Illinois National Insurance Company v. Wyndham Worldwide Operations, Inc.

653 F.3d 225 (3rd Cir. 2011)

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Nature of the Case

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Facts

P issues insurance products and services. Jet Aviation offers aircraft maintenance, completions and refurbishment, engineering, and fixed base operations, along with aircraft management, charter services, aircraft sales, and personnel services. D is a recognized service leader in the hospitality industry. D and Jet Aviation entered into an Aircraft Management Services Agreements. The agreement obligated Jet Aviation to provide domestic flight planning and scheduling, flight crew staffing, and management of scheduled and unscheduled maintenance for D's aircraft. Jet Aviation agreed to procure insurance for Ds aircraft while it was managed by Jet Aviation. The agreement also stated that it would provide D with insurance coverage when D used non-owned aircraft at the direction of Jet Aviation. A series of aircraft fleet management insurance policies were purchased by Jet Aviation and issued by D. The policies contained endorsements that provided coverage for Jet Aviation's clients. These clients were identified on the endorsements as 'Insured Owners' and also as 'Named Insured.' The policy contained this paragraph: 5) The insurance afforded by this policy for the interest of the 'Insured Owner' described in Item 1 of this endorsement or Jet Aviation Business Jets, Inc. (as fully described in Item 1 of the Declarations Page) is extended to other Aircraft insured under this policy but excluding any Non-Owned Aircraft unless such Non-Owned Aircraft is operated by or used at the direction of Jet Aviation Business Jets, Inc. .In 2008, Jet Aviation proposed new language: 5) The insurance afforded by this policy for the interest of the 'Insured Owner' described in Item 1. of this endorsement or Named Insured (as fully described in Item 1 of the Declarations Page) is extended to other Aircraft insured under this policy but excluding any Non-Owned Aircraft unless such Non-Owned Aircraft is operated by or used at the direction of the Named Insured. . . . Jet Aviation and D claim that the drafting change was designed to make it more clear that entities affiliated with Jet Aviation were covered. Both parties believed that it did not expand coverage to entities that were unaffiliated with Jet Aviation, such as D. The modification, as written, appears to provide third parties with coverage when using non-owned aircraft without Jet Aviation's involvement. Ds premium declined from $61,250 for the 2007 policy to $45,367 for the 2008 policy. D did not know about the change made to the endorsement for 2008 and continued to obtain non-owned aircraft liability coverage through a policy issued by StarNet. D was not involved in the negotiations or drafting of the revised provisions of the endorsement. Ketcheson, a Wyndham employee, rented a Cessna 172 from Aviation Adventures to travel to a work-related meeting in Oregon. Jet Aviation had no involvement in this transaction. Ketcheson crashed into a house in Gearhart, Oregon, killing five people. The crash may have triggered coverage under the language of the 2008 policy. P filed suit against D seeking a declaratory judgment that the 2008 policy did not cover claims arising out of the August 2008 Cessna crash. P asked if the contract as written would provide coverage, the District Court should exercise its equitable power of reformation because there had been a mutual mistake in the drafting. The District Court held that D was entitled to coverage and P was not entitled to reformation based upon the alleged mistake. The District Court held 'because D did not participate in the negotiation and drafting of the 2008 policy, there can be no mutual mistake.' It analyzed the writing under a unilateral mistake and determined that reformation was unavailable. P appealed.