Unpublished Disposition, 931 F.2d 59 (9th Cir. 1991)Annotate this Case
AVEMCO INSURANCE COMPANY, Plaintiff-Appellee,v.WINTERS AIRCRAFT ENGINEERING COMPANY,Defendant-Counter-claimant-Appellant,Omac, Inc., Steven G. Mihaylo, Defendants-Appellants.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted April 2, 1991.Decided April 22, 1991.
Before WILLIAM A. NORRIS, CYNTHIA HOLCOMB HALL and TROTT, Circuit Judges.
Winters Aircraft Engineering Company ("Winters"), Omac, Inc. ("Omac"), and Steven G. Mihaylo appeal summary judgment for Avemco Insurance Company ("Avemco"). Winters agreed to advise Omac on engineering matters, and did so negligently. Avemco, Winters's insurer, filed an action for declaratory relief, seeking to avoid coverage under Winters's policy. The district court granted summary judgment for Avemco, finding that Winters's liability for negligent engineering advice did not trigger coverage under the terms of the policy. Winters, Omac, and Mihaylo (collectively, "Winters") filed this timely appeal. We have jurisdiction under 28 U.S.C. § 1291, and we affirm.
* Omac was engaged in the development and manufacture of an experimental business aircraft. In May 1983, Winters agreed to advise Omac on whether the aircraft could satisfy various rules and regulations required for certification by the Federal Aviation Administration (the "FAA"). Mihaylo agreed to provide substantial funding for Omac's project if Winters determined that the aircraft would be certified.
Winters conducted several tests and eventually determined that the plane could be certified within two years, and within Omac's projected cost limits. Some months and several million dollars later, Omac discovered that, in order to meet FAA specifications, the aircraft would require a complete engineering overhaul. Omac put a halt to the project until significant engineering modifications could be made.
Subsequently, Omac and Mihaylo sued Winters for breach of contract, alleging Winters was under a contractual duty to provide accurate engineering advice, and failed to do so.1 Although it disputed coverage for the claim, Avemco provided a defense for Winters at a cost of approximately $300,000. The parties agreed to a stipulated judgment against Winters in the amount of $2,250,000.
Avemco then filed the present action for declaratory relief, seeking a judicial determination that it was not liable under Winters's insurance policy for the sum paid to Omac and Mihaylo. The district court granted summary judgment for Avemco, finding that Winter's policy covered only damage caused by an "occurrence" resulting in "bodily injury" or "property damage." Because there was no such occurrence within the policy's time limits, Winters was not covered.
A grant of summary judgment is reviewed de novo. Haphey v. Linn County, No. 90-35226, slip op. 1349, 1354 (9th Cir. Feb. 5, 1991). The district court
shall grant summary judgment if the evidence "show [s] that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. This court must determine ..., viewing the evidence in the light most favorable to [Winters, whether] there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law.
Smolen v. Deloitte, Haskins & Sells, 921 F.2d 959, 963 (9th Cir. 1990) (citations omitted).
Finality of the Summary Judgment Order
As a threshold matter, Avemco asserts that the summary judgment is not a "single, final and appealable order" under Fed. R. Civ. P. 54(a) because a claim against Winters for attorney's fees remains pending in the trial court. We disagree.
It is now settled in this circuit that "all attorney's fees requests are collateral to the main action. Thus, a judgment on the merits is final and appealable even though a request for attorney's fees is unresolved." International Ass'n of Bridge, Structural, Ornamental, and Reinforcing Ironworkers' Local Union 75 v. Madison Indus., 733 F.2d 656, 659 (9th Cir. 1984); see also Wong v. United States, 859 F.2d 129, 131 (9th Cir. 1988).
Terms of the Insurance Contract
Avemco issued a policy to Winters on December 21, 1982 (the "Policy"), with coverage to commence on December 15, 1982. Coverage under the Policy is limited to "occurrences," defined as "accident [s], ... which result [ ] in bodily injury or property damage neither expected nor intended from the standpoint of the insured."2 The damages here resulted from Winters's breach of its contract with Omac, and included such economic losses as lost investment, lost profits and lost anticipated benefit of a bargain. Accordingly, the district court found that
Avemco's policy, whether it be for products liability, professional services, or omissions and errors, ... provide [s] for payment upon an "occurrence," which under California law must occur during the term of the policy. Since there was no occurrence in this case triggering liability occurring during the term of the policy, [Avemco] is entitled to judgment as a matter of law.
.... The language of [the policy] is conspicuous, clear and unambiguous, and as such is controlling.
Winters does not dispute the district court's conclusion that there was no occurrence under the Policy. Rather, it argues that material questions of fact exist concerning the terms of the insurance contract to which Avemco is bound. On December 16, 1982, Winters's broker, Steve Nourse, hand-delivered Winters's initial premium payment to Avemco. The check was accompanied by a letter from Nourse (the "Letter"), which stated:
Attached please find our check in the amount of $6,338.00 which represents the first installment due for the professional and products liability coverage for the above captioned insured. Per our conversation the total annual premium is in the amount of $25,352.00
I have also enclosed copies of the summaries from Winters Aircraft showing the operations in detail.
