                           ILLINOIS OFFICIAL REPORTS
                                        Appellate Court




               Knezovich v. Hallmark Insurance Co., 2012 IL App (1st) 111677




Appellate Court            SANDRA KNEZOVICH, Personal Representative of the Estate of
Caption                    Anthony David Knezovich, Deceased, Plaintiff-Appellee, v.
                           HALLMARK INSURANCE COMPANY, Defendant-Appellant (William
                           M. Otto, Personal Representative of the Estate of Ralph E. Otto,
                           Deceased; Suzanne Lucas and E. Perrine Downey, Coexecutors of the
                           Estate of C. Michael Downey, Deceased, Defendants-Appellees).



District & No.             First District, Sixth Division
                           Docket No. 1-11-1677


Filed                      August 3, 2012


Held                       Defendant insurer had no duty to defend the deceased, a student pilot,
(Note: This syllabus       who rented a plane insured by defendant and was operating it at the time
constitutes no part of     of a midair collision, since the policy unambiguously excluded coverage
the opinion of the court   for renter pilots; therefore, the denial of defendant’s motion for summary
but has been prepared      judgment in the declaratory judgment action filed by the representative
by the Reporter of         of the deceased renter was reversed.
Decisions for the
convenience of the
reader.)


Decision Under             Appeal from the Circuit Court of Cook County, No. 09-CH-28688; the
Review                     Hon. Leroy K. Martin, Jr., Judge, presiding.



Judgment                   Reversed and remanded.
Counsel on                  Tressler LLP, of Chicago (Mark T. Banovetz and Elizabeth M. McGarry,
Appeal                      of counsel), for appellant.

                            Clifford Law Offices, P.C. (Kevin P. Durkin and Colin H. Dunn, of
                            counsel), Canel, King & Jones (Peter King, of counsel), Rapoport Law
                            Offices, P.C. (David Rapoport and Michael Teich, of counsel), and
                            Kaplan, Massamillo & Andrews, LLC (Robert A. Braun, of counsel), all
                            of Chicago, for appellees.


Panel                       JUSTICE LAMPKIN delivered the judgment of the court, with opinion.
                            Justices Garcia and Palmer concurred in the judgment and opinion.



                                              OPINION

¶1           In a declaratory judgment action, the parties filed cross-motions for summary judgment
        concerning whether defendant-appellant Hallmark Insurance Company (Hallmark) owed a
        duty to defend the estate of a deceased student pilot who had rented an aircraft from
        Hallmark’s insured. The trial court found that Hallmark’s policy provisions concerning the
        exclusion of coverage for student and renter pilots were ambiguous and Hallmark, therefore,
        had a duty to defend and/or indemnify the estate of the student pilot in the underlying
        wrongful death lawsuits. Accordingly, the trial court denied Hallmark’s motion for summary
        judgment and granted the appellees’ cross-motion for summary judgment.
¶2           Hallmark appeals the trial court’s ruling, arguing the trial court erred in interpreting the
        insurance contract. We agree. For the reasons that follow, we reverse the judgment of the
        trial court and remand this cause for further proceedings consistent with this opinion.

¶3                                        I. BACKGROUND
¶4          This insurance coverage dispute arises out of a midair collision between two aircraft, a
        Cessna and a Cirrus, in Wyoming. Both pilots and the sole passenger were killed, and both
        planes were destroyed. Hallmark insured the Cessna, which was owned by Franklin Aviation,
        Inc., a fixed base operator, and, at the time of the collision, was being operated by Anthony
        Knezovich, a student pilot. Ralph Otto was operating the Cirrus, and C. Michael Downey
        was his passenger. A number of wrongful death lawsuits were filed as a result of the
        collision.
¶5          Plaintiff Sandra Knezovich, as the personal representative of the estate of Anthony
        Knezovich, filed a complaint for declaratory judgment seeking a finding that Hallmark had
        a duty to defend and indemnify the Knezovich estate in the underlying wrongful death
        lawsuits.


                                                  -2-
¶6       Hallmark moved for summary judgment, arguing there was no coverage available to
     Anthony Knezovich under the policy Hallmark had issued to Franklin Aviation because a
     provision of the policy excluded renter pilots from coverage. The affidavit of Raymond
     Verheydt, the owner of Franklin Aviation, was attached to the motion. Verheydt averred that
     Franklin Aviation operated a flight school and rented aircraft to its customers. It charged its
     customers for both the rental of aircraft and instruction services. Verheydt was a certified
     flight instructor and provided instruction to customers as requested. Anthony Knezovich held
     a student pilot certificate and was a customer of Franklin Aviation, renting aircraft and
     receiving flight training. Verheydt informed Mr. Knezovich that he would be charged for the
     rental of the airplane on each flight based on an hourly rate. For those flights during which
     he flew with a flight instructor, he would be charged both an hourly rental fee for the use of
     the aircraft and the hourly rate for the instructor. When he was receiving ground instruction,
     he would only be charged for the instructional time. Furthermore, when he was flying
     without a flight instructor, he would be charged a rental fee for the use of the aircraft. Mr.
     Knezovich acknowledged that he understood and agreed with that arrangement.
¶7       Verheydt averred that after he authorized Mr. Knezovich to make his first solo flight on
     April 10, 2008, Mr. Knezovich was authorized to rent the aircraft to fly solo as long as
     Verheydt preapproved each solo flight. Aircraft rentals by certified student pilots and other
     certified pilots were the same except for Verheydt’s preapproval requirement for student pilot
     solo flights and the federal regulation that prohibited a student pilot from operating an
     aircraft as a pilot in command while carrying passengers. On August 10, 2008, Mr.
     Knezovich rented the aircraft to fly solo. During that flight, the aircraft was involved in a
     midair collision, resulting in fatal injuries to Mr. Knezovich and destruction of the aircraft.
¶8       Also attached to Hallmark’s motion for summary judgment was its aircraft insurance
     policy issued to Franklin Aviation. The named insured specified on the coverage
     identification page of the policy was “Franklin Aviation, Inc. and its individual shareholders
     and executive officers.” The definitions section of the policy, provided in pertinent part:
              “a. You and your mean the [named insured].
              b. Someone we protect means any person or organization we provide coverage to
         through this policy other than you.
              c. Anyone or others means any person or organization other than you or someone we
         protect.
                                                ***
              j. Passenger means any person who is in the aircraft or getting in or out of it. If more
         than one of the aircraft shown in item 5 of you Coverage Identification Page is involved
         in one occurrence, every person who is in any of the aircraft is a passenger.
                                                ***
              n. Occurrence means a sudden event or repeated exposure to conditions, involving
         the aircraft during the policy period, neither expected nor intended by you or someone
         we protect, that causes bodily injury or property damage to others during the policy
         period.


