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Center Capital Corp. v. National Union Fire Insurance Co. of Pittsburgh

October 5, 2010

CENTER CAPITAL CORPORATION, PLAINTIFF,
v.
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, DEFENDANT.



MEMORANDUM DECISION AND ORDER

INTRODUCTION

This matter involves a dispute between a loss payee under an insurance policy and an insurer concerning the appropriate measure of damage to a private aircraft. Plaintiff Center Capital Corporation ("Center Capital"), the loss payee under the insurance policy insuring the aircraft, contends that in addition to the cost to repair the aircraft, it is entitled to compensation for the diminution in value of the aircraft due to the physical damage incurred by the aircraft in an accident. Defendant National Union Fire Insurance Company of Pittsburgh, P.A. ("National"), disagrees, arguing that the language of its insurance policy is unambiguous and does not require payment of loss or damages beyond the cost to repair the aircraft. Center Capital filed a Motion for Summary Judgment on June 11, 2010, the Court conducted a telephonic hearing on August 10, 2010, and the matter is now ripe for review.

After reviewing the briefs, relevant authorities, and considering the parties' arguments, the Court concludes that the insurance policy is ambiguous and is reasonably subject to an interpretation allowing for coverage for diminution in value. Plaintiff's motion will therefore be granted. However, the Court makes no finding, as explained below, that the aircraft has suffered or will suffer from a diminution in value after it is repaired.

FACTS

National does not dispute the facts set forth by Center Capital in its statement of facts. (Response at 1, Dkt. 25.) Center Capital extended a loan to McCormick Enterprises, Inc., an Idaho corporation,*fn1 for the purchase of a 2005 Columbia Lancair Company LC41-550FG airplane (the "Aircraft"). In consideration for extending financing, McCormick granted Center Capital a first priority purchase money security interest in the Aircraft. Center Capital perfected its security interest by filing the requisite paperwork with the Federal Aviation Administration.

The loan agreement required McCormick to obtain insurance on the Aircraft naming Center Capital as the loss payee. McCormick obtained insurance from National and named Center Capital as the loss payee under the policy. On July 6, 2008, during taxiing, the Aircraft suffered an accident and incurred damage to its front landing gear, front wheel and wheel mount, left landing gear, wing, nose, and engine. (Compl.¶ 14, 15, Dkt. 1.)

National obtained an estimate of $89,921.02 to repair the damage to the Aircraft. (Compl. ¶ 20, Dkt. 1.) Center Capital, however, disagrees that the sum is adequate under the terms of the policy to compensate it fully for its loss. Center Capital filed suit against National seeking a declaratory judgment from the Court that the insurance policy entitles it to compensation for the "diminution in value that exceeds the cost of mere repair." (Compl.¶ 22, Dkt. 1.) The controversy, therefore, centers around interpretation of the insurance policy.

National agrees that the copy of the insurance policy (the "Policy") attached to the Complaint as Exhibit E is a true and correct copy of the Policy, and both parties agree the policy language dictates the outcome of this case. (Response at 2 Dkt. 25.)

The Policy states that National will provide coverage for the following:

3. INSURANCE FOR PHYSICAL DAMAGE TO YOUR AIRCRAFT COVERAGE C - Aircraft physical damage We will pay for physical damage to your aircraft.

The policy excludes coverage under Coverage C for "depreciation, or damages for loss of use." Under Part Three, describing the limits of the insurer's liability, Coverage C is further explained as follows:

COVERAGE C - The most we will pay for physical damage to your aircraft is the lesser of:

1. its Agreed Value if it is a total loss; or,

2. the costs to repair or replace damage with materials of like kind and quality . . . .

Under Part Four, describing the Conditions of Insurance, the Policy states:

3. LOSS TO YOUR AIRCRAFT

a) OUR SETTLEMENT OPTIONS

On a covered loss, other than a total loss, to your ...


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