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Alberto Culver Co. v. Aon Corp.

Case Date: 05/13/2004
Court: 1st District Appellate
Docket No: 1-02-3815 Rel

FOURTH DIVISION
MAY 13, 2004

1-02-3815

 

ALBERTO-CULVER COMPANY, ASSOCIATED AVIATION
UNDERWRITERS, INC., THE AMERICAN INSURANCE
COMPANY, CENTENNIAL CASUALTY COMPANY,
FEDERAL INSURANCE COMPANY, FIREMAN'S FUND
INSURANCE COMPANY, GREENWICH INSURANCE
COMPANY, LUMBERMAN'S MUTUAL CASUALTY
COMPANY and SUN INSURANCE OFFICE OF AMERICA,

                         Plaintiffs-Appellants,

          v.

AON CORPORATION and AON AVIATION, INC.,

                         Defendants-Appellees,

          and

KALYN ALWIN and DEVIN KOPPIE, Co- Administrators of
the Estate of MARTIN LARRY KOPPIE, Deceased, and
JACQUELINE QUERN, Independent Executor of the Estate of
ARTHUR F. QUERN, Deceased,

                         Interveners,

and

UNITED STATES AVIATION UNDERWRITERS, INC.,

                         Intervener-Appellee.

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)		 Appeal from the
Circuit Court of
Cook County.




















Honorable
Stephen A. Schiller,
Judge Presiding.


JUSTICE HARTMAN delivered the opinion of the court:

This appeal arises from an aircraft accident involving a Gulfstream G-IV aircraft (G-IV)privately owned by Alberto-Culver Company (Alberto), and being utilized by Aon Corporation andAon Aviation, Inc., (sometimes collectively Aon). The plane crashed upon takeoff at PalwaukeeMunicipal Airport (Palwaukee) on October 30, 1996, and was consumed by fire. All four personsaboard perished, including Martin Larry Koppie, chief pilot and captain for Aon Aviation, a subsidiaryof Aon Corporation; Robert Hampton Whitener, pilot and captain for Alberto; Arthur Quern, chiefexecutive officer for Aon Risk Management Inc.; and Catherine Mio Anderson, a flight attendantemployed by Executive Jet, whose services were secured by Aon Aviation. The operative facts ofthe accident itself are set forth in detail in an opinion filed in a previous appeal, Anderson v. Alberto-Culver USA, Inc., 337 Ill. App. 3d 643, 646-47, 789 N.E.2d 304 (2003) (Anderson).

Following preceding liability litigation which found Koppie at fault, the present disputeimplicates insurance coverage involving the respective insurance companies. Associated AviationUnderwriters (AAU), Alberto's insurers, sought, inter alia, a judicial declaration that Aon Aviationand Aon Corporation were not insured under the aircraft insurance policy AAU issued to Alberto. United States Aviation Underwriters (USAU), insurers of Aon Aviation, intervened and successfullymoved for cross-summary judgment against AAU and Alberto. The circuit court found that AonAviation and Aon Corporation were entitled to coverage under Alberto's policy with AAU, and thatAAU has a duty to defend and indemnify Aon Aviation, because AAU's policy was deemed primarycoverage, and USAU's coverage was found excess. Alberto appeals.

Aon Aviation and Alberto each maintained a flight department at Palwaukee, and eachoperated their own G-IV, a twin engine jet that requires a two-pilot crew. The instant flight wasconducted pursuant to an Interchange Agreement entered into on June 7, 1995, by Alberto and Aon,which permitted Aon Corporation and Alberto Culver to utilize each other's G-IV upon occasionwhen needed. Anderson, 337 Ill. App. 3d at 647-48. Aon Aviation is organized "to own, operateand lease aircraft (but not to offer transportation services to the general public)." As contained inParagraph Six of the Interchange Agreement, Aon Aviation and Alberto agreed, inter alia, to (1)"hold harmless and indemnify the other from loss, expense, damages, claims, or suits which theymight suffer as a result of any act or omission of the other party"; (2) maintain operational controlof their own G-IV during use by the other party; and (3) "have, and keep in effect" an aircraftinsurance policy with a minimum $150 million value to provide coverage when piloting each other'sairplanes. Anderson, 337 Ill. App. 3d at 648.

In compliance with the Interchange Agreement, Alberto and Aon separately held non-ownedaircraft coverage through their respective insurance policies, applicable to the use of borrowedaircraft. Aon Aviation purchased a $300 million liability policy from USAU covering Aon Aviationfor any liability relating to its operation of its owned and non-owned aircraft (USAU policy). Albertopurchased aviation insurance from AAU and other interested insurers,(1) providing Alberto with liabilityand property damage coverage in connection with its own and non-owned aircraft (AAU policy).

Importantly, neither the USAU policy nor the AAU policy made reference to the InterchangeAgreement between Alberto and Aon, nor was any evidence produced by Alberto or Aon requestingthat their respective insurance companies make the Interchange Agreement a part of their respectivepolicies of insurance by rider, endorsement or otherwise.

Under Paragraph Eight of the Interchange Agreement (Paragraph Eight), as required byFederal Aviation Regulations (FAR), both parties agreed to maintain "operational control" of theirown aircraft during use by the other party. The Interchange Agreement does not define "operationalcontrol," however, Paragraph Eight refers to the Department of Transportation under the FederalAviation Administration (FAA) for an explanation of this term.(2) "Operational control" is defined inthe Code of Federal Regulations (CFR) as the "exercise of authority over initiating, conducting orterminating a flight." 14 C.F.R.