330_C008

ENGINE DAMAGE NOT "WEAR AND TEAR"

Meridian Leasing, Inc. (Meridian) owned a Piper Meridian aircraft (Aircraft) that was insured with Associated Aviation Underwriters, Inc. (AAU). While starting the aircraft's engine, Meridian's owner and pilot (James Robins) noticed fire coming out of the exhausts. The fire continued until Robins shut down, then restarted the engine. Use of the engine to extinguish the fire resulted in it operating at unsafe temperatures and parts of the engine melted and sprayed the engine casing with molten metal. Damage was substantial, with total costs (engine removal, repair and related expenses) nearing $240,000.

AAU denied Meridian's claim, contending that the loss was barred by the policy’s wear and tear exclusion and Meridian filed suit. The district court, applying the normal meaning of wear and tear, concluded that the damage was eligible for coverage. It awarded Meridian over $295,000 in damages and AAU appealed.

Upon reviewing the case, the district court noted that "wear and tear" was not defined and if it had been AAU's intention to exclude the cause, it could have explicitly stated so in the policy. The court resolved the ambiguity by interpreting the heat limitation as to require "normal" or "ordinary" operation of the engine.

The appellate court disagreed with the suggestion that the exclusion applied only to heat damage characterized as "wear and tear." However, it agreed with the broader holding that the policy was ambiguous. It also found substantial circumstantial evidence suggesting the parties never intended to exclude coverage for the type of event that happened in this case and that the district court did not err in finding the policy language ambiguous. The finding and resolution of the district court was affirmed in favor of Meridian.

Meridian Leasing, Inc., Plaintiff-Appellee, v. Associated Aviation Underwriters, Inc., Defendant-Appellant. U.S. Court of Appeals, Sixth Circuit. No. 04-1184. Filed May 24, 2005. Appeal from the U.S. District court, Western District of Michigan. Affirmed. 2005 CCH Personal and Commercial Liability Cases. Paragraph 64012.