Special Issue || REPORT OF THE COMMITTEE ON AVIATION AND SPACE LAW

REPORT OF THE COMMITTEE ON AVIATION AND SPACE LAWAuthor(s): Keith GerrardSource: The Forum (Section of Insurance, Negligence and Compensation Law, American BarAssociation), Vol. 16, No. 1, Special Issue (1980), pp. 6-33Published by: American Bar AssociationStable URL: http://www.jstor.org/stable/25761615 .

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REPORT OF THE COMMITTEE ON AVIATION AND SPACE LAW

INTRODUCTION

At the annual American Bar Association convention, the Aviation and

Space Law Committee sponsored an excellent and well-attended pro gram focusing upon international aviation accidents.

The following report prepared by the committee emphasizes those areas of aviation and space law in which there has been the most signi ficant activity this past year.

Respectfully submitted, Keith Gerrard Chairman

I. AIRLINE LIABILITY

A. Warsaw Convention Cases

i. Contribution and Indemnity In what appears to be a case of first impression, a federal court in New York has held that an air carrier which has settled a claim to the full extent of its limited liability under the Warsaw Convention cannot be held liable for any further damages to a party seeking contribution for

damages assessed against such party. Swiss Bank Corp. v. First Na tional City Bank, 15 Av. Cas. 17,631 (S.D.N.Y. 1979). In this case, Swiss Air had paid the consignor in settlement the full extent of Swiss Air's possible liability under the Warsaw Convention for the lost cargo shipment. Claims for contribution and liability over against Swiss Air

were dismissed by summary judgment. A curious feature of this decision is that although the liability of a

Warsaw carrier for contribution or indemnity in excess of treaty limits has been debated in the aviation bar for some time, the decision was reached with neither party having briefed the point.

The court also denied a motion by Citibank to reduce any judgment against it by the percentage of Swiss Air's fault, and held that because of

6



Aviation and Space Law 7

Swiss Air's limited liability it would be unfair to reduce the plaintifPs claim by any more than the amount paid in settlement.

Contribution claims against a Warsaw carrier were also an issue in Tokio Marine & Fire Insurance Co. v. McDonnell Douglas Corp., 617 F.2d 936 (2d Cir. 1980). In Tokio the Court of Appeals for the Second

Circuit, applying California law, held that a Warsaw-protected airline which has settled passenger claims is a settling tortfeasor within the

meaning of American Motorcycle Association v. Superior Court, 20 CaL 3d 578,146 Cal. Rptr. 182,579 P.2d 899 (1978), and, therefore, cannot be held liable for additional damages in an action for contribution or

indemnity by an aircraft manufacturer. The manufacturer has argued that the liability of the airline under the provisions of the Warsaw Con vention/Montreal Agreement was contractual and not tortious in na

ture, and, therefore, that the American Motorcycle principle did not

apply. The court of appeals disagreed, holding that Warsaw/Montreal liability is tortious in nature.

ii. Other Cases

In Ricotta v. Iberia Lineas Aereas due Espana, 482 F. Supp. 497

(E.D.N.Y. 1979), o/fd, Order filed May 1, 1980, Docket No. 79-7893

(2d Cir. 1980), summary judgment was granted dismissing a com

plaint for personal injuries for die failure of plaintiff to commence suit within the two-year period of limitation contained in Article 29 of the Warsaw Convention. The passenger plaintiff, arriving in Malaga oh an Iberia aircraft after a flight from New York, was injured when she fell from an Iberia bus taking her and other passengers from the aircraft to the terminal building.

The issue was whether plaintiff's injuries were sustained during the course of the operations of "disembarking" within the meaning of article 17 of the Warsaw Convention.

The district court held that they were, applying the three tests estab lished in Day v. Trans World Airlines, Inc., 528 F.2d 31 (2d Cir.

1975), cert, denied, 429 U.S. 890 (1976), of "activity," "control" and "location." The court found that plaintiff had not reached a safe point inside the terminal nor left the control of Iberia personnel. The area

where the incident occurred was not public. Further, the buses were owned and operated by Iberia, whose personnel had completed an acci dent report on plaintiff in accordance with company policy.

The two-year Warsaw statute of limitations was also at issue in Stone v. Mexicana Airlines, Inc., 610 F.2d 699 (10th Cir. 1979). The court held that allegations of willful misconduct under Article 25 do not remove a Warsaw Convention case from the two-year Warsaw limita tions period.

The undisclosed principal of the consignor named in the air waybill can maintain an action in his own name for lost cargo notwithstanding



8 THE FORUM

articles 12, 13,14 and 15 of the Warsaw Convention. These articles are not to be narrowly construed if to do so would defeat the rights of the true owner. Defendant airline VIASA argued unsuccessfully that only the consignor or consignee named in the air waybill could maintain an action for lost cargo under the Warsaw Convention. Leon Bernstein Commercial Corp, v. Pan American World Airways, Inc., 72 A.D.2d 707, 421 N.Y.S.2d 587 (1st Dep't 1979).

In Maghsoudi v. Pan American World Airways, Inc., 470 F. Supp. 1275 (D. Hawaii 1979) the court held that a Warsaw carrier had un limited liability for loss of baggage where the baggage claim check fails to set forth the weight of the bag.

This same issue was presented to the district court in Greeley v. KLM Royal Dutch Airlines, 85 F.R.D. 697 (S.D.N.Y. 1980). Greeley sued KLM alleging that $1,650 worth of jewelry was lost or stolen from his baggage. While deciding the case on the procedural grounds, the court noted that to bring an action against KLM for the full value of his missing jewelry, Greeley need only establish that KLM failed to

comply with the baggage check requirements of Article 4 of the Warsaw

Convention, therefore precluding the airline from relying on the limita tions of liability in article 22(2) of the Convention and on Rules 25(f) and 25(h) of CAB Tariff No. 55.

A recent Maryland decision, Eifert v. Air India, No. 20292-79 (D. Md. May 1980) went even further, holding that the baggage liability limitation of $20 per kilogram is unconstitutional.

Other Warsaw baggage cases of possible interest include Schedlmayer v. Trans International Airlines, 99 Misc. 2d 478, 416 N.Y.S.2d 461

(Civ. Ct. 1979); and Abdul-Haq v. Pakistani International Airlines, 17 Av. Cas. 17,700 (N.Y. Sup. Ct. 1979).

In Metz v. KLM Royal Dutch Airlines, 15 Av. Cas. 17,843 (D. Mass.

1979) the court held that a heart attack was not an accident within the

meaning of the Warsaw Convention. The court also held that because a heart attack was not an accident the plaintiff was free to pursue an action based on common law negligence and the defendant's liability would not be limited.

In Mahaney v. Air France, 474 F. Supp. 532 (S.D.N.Y. 1979), plain tiff sued under the Federal Aviation Act for bumping in a discriminatory fashion, and sought both compensatory and punitive damages. Defend ant argued the Warsaw Convention provided the exclusive remedy in international flights and raised its two-year statute of limitations as a defense. Although the flight involved in Mahaney was international, and thus within the Convention, the court held the carrier could he liable under either the Federal Aviation Act or the Convention. The court stated the Convention does not exclusively regulate the relation

ship between passengers and carrier on an international flight. The court indicated that if plaintiff had sought to recover only for breach of




contract rather than for unjust discrimination, the case would have been barred by the Convention's two-year statute of limitations.

B. Summary Judgment

Although summary judgment against an airline on the issue of negli gence is infrequent, it does sometimes happen where the negligence of the carrier is established by specific violations of the Federal Aviation

Regulations. For example, in Rathvon v. Columbia Pacific Airlines, King County, Wash., Super. No. 841186, November 16, 1979, (unreported), appeal pending, the court granted a summary judgment against the air line in cases arising out of the crash of a Beech 99 commuter airliner at

Richland, Washington in 1978. The airline's officers and management personnel had admitted that the accident was prohably caused by a combination of misset stabilizer due to a faulty position indicator before takeoff and the crew's inability thereafter to retrim the aircraft because the stabilizer actuator was not functioning properly. The court held that the airline personnel had many indications of these problems prior to the accident, but unfortunately these problems had not been properly recorded. The airline's chief pilot and director of maintenance had both admitted that according to the FAA-approved minirnum equipment list the aircraft should have been grounded.

