AZAPP Blog

Melvin Potter and Potter & Son, Inc., were named insureds under a U.S. Specialty Insurance Company (USSIC) policy covering an aircraft for liability and damage. The policy provided coverage for certain losses when it was piloted by a commercially certified pilot who had “logged” a particular number of flight hours under various conditions. The insured aircraft crashed, killing both the pilot and the two passengers. Although the pilot had extensive flight experience and was a flight instructor, the single log book found in the pilot’s effects documented fewer pilot hours than the number of “logged pilot hours” required. USSIC denied coverage, invoking the “logged” hours requirement, and litigation ensued. The trial court granted summary judgment in favor of USSIC on the basis that the policy term “logged,” although not defined in the policy, means “hours actually flown and reliably recorded in a flight time log.”
The Court of Appeals agreed with the trial court’s construction, observing that although various dictionary definitions supported both parties’ construction of the policy (meaning either hours flown or hours recorded in the log book), the policy’s context clarified that the term “logged” meant hours recorded in a log book. The Court also relied on cases from other jurisdictions, and noted that the insurer’s construction was consistent with the intent of the clause, which was to limit the insurer’s liability for losses associated with inexperienced pilots. The Court further explained that the term “logged” has a specialized meaning within the aviation industry, which a pilot seeking insurance for his or her plane would understand. Accordingly, the Court held that USSIC properly denied coverage under the policy.

The Court further affirmed an award of attorneys’ fees in USSIC’s favor, noting that there was nothing in the record indicating that the fee award would cause Potter any hardship and rejecting various other arguments made against an attorneys’ fee award.

Judge Florez authored the opinion; Judges Brammer and Howard concurred.

Pargman v. Vickers & Foundation Reserve Ins. Co.: Division One Holds That Knowledge of Decedent’s Insurance Co. May Be Imputed to Decedent’s Estate for Purposes of “Relating Back” under Ariz. Rule. Civ. P. 15(c).

This case arose out of an automobile accident that occurred in March, 1997. Vickers’ insurance company, Foundation, was notified of the accident shortly after it occurred. Pargman sued Vickers for damages arising out of the accident in 1999 and notified Foundation of the lawsuit. After attempting unsuccessfully to serve Vickers, Pargman, in communication with Foundation, learned that Vickers had died months after the accident. After almost three years of court proceedings in which Pargman attempted to open Vickers’ estate to sue it in place of Vickers, the estate was opened and Pargman appointed the estate’s personal representative in May 2001. Pargman amended her complaint to sue the estate in November 2000. Foundation moved to dismiss the amended complaint, arguing that the claim was time barred and could not “relate back” to the date of the original complaint under Ariz. R. Civ. P. 15(c) because the estate did not exist until 2001. For that reason, Foundation argued, the estate could not have had knowledge that, but for the mistake, it would have been sued within the period proscribed within Rule 15(c) as required by the rule. The trial court agreed, and dismissed the action.

Vickers appealed, and the Court of Appeals reversed. The Court noted that the only element of Rule 15(c) that was at issue was whether the estate had notice of plaintiff’s action and knowledge that she had mistakenly named the wrong plaintiff. And, under well-established principles of imputation concerning the “identity of interest” between parties, Foundation’s notice of the action and knowledge of Pargman’s mistake should have been imputed to the estate. The Court accordingly held that when a plaintiff mistakenly sues a decedent and not the decedent’s estate and seeks to recover only insurance proceeds, if the decedent’s insurer had notice of the action and knowledge of the plaintiff’s mistake within the period specified by Rule 15(c), an amended complaint will relate back to the date of the original complaint absent any prejudice to the insurer of the estate and assuming the other requirements of Rule 15(c) are met.

Judge Norris authored the opinion; Judges Winthrop and Lankford concurred.

Two daughters sued their father, his wife, and the trustees (collectively defendants) in connection with the daughters’ inter vivos irrevocable trusts, alleging breach of trust, conversion, and fraudulent concealment. The defendants sought to compel mandatory arbitration pursuant to an arbitration clause in the instruments creating the trusts. The daughters had not signed the trust instruments. The Court of Appeals rejected the defendants’ arguments that by seeking benefits under a “contract,” the daughters were obligated by other terms in the contract, including the arbitration provisions, pursuant to either a third party beneficiary or equitable estoppel theory. The Court reasoned that A.R.S. § 12-1501 requires the existence of a provision in a “written contract” to submit to arbitration. The Court held that an inter vivos trust is not, as a matter of law, considered a contract in this context. Rather, a trust beneficiary receives a beneficial interest in trust property, which creates a fiduciary relationship between the trustee and the trust beneficiary that is not based upon an agreement. The Court distinguished a number of cases cited by the defendants where courts had enforced arbitration provisions on trust beneficiaries on the ground that the arbitration clauses enforced in those cases were contained in contracts the courts held bound the beneficiaries. The Court further noted that the “scope of our decision is narrow and limited to the enforceability of arbitration clauses against inter vivos trust beneficiaries,” noting that “[n]othing prohibits the parties from agreeing to arbitrate their existing disputes.”

Judge Gama authored the opinion; Judges Gemmill and Kessler concurred.