Strategies, Challenges, and Answers

The Nevada Supreme Court Says There Is No Need For A Causal Link Between The Exclusion And The Loss In Order To Enforce An Otherwise Unambiguous Exclusion

When it comes to an exclusion of coverage, the carrier is often arguing that the exclusion is enforceable. The person arguing for coverage will often argue that the exclusion is just a “technicality”. In the case of Griffin v. Old Republic Ins. Co., 122 Nev. Adv. Op. 42 (2006), each party took its expected position.

In Giffin, Jensen’s plane crashed in Griffin’s backyard. Griffin got hurt. Old Republic wrote Jensen’s aviation policy. The Old Republic policy required the plane to have a current Airworthiness Certificate. On the day of the crash, Jensen’s Certificate was no longer current.

1073029_chains___ Griffin and Old Republic each filed a separate suit, Griffin filed in state court and Old Republic filed for declaratory relief in federal court. In his suit, Griffin wanted to argue that the crash was not caused by the lack of an Airworthiness Certificate. In its suit, Old Republic said that the issue of causation wasn’t important. The lack of a current Airworthiness Certificate completely excluded coverage, no matter what actually caused the crash.

Old Republic’s suit moved forward faster and got to the U.S. Ninth Circuit Court of Appeals. The Ninth Circuit referred this question to the Nevada Supreme Court:


Under Nevada law, may an insurer deny coverage under an aviation insurance policy for failure to comply with an unambiguous requirement of the policy or is a causal connection between the insured’s noncompliance and the accident required?

 

The Nevada Supreme Court answered that under Nevada law an exclusion would be enforced so long as it was:


1. unambiguous;

2. narrowly tailored;

3. essential to the risk undertaken by the insurer; and

4. not a violation of public policy.

 

The Supreme Court then systematically considered each element as it related to the facts of the case. The court found that each of the elements was met. The Supreme Court ignored argument that it was the “modern trend” to require the carrier to show a causal connection between the insured’s noncompliance and the loss before the insurer could avoid liability. Instead, the court said that it follow the majority of court and would not imply a causality requirement in Old Republic’s exclusion when no causal connection language existed in the policy. In the end the court said that public policy favors an exclusion that encourages owners of aircraft to comply with safety regulations.

The conclusion is that if the carrier writes narrow and unambiguous exclusions that are favored by public policy, the Nevada Supreme Court will enforce those exclusions.

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