C. Damages In the litigation arising out of the American Airlines DC-10 accident at O'Hare International Airport on May 25, 1978, the United States Dis trict Court for the Northern District of Illinois, held that prejudgment interest (the availability of which in diversity cases is to be determined

by state law) is recoverable as an item of substantive damages in death actions under the laws of Illinois, California and Wisconsin. In re Air Crash Disaster near Chicago, Illinois on May 25, 1979, 480 F. Supp. 1280 (N.D. Rl. 1979).

The court handling the litigation arising out of the air crash disaster at Tenerife, Canary Islands on March 27, 1977, rendered a number of

interesting decisions. In Bowen v. Pan American World Airways, Inc., 474 F. Supp. 563 (S.D.N.Y. 1979), the two corporate plaintiffs sought damages as a result of the wrongful deaths of their key employees, alleging that (1) they were damaged in their business, contract and economic relationships with the decedents, (2) they had incurred the

expenses of recruiting, training and hiring substitutes and (3) they had been deprived of the business and personal influence of decedents

and, as a direct and proximate result thereof, the corporations had suf fered reductions in projected economic relations.

Both actions were governed by the law of Alaska, which plaintiffs conceded provided them no statutory remedy. Plaintiffs argued, how

ever, that the court should recognize an Alaskan common law right of an



10 THE FORUM

employer to recover for the loss of the services of a key employee re

sulting from the negligence of the defendants. The court found the argument without merit and granted the motion

of Pan Am to dismiss the corporate causes of action. The court held that Alaska would recognize no such common law claim for wrongful death and that the statutory remedy in Alaska was exclusive.

In Ridout v. Pan American World Airways, Inc., 461 F. Supp. 671

(S.D.N.Y. 1980), EJR, a California corporation of which Ridout was the principal, sought compensation for profits lost as a result of Ridout's

inability to attend to business while recuperating from injuries sus tained as a passenger in the Tenerife accident. The jury was instructed that it could compensate EJR for losses attributable to Ridout's injuries but not that it must. When the jury awarded it no damages, EJR moved for a new trial. The court denied the motion on grounds the jury was free to find there was a failure to prove that EJR suffered a financial loss as a consequence of the injuries of its principal, Ridout.

In Burke v. Pan American World Airways, Inc., 484 F. Supp. 850

(S.D.N.Y. 1980), the surviving twin sister of a passenger killed in the Tenerife crash sued for her own physical and emotional injuries allegedly sustained while at home in California through "extra-sensory empathy" at the time of her twin's death in Tenerife.

Applying the law of California as set forth in Dillon v. Legg, 68 Cal. 2d 728, 69 Cal. Rptr. 72, 441 P.2d 912 (1968), the court granted Boeing and KLM's motion to dismiss, finding plaintiff's alleged injuries were not reasonably foreseeable. The Burke plaintiff met Dillon's "close

relationship" requirement but did not satisfy the additional criteria that she be present at the scene of the crash either at the moment of the acci dent or during its aftermath. At all relevant times, the Burke plaintiff was thousands of miles from the Canary Islands crash site, having no

contemporaneous sensory perceptions, only extrasensory perceptions, of the crash.

D. Miscellaneous

The application of the New York borrowing statute in aviation and prod ucts liability cases continues to give rise to questions. The court of

appeals' latest pronouncement on the subject, Martin v. Julius Dierck

Equipment Co., 43 N.Y.2d 583, 403 N.Y.S.2d 185, 374 N.E.2d 97

(1978) held that a claim "arose" in Virginia within the meaning of the

borrowing statute when the product was used and the injury occurred there, even though the product was manufactured in New York. In

Jennings v. British Airways, 15 Av. Cas. 17,524 (S.D.N.Y. 1979), a

wrongful death claim arising out of an aircraft collision near Zagreb was dismissed as barred by the two-year statute of limitations of New York where the plaintiff was not a New York resident and the cause of action accrued outside the state of New York. The New York borrowing




statute provides that the statute of limitations of the state where the cause of action accrued or the New York statute of limitations, whichever is shorter, will apply where the plaintiff is not a New York resident. A similar result was reached in Evans v. Hawker-Siddeley Aviation, Ltd., 482 F. Supp. 547 (S.D.N.Y. 1979). The court in Evans also held that when the applicable statute of limitations is measured in years, the

anniversary date of the accident is the last day for instituting an action under New York law.

In Loftleider h.f. v. Canadair, Ltd., 15 Av, Cas. 18,038 (N.Y. Sup. Ct. 1980), the court held an action by Icelandic Airlines against Cana dair for loss of an aircraft at JFK was barred by Quebec's two-year statute of limitations. Quebec was the place where the aircraft was

manufactured. The court noted that the place of the accident, New

York, was "fortuitous." After a nonjury trial, the federal district court in Hawaii held that

an air carrier's conduct in terrninating its exclusive agreement with a wholesaler of inclusive tour packages to Australia and New Zealand and its subsequent entry into the wholesale tour market as a competitor with a competitive product was not predatory conduct from which an intent to monopolize the relevant market could be inferred. Moreover, the procedures utilized by the air carrier in implementing its entry into the wholesale tour market, including its pricing of the tours, did not constitute predatory conduct. Foremost International Tours, Inc. v.

Qantas Airways Ltd., 487 F. Supp. 589 (D. Hawaii 1979). The case is presently on appeal by Foremost. Its outcome will have a

significant impact upon the air transport and related industries in the

years ahead as the deregulation of the aviation industry expands pur suant to the Airline Deregulation Act of 1978, Pub. L. No. 95-504, 95th

Cong., 2d Sess., 92 Stat. 1705. In Manfredonia v. American Airlines, 68 A.D.2d 131, 416 N.Y.S.2d

286 (2d Dep't. 1979), the court refused to apply the New York dram

shop statute exterritorially to cover service of liquor to an intoxicated

passenger (who assaulted plaintiff) on an interstate flight beginning in New York. However, plaintiff was entitled to recover under a theory of an implied right of action from a federal regulation prohibiting service of alcoholic beverages to an intoxicated person.

H. MANUFACTURER'S LIABILITY

A. Theory and Proof of Manufacturer's Liability InBernard v. Cessna Aircraft Corp., 614 F.2d 1075 (5th Cir. 1980), the

plaintiffs widow charged that the midair collision between two Cessnas in which her husband was killed was caused by the failure of the manu facturer to incorporate a "window" or "sun roof in the other plane which would have enabled that pilot to see above and behind his air



12 THE FORUM

plane, and to incorporate an opening in the floor of her husband's aircraft to allow him to see below and in front. The court rejected these theories because there was no evidence that such openings would have

prevented the accident. A case likely to have wide repercussions in the aviation products area

is Bell Helicopter Co. v. Bradshaw, 594 S.W.2d 519 (Tex. Civ. App. 1979). This was a personal injury suit by two passengers against the

pilot, the owner and Bell. The pilot and owner cross-claimed against Bell for mdemnity and also cross-claimed for damages for personal in

juries and loss of the aircraft. The cause of the crash was an in-flight separation of the tail rotor. The passengers recovered against the pilot, owner and Bell and the pilot and owner each prevailed on his cross claims against Bell. On appeal the court affirmed the judgment in all

respects. Bell's first argument was that the evidence was insufficient to show the existence of a defect. Bell originally sold the Model 47-G2-A1

helicopter in 1961 with a type 102 tail rotor blade system. The type 102 blade system had been developed by Bell in the mid-1950s. The par ticular blade on the accident aircraft had been manufactured by Bell

prior to 1970. At the time Bell sold the helicopter in 1961 "the 102 blade

represented the most advanced state of the art in tail rotor blade tech

nology." The 102 blade had a design service life of 600 hours. At the time of the accident the particular blade had been in service more than 600 hours.

The court found that the 102 blade had a history of inflight service

problems, and further that "[m]ost of these inflight fatigue fracture failures were chiefly attributable to failure by the respective owners and operators to comply with Bell-suggested, and FAA-mandated, in

spection and maintenance requirements." Because of these problems Bell began in the late 1960s to design an improved blade. The result was the 117 blade system which had a service life of 2,500 hours and was more damage tolerant and required less routine maintenance than the 102. Thus, the 117 was ultimately more economical than the 102. Bell put the 117 on all new production helicopters after 1970. No 117 blades have ever failed in flight. Bell also requested the FAA to put out an AD mandating a retrofit of the 117 blade onto all existing helicop ters. The AD was killed, however, by opposition by the Helicopter Asso ciation of America. Nevertheless, Bell offered a retrofit kit for $2,700, which the owner of the accident aircraft chose not to purchase. After the subject accident Bell issued a service bulletin recommending re

placement of the 102 with the 117 and giving "increased safety" as the reason.

