Facts

On June 10, 2007, a Dassault Falcon 900 corporate jet owned by plaintiff Kerry Acquisitions LLC and operated by plaintiff Trishan Air Inc. went off the end of the runway at the Santa Barbara airport during an aborted takeoff because of alleged misinformation in the aircraft flight manuals regarding takeoff. Although none of the two-crew members and the 13 passengers, who were all executives of Select Personnel Inc., were injured, the aircraft was extensively damaged, with repair costs estimated to possibly exceed $7 million.

At the time of the accident, the aircraft was insured under an insurance policy, which had been issued by Federal Insurance Company (Federal) through its underwriters, Starr Aviation Agency Inc. (Starr). The policy had been procured through retail insurance broker, The Buckner Company Inc., and its agent, David Wittwer, which had been appointed as agents for plaintiffs. The Buckner Company had, in turn, utilized the services of a wholesale insurance agent, Arlington/Roe & Company, due to the specialized nature of the aviation insurance market.

Throughout the negotiations for the policy, all communications had gone from Trishan Air to Wittwer at The Buckner Company, who in turn communicated with Arlington/Roe, which in turn communicated with Starr, with return communications following the reverse chain of communication. At the outset of negotiations, Trishan Air had communicated to Wittwer that they desired a policy which would include an endorsement that would allow them to use occasional part time or "back-up" co-pilots (also referred to as second-in-commands or SICs). Trishan Air wanted to utilize back-up SICs that would be trained by Trishan Air in-house, thus saving them the considerable expense of either having to have the part-time co-pilots go through a formal training school with simulator training in the make and model flown, or find available pilots who had done so.

Wittwer had communicated this desire to Arlington/Roe, which had, in turn, communicated it to Starr. Starr responded with a quote (Starr Quote), which included an endorsement. The endorsement included the following pilot warranty:

"It is required that the aircraft be operated by a two pilot crew at all times that has been approved by the named insured's chief pilot. It is further required that such pilot(s) must have successfully completed a ground and flight recurrent/initial training course for the make and model operated within the last 18 months. Any such course must incorporate the use of a motion-based simulator specifically designed for the insured model/make and model series."

Subsequent correspondence from Starr to Arlington confirmed Starr's position that the training requirements in the warranty would apply to back-up SICs, but also requested more information to enable Starr to reconsider plaintiffs' request:

"Same requirement for backup SICs. As always the more info the insured provides on their plans makes it easier for me to be flexible. So if they have a plan for backups that includes minimum experience they will require and number of times they are used we can look at other options. I think with all the info we can find a solution for the insured."

Arlington/Roe forwarded the Starr Quote to Wittwer in its entirety by e-mail with a cover message, which included:

"Let's talk about the back-up SICs. AIG and Starr are both allowing pilots as approved by the insured's chief pilot but back-up SICs must have completed school for a Falcon model aircraft within the preceding two years with AIG and every 18 months with Starr but it has to have been school specific to the Falcon 900 and the Falcon 50."

This quote thus did not provide what the plaintiffs had desired in terms of part time co-pilot training requirements.

Wittwer sent plaintiffs three insurance proposals, including one from Starr. Wittwer's cover e-mail enclosing the proposals stated that "[w]e've worked hard and achieved the requisite objectives." Wittwer's cover letter and "Executive Summary" of the proposals further stated that, with the Starr proposal, he had "completed and exceeded" the objective to "ameliorate pilot terms for back-up pilots." Wittwer's summary of the Starr Quote noted a "Pilot Warranty" requiring that plaintiffs' aircraft be "operated by a two pilot crew at all times that has been approved by the chief pilot" and that pilots successfully complete certain training within the past 18 months, including motion-based simulator training. That warranty, however, further listed plaintiffs' four employee pilots, leading plaintiffs to understand that it would apply only to such employee pilots and not to their back-up second-in-command pilots.

At no time did Wittwer forward to plaintiffs the actual Star Quote. Based on Wittwer's recommendation, plaintiffs directed the Starr Quote be accepted.

When the Federal policy was issued, it contained the verbatim endorsement that had been set forth in the Starr Quote. A copy of the endorsement was attached to the binder issued by Starr, and was sent by e-mail to Wittwer on May 20, 2007, by Arlington/Roe.

At the time of the June 10, 2007, accident, the co-pilot of the accident aircraft was a part time co-pilot who had never attended any training for the accident model aircraft, which utilized a motion-based simulator specifically designed for the accident model/make and model series. Federal accordingly denied coverage based on a breach of the pilot warranty set forth in the endorsement.

The plaintiffs sued Federal and Starr for breach of contract and insurance bad faith, and in the alternative sued Buckner and Arlington/Roe for negligent misrepresentation for having represented that they had obtained the pilot warranty that plaintiffs had desired, breach of contract, and professional negligence for not having obtained that warranty. Arlington/Roe moved for summary judgment.

PLAINTIFF'S CONTENTIONS:
Plaintiffs claimed that they had been misled to believe that the endorsement applied only to their employee pilots, and believed that they had obtained the coverage that they had desired. Additionally, plaintiffs contended that they substantially complied with the terms of the endorsement by virtue of the significant training possessed by the second-in-command pilot at the time of the subject flight, both generally and in connection with the aircraft involved in the accident.

As concerns Arlington/Roe, plaintiffs claimed that it failed to communicate to Wittwer Starr's request to consider further the endorsement plaintiff's sought upon receipt of further information, thus depriving plaintiffs of (1) notice that the warranty did in fact pertain to back-up SIC pilots, and (2) the opportunity to supply the requested information and continue negotiations for the endorsement they sought.

DEFENDANT'S CONTENTIONS:
Arlington/Roe argued that: 1) it had never represented to plaintiffs, or to their agent Wittwer, that it had, in fact obtained the desired warranty, and that it had, in fact, informed Wittwer that it had not obtained that warranty, and that he admitted in his deposition that he understood that fact; 2) that there was no contract between plaintiffs and Arlington/Roe; and 3) that as a wholesale broker, it owed no duty to plaintiffs to actually obtain the coverage they desired, but only to accurately communicate their desires as to coverage to the insurer and to accurately report back the coverage the insurer was willing to offer, and if that offered coverage was accepted, to bind that coverage. It presented an expert declaration to support the latter argument.

Settlement Discussions

Defendants The Buckner Company Inc. and Wittwer settled with plaintiffs.

Damages

Plaintiffs alleged that the cost of repair was between $7 million and $16 million.

Result

The court granted the motion for summary judgment and entered judgment in favor of Arlington/Roe. The court also granted summary judgments in favor of defendants Federal and Starr.

Other Information

As to Arlington/Roe, the court found that plaintiffs had failed to establish any evidence that there was a contract between them and Arlington/Roe; and even if there had been a contract, the uncontroverted evidence was that there was no breach, as the operative complaint alleged that the terms of the contract were that Arlington/Roe either obtain the requested endorsement, or inform plaintiffs that it had been unable to do so, and that Arlington/Roe had clearly informed plaintiffs' agent Wittwer that it had been unable to obtain the endorsement. The court further found that plaintiffs had failed to establish that Arlington/Roe owed them any duty, as the existence of a professional duty in any subject beyond a layman's knowledge requires expert testimony, and that they failed to produce any expert testimony in support of their argument. INSURER: Darwin Professional Underwriters Inc. insured Arlington/Roe & Company Inc.