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Alberto-Culver Co. v. Aon Corp.

May 13, 2004

[5] ALBERTO-CULVER COMPANY, ASSOCIATED AVIATION UNDERWRITERS, INC., THE AMERICAN INSURANCE COMPANY, CENTENNIAL CASUALTY COMPANY, FEDERAL INSURANCE COMPANY, FIREMAN'S FUND INSURANCE COMPANY, GREENWICH INSURANCE COMPANY, LUMBERMAN'S MUTUAL CASUALTY COMPANY AND SUN INSURANCE OFFICE OF AMERICA, PLAINTIFFS-APPELLANTS,
v.
AON CORPORATION AND AON AVIATION, INC., DEFENDANTS-APPELLEES, AND KALYN ALWIN AND DEVIN KOPPIE, CO- ADMINISTRATORS OF THE ESTATE OF MARTIN LARRY KOPPIE, DECEASED, AND JACQUELINE QUERN, INDEPENDENT EXECUTOR OF THE ESTATE OF ARTHUR F. QUERN, DECEASED, INTERVENERS, AND UNITED STATES AVIATION UNDERWRITERS, INC., INTERVENOR-APPELLEE.



[6] Appeal from the Circuit Court of Cook County. Honorable Stephen A. Schiller, Judge Presiding.

[7] The opinion of the court was delivered by: Justice Hartman

[8]  This appeal arises from an aircraft accident involving a Gulfstream G-IV aircraft (G-IV) privately owned by Alberto-Culver Company (Alberto), and being utilized by Aon Corporation and Aon Aviation, Inc., (sometimes collectively Aon). The plane crashed upon takeoff at Palwaukee Municipal Airport (Palwaukee) on October 30, 1996, and was consumed by fire. All four persons aboard perished, including Martin Larry Koppie, chief pilot and captain for Aon Aviation, a subsidiary of Aon Corporation; Robert Hampton Whitener, pilot and captain for Alberto; Arthur Quern, chief executive officer for Aon Risk Management Inc.; and Catherine Mio Anderson, a flight attendant employed by Executive Jet, whose services were secured by Aon Aviation. The operative facts of the accident itself are set forth in detail in an opinion filed in a previous appeal, Anderson v. Alberto-Culver USA, Inc., 337 Ill. App. 3d 643, 646-47, 789 N.E.2d 304 (2003) (Anderson).

[9]  Following preceding liability litigation which found Koppie at fault, the present dispute implicates insurance coverage involving the respective insurance companies. Associated Aviation Underwriters (AAU), Alberto's insurers, sought, inter alia, a judicial declaration that Aon Aviation and Aon Corporation were not insured under the aircraft insurance policy AAU issued to Alberto. United States Aviation Underwriters (USAU), insurers of Aon Aviation, intervened and successfully moved for cross-summary judgment against AAU and Alberto.

[10]   The circuit court found that Aon Aviation and Aon Corporation were entitled to coverage under Alberto's policy with AAU, and that AAU has a duty to defend and indemnify Aon Aviation, because AAU's policy was deemed primary coverage, and USAU's coverage was found excess. Alberto appeals.

[11]   Aon Aviation and Alberto each maintained a flight department at Palwaukee, and each operated their own G-IV, a twin engine jet that requires a two-pilot crew. The instant flight was conducted pursuant to an Interchange Agreement entered into on June 7, 1995, by Alberto and Aon, which permitted Aon Corporation and Alberto Culver to utilize each other's G-IV upon occasion when needed. Anderson, 337 Ill. App. 3d at 647-48. Aon Aviation is organized "to own, operate and lease aircraft (but not to offer transportation services to the general public)." As contained in Paragraph Six of the Interchange Agreement, Aon Aviation and Alberto agreed, inter alia, to (1) "hold harmless and indemnify the other from loss, expense, damages, claims, or suits which they might suffer as a result of any act or omission of the other party"; (2) maintain operational control of their own G-IV during use by the other party; and (3) "have, and keep in effect" an aircraft insurance policy with a minimum $150 million value to provide coverage when piloting each other's airplanes. Anderson, 337 Ill. App. 3d at 648.

[12]   In compliance with the Interchange Agreement, Alberto and Aon separately held non-owned aircraft coverage through their respective insurance policies, applicable to the use of borrowed aircraft. Aon Aviation purchased a $300 million liability policy from USAU covering Aon Aviation for any liability relating to its operation of its owned and non-owned aircraft (USAU policy). Alberto purchased aviation insurance from AAU and other interested insurers, *fn1 providing Alberto with liability and property damage coverage in connection with its own and non-owned aircraft (AAU policy).