The court concluded that the jury could find the helicopter to be

unreasonably dangerous because of the mere presence of the 102 system on the helicopter after 1970 when the 117 system became commer

cially available. The court concluded that the helicopter was unreason




ably dangerous when it left the manufacturer's control. The helicopter had been owned by a Bell service station from 1969 to 1973. The court found that Bell had a degree of control over the helicopter during this

period in that it could have compelled its service station to install the 117 system.

The evidence also showed that the pilot and owner were negligent and had misused the helicopter. The court found that the misuse was not unforeseeable and therefore not a defense under Texas law to any of the claims. The court also found that because Bell breached a duty to the owner and pilot and the owner and pilot did not breach any duty to Bell (although they breached duties to their passengers) the owner and pilot were entitled to be indemnified by Bell for their liability to the passengers. The court found this result "shocking, particularly in

light of the fact that it may be said that Smith and Ingle [the owner and pilot] were far more culpable regarding plaintiffs' injuries than was

Bell," but thought the solution must come from the legislature. Another potentially important Texas case, a nonaviation products

case, Bailey v. Boatland of Houston, Inc., 585 S.W.2d 805 (Tex. Civ.

App. 1979) deals with the admissibility of state-of-the-art evidence. Plaintiff's decedent was killed in a boating accident and contended that the boat was "defectively designed so as to be Unreasonably dangerous,' primarily because there were no devices installed which would auto

matically kill the engine in the event the operator was thrown from the boat." Id. at 807. After a jury verdict for the defendant, plaintiff con tended on appeal that the court erroneously admitted evidence that such "kill switches" were not commercially available at the time the boat was

manufactured and sold. The Court of Civil Appeals agreed. The court concluded that "the intent and purpose of strict tort liability would [not] be satisfied by the expectations of consumers being defined by the ac tions of manufacturers. . . . The expectation of the ordinary consumer should be based on experience with the product itself, not the expert technological knowledge of the manufacturers within the industry." Id. at 808. The court recognized the existence of contrary authority such as Bruce v. Martin-Marietta Corp., 544 F.2d 442 (10th Cir. 1976).

Malovany v. Beech Aircraft Corp., 15 Av. Cas. 17,844 (D. Conn.

1979) arose from the 1974 crash of a light aircraft originally sold in 1955. The plaintiffs claimed loss of engine power associated with air

entering the fuel system by reason of "sloshing" in an unbaffied fuel

tank and "unporting" of the tank outlet. The plaintiffs contended that

subsequent modifications made in larger tank designs put the defendant on notice of this potential hazard and should have led to a warning notice. The defendant contended that any count based on strict liability or breach of warranty was barred by the Connecticut statute of limita tions for such actions which accrues on the date of sale. The plaintiffs argued, on the other hand, that the customary and requisite ongoing



14 THE FORUM

information flow essential to any operation of the uniquely complex and

highly regulated product (an aircraft) should itself be deemed a "prod uct" for the purposes of the motion?a product deficient in failing over the years (until the date of the accident) to communicate safety devel

opments. In refusing to dismiss the strict liabihty (and breach of warranty)

count, the trial court ruled that the plaintiffs' novel proposition marked the beginning, not the end, of inquiry, and that the matter could best be decided in the trial context of full development and scrutiny of all the

surrounding facts. The importance of properly written manuals was emphasized by the

decision in Bailey v. Aerodyne, Inc., 280 N.W.2d 789 (Wis. 1979). There the manufacturer of an aircraft was held liable for indicating in its service manual that the installation of a "quick drain" valve in the oil sump was safe. In fact, when the aircraft's nose gear was retracted, the strut contacted the valve and caused it to open, draining the engine of oil. The court found the evidence that this occurred ovemhelming and affirmed the jury verdict in favor of plaintiff.

In Lamon v. McDonnell Douglas Corp., 91 Wash.2d 345, 568 P.2d 1346 (1979), summary judgment in favor of an aircraft manufacturer

was reversed. Plaintiff, a United stewardess, fell through an emerg ency hatch connecting the DC-10 lower galley to the first-class compart

ment. The hatch had been opened by another stewardess because of a

power failure and left opened and unattended contrary to United pro cedures. Plaintiff contended the hatch design was defective because it should have been spring-loaded to close automatically. The Washington Supreme Court held that a genuine issue of material fact precluding summary judgment for defendant was created by the affidavit of plain tiff's expert which opined, based on his comparison of the DC-10 hatch

with the 747 hatch, that the DC-10 hatch was unreasonably dangerous. On the other hand, in Kroon v. Beech Aircraft Corp., 485 F. Supp.

1223 (M.D. Fla. 1979), a motion for summary judgment in favor of the manufacturer was granted. The accident was caused by the pilot's failure to remove the gust lock. The Beech checklist has a specific pro cedure to check and remove the gust lock. The court, relying upon Kay v. Cessna Aircraft Corp., 548 F.2d 1370 (9th Cir. 1977), held that "the manufacturer had the right to expect the pilot would not attempt to take off with the gust lock still in place."

Similarly, summary judgment in favor of the manufacturer was

granted in Jurzysta v. Boeing Co., 15 Av. Cas. 18,173 (W.D. Wash.

1980). In that case arising out of the 1974 crash of an Air Force KC 135A aircraft, plaintiffs alleged four separate product defects. Taking each allegation in turn, the court agreed with Boeing that plaintiffs did not have sufficient evidence to raise a genuine issue as to die existence of any defect attributable to Boeing.




Aircraft and subcomponent manufacturers are not the only manufac turers who may be held liable for an airplane crash. Li Aetna Casualty & Surety Co. v. Jeppesen & Co., 463 F. Supp. 94 (D. Nev. 1978), the "manufacturer" of a defective chart was held 80 percent responsible for an aircraft crash in Nevada. The court concluded that the chart in ques tion was neither accurate in what it purported to represent, nor quickly legible nor readily comprehensible. The case is discussed further below under the heading "Comparative Fault."

B. Comparative Fault

The jurisdictions continue to divide on the issue of whether all forms of

comparative fault should be considered a defense to a strict liability action. In the past year Oregon joined the growing list of jurisdictions following Daly v. General Motors Corp., 20 Cal. 3d 725, 144 Cal. Rptr. 380,575 P.2d 1162 (1978). See Baccelleri v. Hyster Co., 287 Or. 3, 587 P.2d 351 (1979). On the other hand, Washington has refused to apply comparative fault to strict products liability. See Seay v. Chrysler Corp., 93 Wash.2d 319, 609 P.2d 1382 (1980).

Comparative fault was an issue in two reported aviation cases. Li Bradshaw v. Bell Helicopter Co., supra, discussed above, the court fol lowed Texas law that only unforeseeable misuse is a comparative de fense. Hopkins v. General Motors Corp., 548 S.W.2d 413 (Tex. 1977). The court found that although the pilot and owner of the subject heli

copter were more at fault than Bell, their misuse was not unforeseeable and therefore was not a defense.

In Aetna Casualty & Surety Co. v. Jeppesen & Co., supra, the court was faced with the problem of allocating percentages of fault under Cali fornia law between the negligent airline and the manufacturer of a

defective chart. In a decision that does not augur well for manufac

turers, the court found Jeppesen 80 percent at fault, stating:

The difficulty here is in deterrrrimng the ratio of fault between Bonanza and Jeppesen. There is no mathematical or other formula known that can be used by this Court or by a jury in making that deterrnination. But a consideration of the consequences of fault on the part of each of the parties and the possible damages which might arise from such fault,

whether in design or conduct, or both, does point a way to a resolution of that very difficult problem. The extent of the possible loss of life from fault by an air carrier is lim ited to the occupancy of one plane at the time of the coinmission of the fault, i.e., on the plane-by-plane and trip-to-trip basis.

On the other hand, the extent of the possible loss of life which can re sult from a faulty landing chart is so very much greater that it is awe some to contemplate. (Emphasis supplied.)

C. Disclaimers and Exculpatory Clauses

Several cases this past year have added to authority that airlines may disclaim or waive any right to sue the manufacturer in tort. In Tokio



16 THE FORUM

Marine & Fire Insurance Co., Ltd. v. McDonnell Douglas Corp., 617 F.2d 936 (2d Cir. 1980) suit was brought against McDonnell Douglas to recover for the loss of a DC-8 owned and operated by Japan Air lines.

