Whether the territorial-limits clause unambiguously excluded coverage for an aircraft lost over international waters while traveling on a reasonably direct route between covered locations.
Holding
No. INA did not establish that its narrow reading was the only fair and reasonable interpretation; the clause could reasonably cover flights on customary, direct routes between covered places, including the route from Haiti to Puerto Rico.
Reasoning
New York insurance law construes ambiguity in favor of the insured and against the insurer. INA therefore bore a demanding burden: it had to show not merely that its interpretation was plausible, but that no reasonable reader could adopt the insureds’ interpretation. On summary judgment, INA could prevail only if its construction was the sole fair construction of the policy language.
The word “within” could reasonably mean more than physical presence over the land or immediately adjacent territorial waters of the listed places. Because the insured object was an airplane—a means of long-distance transportation—the phrase could be read to describe a geographic area encompassing the covered destinations and the space reasonably necessary to travel between them. This reading fit the practical realities of aviation better than treating coverage as suspended whenever a direct route crossed water beyond a three-mile limit.
The territorial endorsement reinforced that conclusion. By extending the policy’s “geographical limits” to the Bahama Islands, the endorsement reasonably implied coverage for flights to and from those islands by customary routes. Otherwise, the insured could insure the plane in the Bahamas but not fly it there or back. The court saw no principled basis for reading routes to the Bahamas as covered while excluding reasonable routes between other locations already named in the original territory clause.
INA could have drafted a precise exclusion for flights outside listed territory or for travel over international waters, but it did not do so. The court noted that insurance law favors coverage when an insurer uses imprecise language despite having readily available terms that would clearly identify the intended risk exclusion. A comparable aviation-policy decision also illustrated how clearer language could distinguish actual flights from transportation of a dismantled aircraft between covered ports.
INA’s appeal to the supposedly greater danger of over-water travel did not make its reading uniquely reasonable. The record did not show that such travel was materially riskier than flights already covered over mountains, deserts, lakes, congested airspace, or other hazardous areas in the United States, Canada, Mexico, and Alaska. The modest additional premium quoted for broader Caribbean coverage also weakened INA’s claim that the risk was substantially different.
INA’s interpretation could produce impractical and potentially unsafe results. Even direct flights between covered points in the continental United States, such as New York and Miami, may pass more than three miles offshore. Requiring pilots to take indirect routes or fly close to the coast to preserve insurance coverage could increase expense and conflict with ordinary aviation and safety practices.
The evidence concerning the parties’ intent further undercut summary judgment for INA. Khurey stated in his application that he expected to use the aircraft outside the continental United States “for vacations,” and the fatal flight occurred during such a vacation. The appellants also alleged that Khurey’s family had ties to Puerto Rico and expected to travel there. Although factual development remained necessary, those circumstances were consistent with an expectation that travel between the United States and Puerto Rico would be insured.