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Sandra Knezovich, Personal Representative of the v. Hallmark Insurance Company

August 3, 2012

SANDRA KNEZOVICH, PERSONAL REPRESENTATIVE OF THE
ESTATE OF ANTHONY DAVID KNEZOVICH, DECEASED,
PLAINTIFF-APPELLEE,
v.
HALLMARK INSURANCE COMPANY, DEFENDANT-APPELLANT WILLIAM M. OTTO, PERSONAL REPRESENTATIVE OF THE ESTATE OF RALPH E. OTTO, DECEASED; SUZANNE LUCAS AND E. PERRINE DOWNEY, COEXECUTORS OF THE ESTATE OF C. MICHAEL DOWNEY, DECEASED,
DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County No. 09 CH 28688 Honorable Leroy K. Martin, Jr., Judge Presiding.

The opinion of the court was delivered by: Justice Lampkin

JUSTICE LAMPKIN delivered the judgment of the court, with opinion. Justices Garcia and Palmer concurred in the judgment and opinion.

OPINION

¶ 1 In a declaratory judgment action, the parties filed cross-motions for summary judgment concerning whether defendant-appellant Hallmark Insurance Company (Hallmark) owed a duty to defend the estate of a deceased student pilot who had rented an aircraft from Hallmark's insured. The trial court found that Hallmark's policy provisions concerning the exclusion of coverage for student and renter pilots were ambiguous and Hallmark, therefore, had a duty to defend and/or indemnify the estate of the student pilot in the underlying wrongful death lawsuits. Accordingly, the trial court denied Hallmark's motion for summary judgment and granted the appellees' cross-motion for summary judgment.

¶ 2 Hallmark appeals the trial court's ruling, arguing the trial court erred in interpreting the insurance contract. We agree. For the reasons that follow, we reverse the judgment of the trial court and remand this cause for further proceedings consistent with this opinion.

¶ 3 I. BACKGROUND

¶ 4 This insurance coverage dispute arises out of a midair collision between two aircraft, a Cessna and a Cirrus, in Wyoming. Both pilots and the sole passenger were killed, and both planes were destroyed. Hallmark insured the Cessna, which was owned by Franklin Aviation, Inc., a fixed base operator, and, at the time of the collision, was being operated by Anthony Knezovich, a student pilot. Ralph Otto was operating the Cirrus, and C. Michael Downey was his passenger. A number of wrongful death lawsuits were filed as a result of the collision.

¶ 5 Plaintiff Sandra Knezovich, as the personal representative of the estate of Anthony Knezovich, filed a complaint for declaratory judgment seeking a finding that Hallmark had a duty to defend and indemnify the Knezovich estate in the underlying wrongful death lawsuits.

¶ 6 Hallmark moved for summary judgment, arguing there was no coverage available to Anthony Knezovich under the policy Hallmark had issued to Franklin Aviation because a provision of the policy excluded renter pilots from coverage. The affidavit of Raymond Verheydt, the owner of Franklin Aviation, was attached to the motion. Verheydt averred that Franklin Aviation operated a flight school and rented aircraft to its customers. It charged its customers for both the rental of aircraft and instruction services. Verheydt was a certified flight instructor and provided instruction to customers as requested. Anthony Knezovich held a student pilot certificate and was a customer of Franklin Aviation, renting aircraft and receiving flight training. Verheydt informed Mr. Knezovich that he would be charged for the rental of the airplane on each flight based on an hourly rate. For those flights during which he flew with a flight instructor, he would be charged both an hourly rental fee for the use of the aircraft and the hourly rate for the instructor. When he was receiving ground instruction, he would only be charged for the instructional time. Furthermore, when he was flying without a flight instructor, he would be charged a rental fee for the use of the aircraft. Mr. Knezovich acknowledged that he understood and agreed with that arrangement.

¶ 7 Verheydt averred that after he authorized Mr. Knezovich to make his first solo flight on April 10, 2008, Mr. Knezovich was authorized to rent the aircraft to fly solo as long as Verheydt preapproved each solo flight. Aircraft rentals by certified student pilots and other certified pilots were the same except for Verheydt's preapproval requirement for student pilot solo flights and the federal regulation that prohibited a student pilot from operating an aircraft as a pilot in command while carrying passengers. On August 10, 2008, Mr. Knezovich rented the aircraft to fly solo. During that flight, the aircraft was involved in a midair collision, resulting in fatal injuries to Mr. Knezovich and destruction of the aircraft.

¶ 8 Also attached to Hallmark's motion for summary judgment was its aircraft insurance policy issued to Franklin Aviation. The named insured specified on the coverage identification page of the policy was "Franklin Aviation, Inc. and its individual shareholders and executive officers." The definitions section of the policy, provided in pertinent part:

"a. You and your mean the [named insured].

b. Someone we protect means any person or organization we provide

coverage to through this policy other than you.

c. Anyone or others means any person or organization other than you or someone we protect.

j. Passenger means any person who is in the aircraft or getting in or out of it. If more than one of the aircraft shown in item 5 of you Coverage Identification Page is involved in one occurrence, every person who is in any of the aircraft is a passenger.

n. Occurrence means a sudden event or repeated exposure to conditions, involving the aircraft during the policy period, neither expected nor intended by you or someone we protect, that causes bodily injury ...


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