Liability was alleged on the basis of strict liability, negligence, negligent failure to warn, and negligent misrepresentations as to the condition of the aircraft at the time of sale. Applying the law of California, the Sec ond Circuit found the contractual waiver and disclaimer broad enough to bar each theory of liability. The court was persuaded by the fact that the disclaimer was the product of lengthy and detailed negotiations be tween two large corporations of relatively equal strength.

Identical considerations persuaded the U.S. District Court for the Western District of Washington to grant summary judgment in favor of the Boeing Company and Logistic Support Corporation in an action

brought by the Islamic Republic of Iran to recover for the loss of a 747 aircraft. In Islamic Republic of Iran v. Boeing Co., 15 Av. Cas. 18,189 (W.D. Wash. 1980) two separate agreements, one negotiated with

Boeing in connection with a modification of the aircraft, and one nego tiated with LSC in connection with the operation and maintenance of the aircraft were construed in light of Iran's claims of negligence and strict liability. In both cases, the court found that Iran bargained from a position equal to that of its corporate counterparts, that the disclaimers were unambiguous, and that there was no public policy against bmding Iran to its contractual obligations.

In O'Brien v. Grumman Corp., 475 F. Supp. 284 (S.D.N.Y. 1979), New York law was applied to the contract of sale to bar a strict liability claim against the aircraft manufacturer. Although the contractual pro vision at issue did not specifically refer to either strict liability or negli gence, the New York court was convinced that an intent to bar strict

liability claims was evidenced by the disclaimer of implied warranties.

Using the same analysis, the court concluded that the warranty lan

guage did not indicate an intent to waive claims based upon negligence. Accordingly, the manufacturer was denied summary judgment as to the negligence claims.

D. Property Damage, Economic Loss and Loss of Use

In Scandinavian Airline System v. United Aircraft Corp., 601 F.2d 425

(9th Cir. 1979), the court held that for policy reasons, the strict liability doctrine was not available to a large air carrier suing an engine manu facturer for alleged defect in the engine which resulted in damage to the engine and the aircraft on which it was installed.

The trial court ruled that under California law SAS could not proceed on a theory of strict liability, stating:

We also hold that United Aircraft is not liable to SAS on a theory of strict liability in tort, not because of the exculpatory clause (in United's contract of sale), but because of the lack of public policy for such a po sition. As mentioned above, public policy is designed to protect the small




consumer and to allocate the risk of loss to the person most able to hear it, in that case, the manufacturer. Here, where there are two large com

panies contracting, it is only a question of who between two equals should he made to hear the risk of loss. We see no reason why the manu facturer should be made to bear the risk of loss without fault as between it and a large corporate buyer. It should be noted again that there is no injury here.

In sustaining the trial court, the appellate court said in part:

The trial judge's decision does not conflict with the risk distribution rationale in California products liability law. SAS and United are finan cial equals. Further, both are business entities who sell a product or per form a service which is ultimately paid for by SAS's customers. As a result, "[w]hether the loss is thrust initially upon the manufacturer (United) or the consumer (SAS), it is ultimately passed on as a cost of doing business included in the price of the products of one another and thus spread over a broad commercial stream". Kaiser Steel Corp. v. West

inghouse Elec. Corp., 55 Cal. App. 3d 737, 748 (1976). Unlike the con sumers in Greenman, Seely and Price, SAS can allocate its risk of loss equally as well as United. Therefore, the societal interest in loss shifting present in those cases is absent here.

The appellate court relied heavily on the Kaiser case which stated that the doctrine of products liability does not apply as between parties

who: (1) deal in a commercial setting; (2) deal from positions of

relatively equal economic strength; (3) bargain the specifications of the

product; and (4) negotiate the risk of loss from defects in it, stating:

Interpreting these four requirements as the court did in Kaiser leads us to the conclusion that SAS does not have a claim in strict liability against United. SAS (and) United . . . dealt in a commercial setting from positions of relatively equal economic strength. The specifications of the engines were negotiated by the parties. Finally, . . . United and SAS all negotiated the risk of loss for defects in the engine.

In Koninklijke Luchtvaart Maatschaapij, N.V. v. United Technolo

gies Corp., 610 F.2d 1052 (2d Cir. 1979), the Court of Appeals for the Second Circuit held that a lessee of a commercial aircraft may recover loss of use damages based on rental value without proving that any ac tual financial loss was suffered and without proving that a substitute aircraft was needed to cover the loss of the damaged aircraft during the

period of repair. The district court, after a trial before a magistrate limited to the question of whether plaintiff KLM had sustained any

damages for loss of use of the damaged aircraft during the period of

repair, dismissed the complaint on the merits after holding that KLM had failed to prove any damages under several theories advanced. The court of appeals reversed and remanded for further proceedings, hold

ing that the rental value of the aircraft for the period of idleness while the aircraft was undergoing repairs, measured by the rental actually paid by KLM under the long-term lease applicable to the damaged air

craft, was a proper measure of damages. That portion of the judgment of the district court which rejected as speculative claims for increased



18 THE FORUM

operating costs and lost revenue was held not to be clearly erroneous and

accordingly was affirmed.

E. Punitive Damages i. Applicable Law

In In re Air Crash Disaster near Chicago, Illinois on May 25, 1979, 15 Av. Cas. 18,137 (N.D. 111. 1980), the court held that the principal place of business of the corporate defendants governed the issue of whether

they were subject to punitive damages. The case arose from the crash of an American Anrlines DC-10 jet near

O'Hare International Airport on May 25, 1979; and the issue was de cided upon companion motions of corporate defendants American Air lines (aircraft operator) and McDonnell Douglas Corporation (aircraft

manufacturer) to strike all claims for punitive damages in the pending wrongful death cases.

McDonnell Douglas contended that the court should apply the law of

Illinois, the place of the accident. Illinois law does not permit the re

covery of punitive damages in wrongful death actions. American contended that the court should apply the law of Illinois to

the cases originally filed in that state or in Michigan, and the law of New York to the cases originally filed in that state or in California. lake

Illinois, New York does not permit the recovery of punitive damages in

wrongful death cases. The numerous plaintiffs took various positions, all consistent with

applying some state law which would grant the right to seek punitive damages in wrongful death cases.

Applying the choice of law rules of Illinois, New York, California and

Michigan, the court nominated four potential candidates for the con

trolling law: (1) the place of the injury (Illinois); (2) the place where the conduct causing injury occurred (Oklahoma for American and Cali fornia for McDonnell Douglas); (3) the domicile, residence, national

ity, place of incorporation and place of business of the parties (various for the plaintiffs, New York for American and Missouri for McDonnell

Douglas); or (4) the place where the relationship, if any, of the parties is centered.

The court concluded that the most significant contacts (Dlinois's con flict of rules test) were "2" and "3" above. It then concluded that if there were any conflict among the laws of these various jurisdictions, the law of the corporate defendants' principal place of business should control.

This decision is now on an interlocutory appeal to the Seventh Circuit.

ii. Equal Protection Clauses of Federal and State Constitutions

In In re Paris Air Crash of March 3,1974, 15 Av. Cas. 18,166 (9th Or.

1980), rev'g 427 F. Supp. 701 (CD. Cal. 1977), the court held that the




California rule that punitive damages are not permitted in wrongful death actions, although they are permitted in personal injury and prop erty damage actions, does not violate the equal protection provisions of the Federal Constitution, or the Constitution of the State of CaMornia.

The trial court had held that the above classification was unreason

able, basing its holding on the reasoning that the "right to be free from

oppressive, fraudulent or malicious conduct ... is personal and sub

stantially within the protections accorded fundamental rights found

expressly and impliedly in the Fifth and Fourteenth Amendments to the United States Constitution.,, 427 F. Supp. at 708.

The court of appeals rejected this reasoning, holding instead that the correct rule to be applied with respect to the alleged violation of the Federal Constitution is whether there is a rational relation between the statute and a legislative object (and a rational distinction between classi

fications). Finding that there was such, the court found no violation of the Federal Constitution. With respect to the equal protection provisions of the California Con

stitution, the court applied the more stringent rule that the classification must "advance a discernible purpose in a rational manner." Applying this rule, the court held the punitive damage limitation to be constitu tional. In so doing, the court pointed out that the purpose of the statute involved (Cal. Civ. Proc. Code ? 377) was to permit survivors to re cover "compensation for the economic loss and deprivation of consor tium they suffer as a result of the death," and that one of its goals is

"placing reasonable limits on wrongful death actions in the state" (Jus tus v. Atchison, 19 Cal. 3d 564, 581-82 (1977)) and that disallowance of punitive damages in wrongful death actions serves this goal, at least to some extent.