The limit of liability is $5,000,000 professional and products, with a $1,000,000 grounding limit.
Winters argues that Avemco is bound to the terms of the Letter, and not the Policy. It claims: "The Court overlooked the fact that the [L]etter and Avemco's acceptance of the premium created an insurance contract on terms set forth in the [L]etter. Avemco had no right to alter or limit those terms without Winters' [s] approval, particularly after it accepted payment of the premium."
Winters believes that because the Letter mentions the term "professional liability," it "does not limit coverage as [the Policy does]. No reference is made by the [b]roker concerning bodily injury or property damage.... Only the [P]olicy, subsequently issued, contains a limitation for bodily injury and property damage." (emphasis in original). Winters further claims it bargained successfully for the same professional liability coverage it received under a prior Lloyds of London policy. In response, Avemco concedes that the Policy covers "professional liability," and that the coverage is identical to that under the prior policy. Nonetheless, it argues, coverage is limited to occurrences which result in bodily injury or property damage. We agree.
Avemco concedes that the Policy covers "exactly what Winters requested."3 All parties involved in the negotiation believed that Winters desired coverage identical in scope to that of the Lloyds of London policy, and Avemco concedes for this appeal that its policy is identical to the prior policy. That policy, however, like the Policy here, limited coverage to damage caused by "occurrences." As a result, even if the Policy covers professional liability--as Winters argues and Avemco concedes--there is no coverage unless there has been an occurrence. The inclusion of "professional liability" as a covered peril does not alter the requirement that there be an "occurrence." An "occurrence" under this policy requires either "bodily injury" or "property damage," neither of which is present here. We therefore agree with the district court's conclusion that Avemco is not liable because there was no occurrence.
Even if it is bound by the terms of the Policy, Winters claims material questions of fact exist because "Endorsement 3" to the Policy is ambiguous and should be construed to favor coverage. See Hanson v. Prudential Ins. Co., 793 F.2d 762, 764 (9th Cir. 1985). We disagree.
According to the Policy, coverage is triggered if bodily injury or property damage that is caused by an occurrence "arises out of the aircraft products hazard." "Aircraft products hazard" in turn refers to "aircraft products." Endorsement 3 defines aircraft products to include "General Aviation Engineering [and] design and testing for F.A.A. regulation compliance and approval...." Winters claims that because this definition covers professional services and contains "no limitations to coverage," it is somehow not subject to the clear language of the Policy. This argument is without merit.
Endorsement 3 merely defines the products covered by the Policy. It does not purport to change the Policy or expand the coverage trigger beyond the original language. Indeed, it states that " [n]othing herein contained shall be held to vary, waive, alter or extend any of the terms, conditions, agreements, or warranties of the ... Policy, other than as above stated." Further, the language is not ambiguous. As we stated above, even if professional services are covered by the Policy, there must be an occurrence causing bodily injury or property damage.
We agree with the district court that the language of the Policy is conspicuous, clear, and unambiguous.
Winters's Reasonable Expectations
Winters claims the district court erred in failing to interpret the language of the Policy in light of Winters's reasonable expectations at the time it purchased coverage. See Hanson, 783 F.2d at 765. This argument is without merit.
Interpreting an insurance policy, a court may consider the insured's expectations only if the policy fails to define the term at issue. Id. Here, again, the language of the Policy was clear and unambiguous. We therefore conclude that the district court did not err in failing to consider Winters's expectations.
This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Circuit Rule 36-3
Omac and Mihaylo also asserted claims against Winters for negligence and negligent misrepresentation
The Policy defines "Bodily Injury" as "physical injury, sickness or disease sustained by any person which occurs during the Policy Period, including death at any time resulting therefrom." "Property damage" is defined as "physical injury to or destruction of tangible property which occurs during the Policy Period, including loss of use thereof at any time resulting therefrom."
Moreover, Winters signed the Policy and presumably is bound to its terms. With this fact in mind, it appears that Winters is asking for reformation of the written contract to reflect its own perception of the parties actual agreement. Winters did not raise the reformation theory before the district court. Rather, it argued that coverage was mandated by the express terms of the policy because professional liability coverage was not limited by the "occurrence" language
"This court will not 'review an issue not raised below unless necessary to prevent manifest injustice.' [We] will address the issue only if the proponent can point to 'exceptional circumstances why the issue was not raised below.' " Davis v. Mason County, Nos. 88-3947, 88-4394, 88-3951, slip op. 2599, 2607 (9th Cir. March 12, 1991) (citations omitted). Because Winters did not raise the reformation theory below, it is precluded from raising it now.