But you must have given your permission for this use.... (emphasis added)

This case turns on the meaning of the phrase "legally responsible." The district court reasoned that if a previous owner charged with negligent maintenance of the aircraft is liable in a tort suit, liability necessarily would be based on his legal responsibility for the aircraft. Because the previous owner in this case may be "legally responsible," the court determined that he is covered as an insured under the liability provisions of the INA policy. We disagree. Taken to its logical end, the district court's interpretation of "legally responsible" would provide coverage for anyone who is potentially liable in a tort action involving the aircraft, including the manufacturers and distributors. This harsh and inequitable interpretation of Wilson's policy was clearly erroneous.

In construing an insurance policy, a court should avoid an interpretation that will make the policy unusual, extraordinary, harsh, unjust or inequitable, or that will result in an absurdity. Herzka & Knowles v. Salter, 6 Cal. App. 3d 325, 335, 86 Cal. Rptr. 23, 29 (1970). The district court's interpretation would require INA to defend and indemnify anyone who incurred liability "based on his legal responsibility for the aircraft," regardless of when that responsibility existed. This interpretation would extend the contract of insurance back through years of ownership and maintenance to encompass persons completely unrelated to Wilson, persons whose only contact with the aircraft occurred before the insurance policy was even written. Wilson's insurance policy would thus achieve a duration far beyond that contemplated by either insurer or insured.

Insurance policies are interpreted by rules governing contracts, and will be enforced only according to the manifest intention of the parties. Financial Indem. Co. v. Murphy, 223 Cal. App. 2d 621, 628, 35 Cal. Rptr. 913, 917 (1963). An insurance policy must be read "as employing the ordinary usages of its terms as they might be understood by the layman in the context of the policy and the purposes it serves." California State Auto Assn. Inter-Ins. Bureau v. Superior Court, 177 Cal. App. 3d 855, 859, 223 Cal. Rptr. 246, 248 (1986). Here, the contracting parties did not attach such a broad sweeping meaning to the phrase "legally responsible." In his declaration, Wilson stated that he did not intend to purchase coverage for McNeil or any other prior owner. Since Wilson would derive no benefit from doing so, this statement is credible. Moreover, McNeil himself declared that he was "unaware of [Wilson's] coverage and the scope of the coverage until this litigation arose." Hence, no one intended to secure liability coverage for McNeil under Wilson's policy.

Accordingly, the district court erred in finding McNeil entitled to be defended and indemnified under the policy INA issued to Wilson.

REVERSED.