A petition for an en banc hearing is now pending before the court.

m. liability of the united states

A. Inspection and Certification

Perhaps the most important development during the last year occurred in the area of government liability for inspection and certification of aircraft. In United Scottish Insurance Co. v. United States, 614 F.2d 188

(9th Cir. 1979), the court first reaffirmed the law in the Ninth Circuit that the United States can be held liable under the Federal Tort Claims

Act for negligent aircraft inspection and certification, Arney v. United

States, 479 F.2d 653 (9th Cir. 1973), and then discussed the elements

necessary to establish a cause of action. The court found that govern ment liability can exist for such claims if allowed under a "good Sa maritan test" of the state law to be applied.

In United Scottish, plaintiffs alleged that the FAA had negligently issued a Supplemental Type Certificate for installation of a gasoline



20 THE FORUM

heater in the nose of an aircraft. The heater later developed a leak which caused an in-flight fire and subsequent crash of the aircraft. The dis trict court found the United States liable to all plaintiffs on the basis that the FAA had negligently inspected the aircraft prior to issuance of the certificate and that this negligent inspection approximately caused the in-flight fire and crash, thereby injuring plaintiffs.

Among other grounds asserted on appeal, the United States argued that (1) under the jurisdictional statute, 28 U.S.C. Section 1346(b), the district court has jurisdiction to award damages against the govern

ment under the Federal Tort Claims Act only when a private individual could he held liable pursuant to state law in like circumstances, and

(2) since the government's action was in the nature of a safety inspec tion and approval, there is no analogous "private person" liability as

required by Section 1346(b). In so arguing the government asked the court either to limit or to overrule Arney.

The United Scottish court refused to restrict Arney. The court did

interpret the Arney ruling to mean, however, that while government liability may arise for negligence or improper issuance of an airworthi ness certificate, a duty of due care does not necessarily arise directly out of FAA regulations. Although such functions are carried out pursu ant to statute or to regulations, they do not arise from a primary duty to

provide the service in question. Addressing the government's second

argument, the United Scottish court held that liability may exist where the safety inspection and approval would impose a duty of due care under the law of the state where the act of omission occurred.

The crucial inquiry is whether, in undertaking the inspection, a duty to perform the inspection carefully arose under state law because of the relationship thereby created?the "good Samaritan" rule.

In essence, therefore, a cause of action may arise for the negligent inspection and certification of aircraft in situations where plaintiffs can establish an analogous "good Samaritan" cause of action under applica ble state law. However, the United Scottish decision leaves as many questions unanswered as those which it resolved. First, because plain tiffs had made no showing in the court below as to which state law ap plied, there was no record as to whether they could rely upon a "good Samaritan" rule and, if so, which particular doctrine they would have to satisfy. Second, because the case was remanded, the United Scottish court did not address the remaining defenses raised by the government, including discretionary function and misrepresentation. These defenses

will certainly he raised by the United States any time a "good Samari tan" cause of action is established. For example, where a program is established by the FAA for the certification of a large aircraft such as the DC-10, the discretionary function defense may well loom large. Finally, in establishing a "good Samaritan" cause of action plaintiffs may be faced with an impossible conundrum. An essential element of




almost all "good Samaritan" causes of action is the element of reliance. It may be difficult for plaintiffs to establish a passenger's reliance upon FAA inspection and certification, about which most passengers prob ably know little. And insofar as plaintiffs' counsel are able to establish

passengers' knowledge of and reliance on FAA inspection and certifica

tion, they may well be estabhshing a misrepresentation defense. In Hoffman v. United States, 600 F.2d 590 (6th Cir. 1979), the court

affirmed the dismissal of a complaint in which plaintiffs sued the United States for negligent issuance of a license. The government had failed to demand proper insurance coverage from the owner of the aircraft be fore issuing an ATCO certificate. The aircraft later crashed injuring plaintiffs. The trial court found that the failure to require prior insur ance coverage was not a proximate cause of the crash and dismissed the

complaint. The Sixth Circuit affirmed but stated in dicta that if the case were to be decided under the Federal Tort Claims Act it would be forced to find that the discretionary acts and misrepresentations defenses con stituted exceptions from federal liability under the Act, citing Dalehite v. United States, 346 U.S. 15, 73 S. Ct. 956, 97 L. Ed. 1427 (1953).

B. Comparative Fault

In two 1979 cases decided by the Ninth Circuit, the liability of the United States under California's comparative fault system of apportion ing liability was analyzed.

In Mattschei v. United States, 600 F.2d 205 (9th Cir. 1979), the United States was found to be 30 percent liable for the failure of an air traffic controller to exercise due care to prevent a midair collision near the Hayward, California airport. Mattschei was killed in the collision. The court refused a motion of the United States to implead the pilot of the second aircraft and his employer as possible co-tortfeasors. Conse

quently, at the trial of the action no finding of comparative fault was made between United States, the second pilot, and his employer. Since the other possible tortfeasors had not been impleaded the United States

was found to be liable for the entire amount of plaintiffs' losses reduced

by decedent's proportionate degree of fault. On appeal, the government argued that in a state where a comparative fault rule prevails, the gov ernment's liability is limited to its own share of the negligence which caused the injury. The court rejected this argument, holding that under 28 U.S.C. Section 1346(b) the United States is responsible "in the same manner and to the same extent as a private individual under like cir cumstances" in accordance with "the law of the place where the wrong ful act or omission occurred." The United States could not obtain differ ent treatment than would be given to a private tortfeasor. The court

held, however, that the trial court erred in not allowing the United States to implead other potential co-tortfeasors and remanded the case.

In Rudelsan v. United States, 602 F.2d 1326 (9th Cir. 1979), the



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United States was found to be 20 percent liable because the air traffic con trollers at the Santa Monica airport negligently failed to scan the entry corridor area of the downwind leg of the traffic pattern for two minutes

immediately preceding a midair collision. The trial court held that had

they done so, they would have seen the peril and warned the pilot in time to avoid the collision. Prior to the verdict being returned, Rudelson's heirs settled their claims against the defendants other than the United States. The verdict was in favor of Rudelson's heirs, which verdict was reduced by the percentage amount of Rudelson's fault and the amount of the settlement with the remaining defendants. The United States was liable for the remainder of the verdict. Thus, the United States, which was found to bear only 20 percent of the blame for the collision, was or dered to pay almost 75 percent of plaintiffs damages (and 55 percent of other plaintiffs' damages). The government assigned as error the district judge's application to the United States of the rule of joint and several liability, arguing that the Federal Tort Claims Act limits waiver of sovereign immunity to only that amount of damages directly attribut able to the United States. In essence, the government urged the court to supplant state law with a federal rule under which the government's damages liability would be directly proportionate to the United States' relative degree of fault. As in Mattschei the argument was rejected, the court holding that the Act makes the United States liable in the same

manner and to the same extent as a private individual under like cir cumstances. 28 U.S.C. ? 2674. The court refused to create any ju dicial exception to this rule.

C. Weather Related Liability In Himmler v. United States, 474 F. Supp. 914 (E.D. Pa. 1979), the

government was held liable for the deaths and injuries suffered by members of a family living in a home struck by an aircraft after the

pilot apparently became disoriented in IFR conditions. The court held that the air traffic controller failed to give proper assistance to the

pilot and in fact contributed to the spatial disorientation which pre sumably caused the crash. The controller failed to instruct the pilot to

keep his eyes on the instruments, failed to talk to the pilot frequently and with reasonable continuity, confused the pilot by giving another air craft a second and unnecessary clearance to land, had the pilot look out side the aircraft for the airport's lights when the aircraft was at 2,000 feet and the reported ceiling at the field was 400 feet, gave too many and too excessive turns to the pilot and did not convey to the pilot nec

essary weather information concerning VFR conditions at a nearby airfield.

