You can add Nevada to the the growing majority of states that do not require a causal connection between an insurance policy exclusion and a loss in order for an insurer to deny coverage. In Griffin v. Old Republic Ins. Co., Griffin was injured when an aircraft piloted by Kevin Jensen crashed into Griffn’s backyard. Jensen insured the aircraft through Old Republic Insurance Company. Old Republic’s aviation policy excluded coverage when “the Airworthiness Certificate of the aircraft is not in full force and effect” or when “the aircraft has not been subjected to the appropriate airworthiness inspection(s) as required under current applicable Federal Air Regulations for the operations involved.” Mr. Jensen also initialed a clause in the insurance application, stating that coverage would not be available for his aircraft “unless a standard airworthiness certificate is in full force and effect.”
As you might imagine, Griffin sued Jensen and his wife in state court. In response, Old Republic filed an action in the United States District Court for the District of Nevada seeking a declaratory judgment. Old Republic argued that it had no obligation to pay damages to Griffin or Jensen because the aircraft’s airworthiness certificate had lapsed and was not “in full force and effect” at the time of the accident. It argued that coverage was expressly excluded in this situation. The federal district court granted summary judgment for Old Republic holding that “even if Jensen’s failure to maintain an airworthiness certificate was not related to the cause of the accident, Nevada law did not require a causal connection between the exclusion and the loss in order for the insurer to avoid liability.” Griffin then appealed to the Court of Appeals for the Ninth Circuit.
On appeal, the 9th Circuit held that under Nevada law, “insurers may avoid liability under safety-related exclusions in aviation insurance policies, even when the insured’s noncompliance with the exclusion is not causally related to the loss, so long as the exclusion is unambiguous, narrowly tailored, and essential to the risk undertaken by the insurer.” It went on to analyze the airworthiness exclusion and concluded that “the airworthiness exclusion at issue in this case is narrowly tailored and essential to the risk undertaken by the insurer” and it applied to exclude coverage.
Although this appears to be an unfortunate decision for Griffin, it is actually a good decision for aircraft insurers and aircraft owners seeking insurance. The decision allows aircraft insurer’s to limit their exposure which will hopefully keep aircraft insurance premiums more reasonable and ensure that aircraft insurance will be available. In the absence of this type of decision, and to avoid the increased liability exposure that results, insurers have in the past, and could in the future, cease writing aircraft insurance policies in states that require a causal connection between a policy exclusion and the loss in order for the exclusion to apply.