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Vol. 5, Iss. 6
May 31, 2016

A Who’s Buried In Grant’s Tomb? Coverage Case

 

Sometimes you read a coverage case and come away wondering what one of the parties was thinking to bring it. This goes for both policyholders and insurers. Although I think it applies to policyholders more. For a policyholder (or underlying plaintiff), the need to find coverage can be monumental. Likely more so than an insurer’s need to avoid paying one claim. Not to mention that, with ambiguities often being interpreted against the insurer, the policyholder has more reason to bring a case with no reasonable chance of success. I call these cases, with obvious outcomes -- “Whose buried in Grant’s tomb?” coverage cases.

U.S. Specialty Ins. Co. v. Sussex Airport, Inc., No. 14-5494 (D.N.J. May 9, 2016) is a Grant’s tomb case. Skydive Sussex, LLC leased a parachute jumping concession at Sussex Airport. The airport authorized a drop zone for parachuting activities on the southwest side of the airport runway. Reginald Wood purchased a tandem skydive from Skydive Sussex. During the skydive, Wood allegedly landed outside of the established drop zone and collided with a parked motor vehicle, causing significant bodily injuries. Wood filed suit for the injuries he allegedly sustained during his skydive.

US Specialty issued a commercial general liability policy to Sussex Airport. U.S. Specialty undertook Sussex Airport’s defense, but reserved its rights to (1) disclaim liability and coverage for the Underlying Action and (2) recoup the costs of defense in the Underlying Action, should the Policy not apply. The policy contained a Parachute Jumping exclusion stating as follows: “This insurance does not apply to ... [b]odily injury or property damage arising out of the conduct of or participation in, or preparation for, any parachuting activities.” U.S. Specialty filed coverage litigation.

Hello? It seems pretty obvious: Mr. Wood was injured in the course of a parachute jump and the policy excludes exactly that. Not surprisingly, the court had little trouble disposing of the insured’s arguments.

The insured argued that the Parachute Jumping exclusion should not apply because it did not directly operate the skydiving activities at the Sussex Airport. Rather, Skydive Sussex, LLC did. But the court rejected this: “In effect, Defendants’ interpretation would require the Court to rewrite the Exclusion such that it only applies where bodily injury occurred due to actions taken directly by the insured. Should Plaintiff have desired to restrict the Exclusion so that it only covered parties directly engaged’ in parachuting activities, however, it could have done so explicitly. A far more natural reading of the Exclusion, in context with the Policy, is that the Exclusion is not limited based on which party physically conducted the parachuting activities—it does not cover ‘[b]odily injury ... arising out of the conduct of or participation in, or preparation for, any parachuting activities.’” (emphasis in original).

Next the court turned to the insured’s argument that its potential liability may be unrelated to “the conduct of or participation in, or preparation for, any parachuting activities.” The court’s response was unambiguous: “This argument is also futile,” explaining that the underlying action “alleges that the skydiving flight commenced from Sussex Airport, that Defendants ‘did not conform to applicable skydiving standards of care,’ and that Defendants ‘established a drop zone that was not in conformance with industry standards.’ In fact, the Underlying Complaint only alleges causes of action related to the events surrounding Wood’s skydive, including duties Defendants allegedly had to Wood.”

Lastly, on the question of reimbursement of defense costs, the court held that it was permitted.


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