D. Failure to Follow Search and Rescue Procedures

In Swoboda v. United States, 22 ATLA L. Rep. 396 (S.D. Fla. 1979), the government was held 50 percent responsible for the death of a pilot




lost during a trans-Pacific flight. Early in the flight Anchorage Center became aware that the pilot was unable to transmit on his VHF chan nels. The Center later received a report of intermittent signals from the

Emergency Locater Transmitter of the decedent's aircraft but no action was taken. The government failed to act in a timely manner to initiate the search and rescue and, once it was initiated, gave wrong coordinates to the search and rescue operation, resulting in several hours of search

activity in the wrong area. The court held that the Center's failure to follow search and rescue procedures mandated by FAA regulations was a proximate cause of the death.

E. Nonprecision Approach Radar

In the last of the cases arising from the crash of Eastern Airlines' Flight 212 near Charlotte, North Carolina on September 11, 1974, the trial court found that the air traffic control personnel at the Charlotte Air craft Control Center were not negligent during the approach of Flight 212 to the field. Flight 212 was on a nonprecision approach at the time that it crashed. The approach was being monitored by the approach controllers on ARTS III radar equipment.

The action, Aetna Casualty & Surety Co. v. United States, 438 F.

Supp. 886 (W.D.N.C. 1980), was brought by nineteen companies who insured Eastern against liability and the Eastern DC-9 against loss

against the United States under the Federal Tort Claims Act. Plaintiffs contended that the negligence of the United States was established on two theories: First, that the air traffic controllers breached an alleged duty to monitor the approaching aircraft with respect to its height above the ground and to detect its dangerously low altitude and advise the crew that they were flying too low; and second, that the controllers in fact observed the plane at the dangerously low altitude and failed to

warn the crew. The court, however, found that plaintiffs failed to estab lish the existence of a duty to use the ARTS III radar monitoring equip

ment to monitor an aircraft's altitude and rate of descent during the

nonprecision approach. The court was persuaded by evidence that ARTS was designed as an aid only to separate airplanes from each other and was not intended as an aid to approach nor as a system to separate planes from the ground. The court further found that the duty to main tain a safe altitude on a nonprecision approach was strictly the respon sibility of Flight 212's crew. Second, the court held that while the duty to warn would arise if any controller had actually observed Flight 212 in peril, there was no direct evidence that any controller so observed the flight.

F. The Feres Doctrine

Two cases this past year applied the Feres doctrine to bar actions

brought under the Federal Tort Claims Act to recover damages for the death of a serviceman in a plane crash. In Eckles v. United States, 471



24 THE FORUM

F. Supp. 108 (M.D. Pa. 1979) plaintiff's decedent was killed while

engaged in recreational flying as a member of his base aero club, a

nonappropriated fund activity of the government, open only to military personnel and certain Department of Defense employees. The facts in

Woodside v. United States, 606 F.2d 134 (6th Cir. 1979) were remark

ably similar. There, however, plaintiff's decedent was on leave when the aero club plane in which he was receiving instruction crashed.

Both courts agreed that the proper focus of Feres analysis is upon the extent to which the deceased serviceman's activity at the time of death

was related to his status as a member of the military. Both found aero club flying to be "service-connected," noting that membership in the club was available to decedent only by virtue of his service in the mili

tary, the club was established by the military, indirectly funded by the

military, regulated by the military and supervised by the base com mander.

IV. AVIATION INSURANCE

The past year saw a number of insurance coverage questions decided by the courts, with the insurers prevailing in most reported cases. Some of the more interesting and/or important decisions are:

Steinbach v. Aetna Casualty & Surety Co., 15 Av. Cas. 18,096 (N.Y. Sup. Ct. 1980). The infant plaintiff was hit on the head by a package of pamphlets dropped from the insured's airplane. A personal injury action against the insured, commenced in state court in New York, was defended by the insured's personal attorney and resulted in a stipulated settlement which was never paid. Plaintiff then obtained a judgment for the amount of the settlement and brought an action to require the insurer to satisfy the judgment. The insured defended on the ground that a New Hampshire court had previously held, in a declaratory judg

ment action by the insurer against the insured, that there was no cov

erage under the policy for the accident because the insured had failed to

give the insurer prompt notice of the accident. Plaintiff argued that the failure of an insured to notify his insurer should not prejudice the right of the injured party and that the judgment in the New Hampshire de

claratory judgment action was not binding upon the plaintiff who was not a party thereto. The court disagreed on both points, holding that "the injured party has no greater right against the insurer than the in sured would have had" and that the adjudication of the insurer's obli

gation in the declaratory judgment action was binding upon the plaintiff under the full faith and credit clause.

The res judicata point was also raised in Boone v. Ranger Insurance

Co., 152 Ga. App. 891, 264 S.E.2d 325 (1980). Plaintiff's decedent was a passenger in a private aircraft owned by the insured which had been rented to one Kilgore. Kilgore did not possess a proper medical certifi




cate as required by FAA regulations. In a previous action, the insured had sued his insurer for damages for the loss of the aircraft. That action had resulted in the entry of summary judgment in favor of the insurer. In the Boone action, the trial court granted summary judgment for the insurer and plaintiff appealed arguing that the trial court had

erroneously relied on the earlier determination as res judicata. The

appellate court rejected her contention concluding that the basis for the decision below was not the doctrine of res judicata, but rather the doctrine of stare decisis under which the holding in the earlier case was deemed persuasive.

Several of the cases in the past year dealt with definitions of terms used in policies. In Morgan v. Continental Casualty Co., 382 So. 2d 351

(Fla. App. 1980), the decedent was insured under a group insurance

policy which provided coverage for injuries or deaths occurring "while the Insured Employee ... is riding as a passenger in any aircraft." De cedent was killed in a light plane accident. It appears that at the time of the accident the decedent was not actually operating the aircraft al

though he was the only licensed pilot on board. The court concluded that "a 'pilot' does not embrace the term 'passenger' within policy coverage ... [A] pilot is not a passenger and does not lose his status as such

because he remains responsible and in command of the aircraft even

though he undertakes some momentary task other than the actual op eration of the aircraft." The court relied on the fact that under FAA

regulations decedent was the pilot in command of the aircraft at all times.

In Dale Electronics, Inc. v. Federal Insurance Co., 205 Neb. 115, 286 N.W.2d 437 (1979), the definitions of two phrases used in an aviation insurance policy were at issue. The policy provided hull coverage to the

insured, but contained a requirement that the aircraft be operated with a copilot. However, no copilot was required for any "ferry flight" under

"daylight Visual Flight Rules conditions." The aircraft crashed attempt ing to land in Olathe, Kansas, on a flight from Oklahoma City to Co

lumbus, Nebraska. The defendant insurer denied coverage on two bases: first, that the aircraft was not on a ferry flight since, although the trip from Oklahoma City to Columbus was clearly a ferry flight, the

stopover in Kansas was not related to the ferry nature of the trip; and

second, that the aircraft was not being operated under "Visual Flight Rules conditions." The court rejected both contentions. It held first that a flight did not lose its status as a ferry flight merely because of an

unrelated enroute stop. With respect to the insurer's second contention, the court noted that there is a distinction between operating under visual flight rules conditions and operating under visual flight rules

(VFR). The court found that the policy referred to weather conditions rather than the type of clearance obtained by the pilot. The evidence showed that the weather conditions were "special VFR" which the court



26 THE FORUM

considered to be within the policy term of "[VFR] conditions." The court

also regarded it as irrelevant that the pilot had not obtained a special VFR clearance from the air traffic controller, since the policy referred not to whether the plane was properly being operated under special VFR but rather whether it was being operated in special VFR weather conditions.

The definitions of two policy terms were also at issue in Vanguard Insurance Co. v. Stewart, 593 S.W.2d 736 (Tex. Civ. App. 1979). The hull anil medical payments insurance policy involved in that case re

quired that the aircraft be operated by a pilot who

possesses a private or commercial pilot's certificate and has logged at least 750 hours as a pilot in command which includes at least 50 hours in a single-engine aircraft equipped with a conventional landing gear and 10 hours in a Cessna 180 aircraft.

At issue were the meanings of the terms "logged" and "conventional

landing gear." The evidence established that the pilot operating the air craft at the time of the crash, one Greak, had logged as pilot in com

mand at least 50 hours in a single-engine aircraft equipped with a tri

cycle landing gear and had flown, but not recorded in any logbook, at ledst iO hours in a Cessna 180 aircraft. The court concluded that a

tricycle landing gear was a "conventional landing gear" within the mean

ing of the policy. However, the court denied coverage because the pol icy's explicit requirement of 10 hours "logged" time could not be satis fied by evidence of unlogged flying time.