[13]   Importantly, neither the USAU policy nor the AAU policy made reference to the Interchange Agreement between Alberto and Aon, nor was any evidence produced by Alberto or Aon requesting that their respective insurance companies make the Interchange Agreement a part of their respective policies of insurance by rider, endorsement or otherwise.

[14]   Under Paragraph Eight of the Interchange Agreement (Paragraph Eight), as required by Federal Aviation Regulations (FAR), both parties agreed to maintain "operational control" of their own aircraft during use by the other party. The Interchange Agreement does not define "operational control," however, Paragraph Eight refers to the Department of Transportation under the Federal Aviation Administration (FAA) for an explanation of this term. *fn2 "Operational control" is defined in the Code of Federal Regulations (CFR) as the "exercise of authority over initiating, conducting or terminating a flight." 14 C.F.R. § 1.1 (2001). Koppie, listed as chief pilot for Aon Aviation, signed the agreement twice for "Operational Control" and acceptance purposes. Anderson, 337 Ill. App. 3d at 648.

[15]   The AAU insurance policy obtained by Alberto provides coverage to the "Insured" for "all sums for which the Insured shall become legally obligated to pay as damages because of bodily injury sustained by any person and property damage, caused by an occurrence and arising out of the ownership, maintenance or use of the scheduled aircraft." Alberto was the named insured on the AAU policy. The General Policy Definitions of the AAU policy define an "Insured" as "(a) any person while using the aircraft with the permission of the Named Insured provided the actual use is within the scope of such permission, and (b) any other person, or organization, but only with respect to his or its liability because of acts or omissions of the Named Insured or of an Insured under (a) above, provided, however, that the insurance afforded under subsections 2(a) and (b) above does not apply to: (i) any person or organization or agent or employee thereof (other than employees of the Named Insured) engaged in *** the operation of *** any flying service, or aircraft or piloting service, with respect to any occurrence arising out of such activity" (Exclusion (i)). No definition of what is meant by "flying service, or aircraft or piloting service" is set forth in the AAU policy.

[16]   Lawrence Colton, the former executive vice president and head of general aviation underwriting at AAU, averred by affidavit *fn3 that the policy language was modified from "charter service" to "flying service" to avoid any implication that a monetary charge or commercial activity was required to trigger the preclusion of coverage for certain permissive users under the AAU policy.

[17]   The AAU policy also set forth, in General Condition Four, a provision of "Other Insurance" which avers, "[e]xcept with respect to insurance specifically purchased by [Alberto] to apply in excess of this policy, if there is other insurance in [Alberto's] name or otherwise, against loss, liability or expense covered by this policy, [AAU] shall not be liable *** for a greater portion of such loss *** than the applicable limit of [AAU's] liability bears to the total applicable [l]imit of [l]iability of all valid and collectible insurance against such loss, liability or expense."

[18]   The AAU policy additionally provided Alberto with liability coverage for its use of non-owned aircraft. That part of the policy contained its own condition of "Other Insurance," under which AAU's non-owned coverage was to be in excess of any other insurance available to Alberto, either as "an [i]nsured under a policy applicable to the non-owned aircraft or otherwise."

[19]   Similarly, Aon Aviation held non-owned aircraft coverage by obtaining an endorsement to its policy with USAU, which states: "[y]our business needs may require you [to] rent, borrow, or use aircraft you don't own. For this reason, we've developed this endorsement to expand your liability coverage and your medical coverage to apply while you're using aircraft you don't own." The USAU policy's non-owned coverage endorsement also contains an "other insurance" clause that asserts:

[20]   "[t]his endorsement provides you with excess insurance. This means that if you have other insurance covering a loss that's also covered by this endorsement, we'll pay claims only when all other valid and collectible insurance covering the loss has been exhausted. Of course, this restriction does not apply to any insurance you purchased in excess of this endorsement."

[21]   After the crash, Aon Aviation notified AAU of the accident, seeking coverage under the AAU policy issued to Alberto. Alberto and its insurers (collectively AAU/Alberto) filed a complaint for an insurance coverage declaration on January 17, 1997, seeking, inter alia, a judgment that Aon Aviation was not an insured under the AAU policy issued to Alberto. *fn4 On May 2, 2001, USAU, moved to intervene in the action, which the circuit court allowed on July 5, 2001.

[22]   On July 6, 2001, USAU filed an intervening petition containing three claims, namely, that: (1) Aon Aviation is an insured under the AAU policy, (2) it is entitled to defense and indemnity from AAU, and (3) it is covered primarily by Alberto's AAU ...


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