In Casino Air Charter, Inc. v. Sierra Pacific Power Co., 95 Nev_, 596 P.2d (1979) the court held that a utility company which had en

gaged an aircraft with pilot to survey a proposed power line had not "hired" the aircraft so as to make the owner and operator of the aircraft an extra insured under the company's excess liability insurance policy.

The Oregon Court of Appeals found that a policy covering "all risks" for direct and accidental damage to an aircraft while the aircraft was in

motion under its own power or momentum included the cost of an en

gine teardown and inspection necessary to certify the aircraft after an accident. In Busch v. Ranger Insurance Co., 46 Or. App. 17, 610 P.2d 304 (1980), the insureds successfully argued that when they bought an "all-risks" policy covering an airplane that could only be lawfully oper ated if it was certified airworthy, they had a right to expect that cov

erage would extend to all of the consequences of an accident that rendered an aircraft "unairworthy."

Several cases presented issues as to possible ambiguities in aviation insurance policies. In Foremost Insurance Co. v. Sheppard, 610 F.2d 551 (8th Cir. 1979), the issue was whether the policy provided the in sured with liability coverage for the death of a student pilot who was

operating the aircraft at the time of the accident. The insurer argued




that the claim of the student pilot fell within a clause excluding cover

age for pilots or crewmen. The court found that notwithstanding this

exclusion, the policy was ambiguous because of several provisions ex

pressly authorizing the aircraft to be used for student instruction. The court reviewed earlier decisions from other jurisdictions going both

ways and concluded that the policy of resolving ambiguities in favor of the insured was controlling. The court "recognize[d] that this incon

gruity [in the policy] might plausibly be reconciled by construing the policy strictly and technically"; however, the court concluded ti\at "[u]pon a review of the entire aircraft policy, we believe that an aver

age policy holder would be justified in concluding that liability coverage is provided for student pilots."

In contrast to Foremost, the Idaho Supreme Court was not troubled

by a similar alleged policy inconsistency in Levra v. National Union Fire Insurance Co., 99 Idaho 871, 590 P.2d 1017 (1979). In Levra the policy form's printed definition of "insured" expressly excluded "any rentor

pilot." However, in a typed declaration for the policy, it was stated that the aircraft was to be used "only"' for instruction and rental purposes.

Nevertheless, the court denied coverage, stating "these declarations can not be said to designate who is or who is not an insured, or to expand or contract that defined class of persons afforded liability insurance

protection." The insured was also unsuccessful in demonstrating the existence of

a policy ambiguity in Goddard v. Avemco Insurance Co., 43 Or. App. 39, 602 P.2d 291 (1979). The policy provided coverage only when the aircraft was being operated by a pilot holding a valid medical certificate. The named insured, Goddard, obtained the policy and stated on his ap plication that he did not hold a current medical certificate. He argued from that that the policy was ambiguous and that the insured should be

estopped to deny coverage. The court rejected this position stating, "[i]n this case the policy . . . was issued to cover several risks other than

insuring Forrest Goddard. The aircraft was insured and could be flown

by the designated pilots, including Forrest Goddard, if the pilots had a current medical certificate at the time of the flight." The court con cluded that there was no estoppel since "[t]he conduct in renewing the

policy is not tantamount to a representation that the unambiguous medi cal certificate requirement in the policy is inapplicable."

In DiSanto v. Enstrom Helicopter Corp., 489 F. Supp. 1352 (ED. Pa.

1980) the policy ultimately issued contained a different pilot require ments endorsement than that in the original communications between the parties. This fact did not, however, render the endorsement void because the court found that the parties plainly contemplated that the

policy details would be supplied later and that the course of dealings between the parties conformed to the setded practice of the insurance

industry.



28 THE FORUM

In White v. Washington National Insurance Co., 253 S.E.2d 144 (W. Va. 1979), the West Virginia Supreme Court held there was no cover

age in an accidental death policy for two members of the Marshall Uni

versity football team and coaching staff who were killed in the 1970 crash of a Southern Airways charter flight. The court did not find any ambiguity in a provision limiting coverage to injuries resulting from

being a passenger on an aircraft "frying upon a regular passenger route with a definite schedule of departures and arrivals between established and recognized airports." The charter flight was held not to be covered. The court would not accept assertions of ambiguities "created by Her culean straining which renders common words meaningless."

Similarly, the Texas Court of Civil Appeals in Graves v. Charter Na tional Insurance Co., 15 Av. Cas. 18,211 (Tex. Civ. App. 1980) sum

marily found no coverage under policy terms which excluded a "named insured." In that case, Graves, doing business as Graves Aircraft Schools and Rentals, was seriously injured in the head while assisting the owner of an aircraft start the aircraft. When Graves brought suit against the aircraft owner, the owner's insurer sought a declaratory judgment that Graves was a ''named insured" excluded from coverage and therefore the insurer had no duty to defend the personal injury suit against the aircraft owner. The court found the endorsement excluding Graves un

ambiguous, and was unimpressed with contentions that the character of Graves' business activity had changed and that Graves was unaware of the addition of his name to the policy exclusions.

In Dolores Ayres v. Prudential Insurance Co. of America, 602 F.2d 1309 (9th Cir. 1979), the court held that a groupiaccidental death insur ance policy that excluded coverage for an insured employee's death while

piloting an aircraft barred payment of the death benefits when an insured

employee was killed in the crash of an aircraft that he was piloting. The court rejected appellant's contention that there was an ambiguity in the exclusion clause that would lead one to believe that the exclusion

applied to an insured while piloting an aircraft in conjunction with his

employment duties, rather than piloting the aircraft off the job. The Minnesota Supreme Court in Rausch v. Beech Aircraft Corp., 277

N.W.2d 645 (Minn. 1979), found that a general liability policy issued to an aircraft lessee which excluded "liability arising out of the . . . use ... of aircraft" did not cover a claim against the lessee for attorneys' fees and expenses incurred by the aircraft owner/lessor in successfully defending himself against claims arising out of a crash of the aircraft while under lease. The owner/lessor had obtained a judgment for these

expenses against the lessee under the terms of his lease contract. He then sought to recover directly from the lessee's insurer. The court held that although the lessee's liability for the fees had been based upon a contract rather than tort it still arose from the lessee's use of the air craft and was thus excluded from coverage.




The Louisiana Supreme Court, on the other hand, applied that state's "anti-technical statutes" to hold that no coverage existed for a crash of a company aircraft which was being flown by a pilot not named on the

policy. In Benton Casing Service, Inc. v. Avemco Insurance Co., 379 So. 2d 225 (La. 1979), the court found that a declaration stating that the

policy was to apply to aircraft in flight "only while being operated by one of the following pilots" did not constitute an exclusion of coverage for unlisted pilots. Instead it was held to be a warranty or representa tion of the insured. A Louisiana statute provided that misrepresentation by an insured in negotiating for an insurance contract cannot defeat

coverage unless made with the intent to deceive. The court found there was no such intent in this case, as the company had several aircraft and several pilots and did on occasion advise its underwriters to change or add pilot-employees on its policies.

Four insurance coverage decisions last year considered the question of whether to defeat coverage there must be a causal relationship be tween a particular policy coverage limitation and the claim. All held such a causal relationship was not required. First, in United States Avia tion Underwriters v. Rex Ray Corp., 15 Av. Cas. 17,625 (Mass. Super. Ct. 1979), the court was asked prior to trial to determine two cover

age issues relating to a policy "pilot hours" clause. The first was whether the insured or insurer had the burden of proof under the clause which

required that the aircraft's pilots have certain minimum hours. The court found that the hours clause was a policy coverage exclusion rather than a warranty or condition of coverage, and that therefore the burden of proof of its breach was on the insurer. The second question was whether to enforce the exclusion there must be proof of a causal con nection between the claimed loss and a violation of the hours provision. The court said that no causal connection was required. This was said to be "the more common rule."

The Fifth Circuit, applying Florida law in Hollywood Flying Service v.

Compass Insurance Co., 597 F.2d 507 (5th Cir. 1979), also held that a causal relationship was not required to enforce a policy exclusion. The court affirmed the dismissal of an action to recover the insured value of an aircraft which had crashed into the Gulf of Mexico. The cause of the crash was not known. The person who rented the aircraft, however, tes

tified that several items of aircraft equipment had not been working and that the FAA-approved manual was not on board. The court affirmed an exclusion of coverage for flights made without the aircraft having an airworthiness certificate "in full force and effect." The aircraft de

ficiencies were considered to make the certificate not "in effect" so long as they remained uncorrected.

The Colorado Court of Appeals in Schantini v. Hartford Accident &

Indemnity Co., 605 P.2d 920 (Colo. App. 1979), denied coverage under a group life insurance policy to a death occurring while decedent was a



30 THE FORUM

passenger in a light aircraft. The policy contained an exclusion for in

juries sustained while riding in an aircraft unless the decedent was a

passenger in an aircraft operated in accordance with governmental regu lations. The aircraft was being operated by a student pilot who was pro hibited from carrying passengers. The cause of the accident was never

determined; however, the court held the exclusion applicable because no causal relationship between the violation of FAA regulations and the accident need be shown.

Finally, the United States District Court for the Eastern District of

Pennsylvania held that insurance coverage was properly denied under a

policy endorsement requiring a pilot to have a commercial pilot certifi cate with rotocraft rating and a minimum logged flying time of 500 hours as pilot of command of rotocraft. In DiSanto v. Enstrom Helicop ter Corp., 489 F. Supp. 1352 (E.D. Pa. 1980) the pilot commanding a rotocraft destroyed during a test flight held only a private pilot cer tificate and possessed less than 200 flight hours in rotorcraft, although it was conceded that pilot qualification had no causal relationship to the accident. The court followed the Pennsylvania Supreme Court in hold

ing that a causal connection between the loss and conditions of the insurance contract was wholly without bearing on the question of whether conditions were breached.

V. CHOICE OF LAW

Choice of law was an issue in a number of aviation cases in the past year. In many of these cases the court's comments on choice of law were made in the context of ruling on a motion by the defendants to dismiss based on the doctrine of forum non conveniens. These cases are discussed in the next section of this report. Other aviation choice of law cases include O'Brien v. Grumman Corp., 475 F. Supp. 284

(S.D.N.Y. 1979); Icelandic Airlines, Inc. v. Canadair, Ltd.,_Misc. 2d_, 428 N.Y.S.2d 393 (1980); In re Air Crash Disaster near

Saigon, 476 F. Supp. 521 (D.D.C. 1979); and In re Air Crash Disaster near Chicago, Illinois, on May 25, 1979, 15 Av. Cas. 18,137 (N.D. 111.

1980). The Chicago case is discussed above under the heading "Manu facturer's liability."

O'Brien arose out of the crash of a Grumman Gulfstream II business

jet in South Carolina. The crash occurred during training of pilots em

ployed by plaintiff IBM. The issue was whether New York law which allowed a cause of action for wrongful death based on strict liability applied, or whether the law of Georgia, which denied plaintiffs in a

wrongful death action use of the strict liability theory should apply. The court held that New York law applied because the New York contacts were greater and New York had the greatest interest in the application of its law. The aircraft was owned by a New York corporation; it had




originally been designed by Grumman in New York; two of the plaintiffs were from New York, and the third had originally been employed by Gnimman in New York but had moved to Georgia when the Gulf stream II program was shifted there after the aircraft was in production.

The Icelandic case arose out of the crash of an aircraft in Bangladesh. In a suit against a New York-based component manufacturer, Huck

trol, the court held that the substantive law to be applied was the law of

Quebec, Canada which was where the aircraft was designed, manufac tured and sold. The court held that the place of the accident was for tuitous. Because Quebec did not recognize a cause of action in strict

products liability the court dismissed the strict liability count.

Saigon is an interesting, but perhaps unique, decision whicrl consid ered tHe law to be applied to claims arising out of the tragic 1975 crash of the U.S. Air Force C-5A aircraft carrying Vietnamese orphans to the United States. The court applied an "interest analysis'* to decide

which law to apply to questions of capacity to sue on behalf of the de ceased orphans. Because of the extensive U.S. government involvement in the Vietnamese war and in the flight, and because of the demise of the Vietnamese government shortly after the accident, the court found that the law of the "seat of the government of the United States," the

District of Columbia, should apply.

VI. FORUM NON CONVENIENS

With a few exceptions the trend in the past year has been toward dis

missing on forum non conveniens grounds actions against American manufacturers arising out of foreign accidents where the plaintiff and/or the other culpable parties were not American.

In Macedo v. Boeing Co., 15 Av. Cas. 18,032 (N.D. 111. 1980), the court dismissed actions by foreign and American plaintiffs against a

foreign carrier and American manufacturers which had been brought as a result of an accident in Portugal. Rejecting the attempt by plaintiffs to give undue weight to the alleged products liability aspects of the case the court reviewed the substantial evidence readily available only in

Portugal and dismissed the case on the grounds of forum non con

veniens. Among such evidence was the wreckage, the airport, mainte nance records, documents related to the carrier's procedures, the flight data recorder, the transcript of air traffic control communications with the aircraft and witnesses. The court also noted the willingness of the American manufacturers to submit to the jurisdiction of the courts of

Portugal. The court also noted its own congested calendar and observed that to

keep the cases in Illinois would require that they be litigated in a com

munity which bears no real relationship to the accident. With respect to the American plaintiffs the court pointed out that



32 THE FORUM

American citizens do not have an absolute right to litigate in this

country claims whose resolution is more properly sought elsewhere. In the last analysis, the court found that Portugal had substantially more contact with these suits and provided a substantially more convenient forum for the just and total disposition of the claims of both the Ameri can and the foreign plaintiffs.

In Hemmelgarn v. Boeing Co., 15 Av. Cas. 17,575 (San Diego Super. Ct. 1979), aff'd, 106 Cal. App. 3d 576, 165 Cal. Rptr. 190 (1980), review denied, the court dismissed actions by foreign plaintiffs brought as a result of an accident in Canada. The actions arose from the crash of a Pacific Western Airlines Boeing 737 during a landing at the Cran

brook, British Columbia Airport. A local coroner's jury found contribut

ing causes of the crash to be inadequate air traffic control communica tions and the pilot's decision to go-around in violation of airline pro cedures.

The airline had informed all plaintiffs that on its behalf and on behalf of certain other potentially liable parties it would settle all claims or

litigate the sole issue of damages without contesting liability. The plain tiffs nevertheless attempted to litigate in California on the alleged basis of fault on the part of a California-based aircraft component supplier. All defendants had agreed to submit to the jurisdiction of the Canadian courts.

Pointing out the limited nexus with California and the very substan tial connection with Canada the court dismissed the actions. This dis

missal was affirmed by the California Court of Appeal and the Califor nia Supreme Court denied review.

In a companion action arising out of the Cranbrook accident brought in federal court in Los Angeles, Judge Marion Felzer of that court dis

missed the action on the basis of forum non conveniens. Orr v. Boeing Co., No. CV79-526 (CD. Cal., April 25, 1979).

Dismissals on the basis of forum non conveniens were affirmed by the appellate courts in Fosen v. United Technologies Corp., 484 F. Supp. 490 (S.D.N.Y. 1979), aff'd,_F.2d _(2d Cir. 1980) and Dahl v. United Technologies Corp., 472 F. Supp. 696 (D. Del. 1979, afjfd,

_F.2d_ (3d Cir. 1980). Both cases arose out of helicopter accidents in the North Sea. On the other hand, in Reyno v. Piper Air craft Corp.,_F.2d_(3d Cir. 1980), rev'g 479 F. Supp. 727

(M.D. Pa. 1979), the Third Circuit reversed the forum non conveniens dismissal of an action against the aircraft manufacturer, Piper, and the

propeller manufacturer. The accident occurred in Scotland and all the

plaintiffs were residents of Scotland. The court held that the forum non conveniens dismissal should not have been granted because (1) the defendants had initially moved for a transfer to Pennsylvania under 28 U.S.C. section 1404(a) on the grounds that Pennsylvania was a con venient forum and (2) under California and Pennsylvania choice of law




rules the Pennsylvania doctrine of strict products liability would prob ably apply. A petition for rehearing is pending.

Other courts have split on this issue. Compare Orion Insurance Co. v. United Technologies Corp., 15 Av. Cas. 18,061 (S.D.N.Y. 1980) (dis missing action by British owners of helicopter which crashed in the North Sea) with Petroleum Helikopters de Colombia v. Textron, Inc., 15 Av. Cas. 18,112 (D.D.C. 1980) (refusing to msmiss action against American manufacturer by owner of helicopter which crashed in Co

lombia).



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Special Issue || REPORT OF THE COMMITTEE ON AVIATION AND SPACE LAW