                                               -3-
         ***
         p. Student Pilot means any pilot holding a valid student pilot certificate issued by the
     FAA who is receiving flight instruction or operating the aircraft solo under the direct
     supervision and flight endorsement of a FAA Certified Flight Instructor.
         q. Renter Pilot means any person or organization who is renting the aircraft from
     you.
         r. Pleasure and Business means use of the aircraft by you or by someone we protect
     for personal and business-related purposes where no charge is made for such use. You
     or someone we protect may receive reimbursement for expenses incurred in operating the
     aircraft provided such reimbursement is limited to expenses allowable, if any, to a Private
     Pilot under Part 61 of the FAA regulations.
         s. Instruction and/or Rental means use of the aircraft by you for the instruction of,
     or rental to, others for their pleasure and business purposes. You or someone we protect
     may also use the aircraft for pleasure and business purposes.” (Emphases added.)
¶9   Part 3 of the policy, entitled “Liability to Others,” provided in pertinent part:
         “1. What We Cover
              We will pay for damage that you, or someone we protect, are legally required to
         pay for bodily injury or property damage to others caused by an occurrence during
         the policy period.
                                           ***
         2. Who Is Protected (You and Someone We Protect)
              Except for those entitles and persons described in Paragraph 3 below, your
         bodily injury and property damage liability coverage protects you and someone we
         protect. The term someone we protect means any organization or person you permit
         to operate the aircraft. The term someone we protect also includes the following:
                  a. any person riding in the aircraft and any person or organization legally
              responsible for the use of the aircraft provided such use is with your express
              permission; and
                  b. any employee while acting within the scope of his or her employment by
              you or someone we protect. ***
                      If instruction and rental, charter/air taxi or other uses involving a charge
                  made to others are permitted by your Policy, any person who receives
                  compensation for providing flight instruction or pilot services *** in the
                  aircraft for your benefit or on your behalf shall be considered to be your
                  employee acting within the course and scope of employment with respect to
                  an occurrence that arises out of such activities, regardless of whether you
                  deem that person to be your employee or an independent contractor for any
                  other purposes under any state or federal employment-related ordinance,
                  statute or regulation.
         3. Who Is Not Protected


                                           -4-
                   Your bodily injury and property damage coverage does not protect:
                   ***
                   b. Renter Pilots
                       A renter pilot with respect to any occurrence arising out of the operation of
                   the aircraft by a renter pilot.
               4. What Is Not Covered
                   We do not cover any:
                                                ***
                       f. Student Pilots
                           Property damage or bodily injury if the aircraft is being operated in flight
                       by a Student Pilot with passengers unless a passenger is a pilot acting as pilot
                       in command [and has a current and proper medical certificate, flight review,
                       and pilot certificate with necessary ratings, each as required by the FAA].
               5. Additional Protection
               ***
                   We will:
                       a. Defend Claims
                           Defend at our expense with attorneys we choose, any claim or legal action
                       against you or someone we protect with respect to any claims for bodily
                       injury or property damages resulting from an occurrence we cover.”
                       (Emphases added.)
¶ 10       Defendant-appellee Suzanne Lucas and E. Perrine Downey, coexecutors of the estate of
       C. Michael Downey, filed a cross-motion for summary judgment seeking a finding that the
       Hallmark policy was ambiguous when applied to the facts in this case and, thus, Hallmark
       had a duty to defend and indemnify the Knezovich estate in the underlying lawsuits. The
       Downey estate argued that flight instruction was a permissive use of the aircraft under the
       policy and student pilots, as defined under the policy, fell within the scope of persons insured
       under the policy. Although a policy provision excluded coverage for renter pilots, that
       provision did not expressly exclude student pilots or mention flight instruction in any way.
       The Downey estate asserted that Mr. Knezovich’s dual status as a student pilot and a renter
       pilot raised an ambiguity in Hallmark’s exclusionary language that must be construed in
       favor of coverage in this case. Defendant-appellee William Otto, personal representative of
       the estate of Ralph Otto, and the Knezovich estate joined the Downey estate’s cross-motion.
¶ 11       The trial court denied Hallmark’s motion for summary judgment and granted Downey’s
       cross-motion for summary judgment, concluding that the policy was ambiguous due to Mr.
       Knezovich’s status as a student pilot. The trial court stated that it could not determine
       whether Mr. Knezovich was a renter pilot as defined by the policy and therefore should be
       excluded as an insured. Consequently, the trial court held that Hallmark had a duty to defend
       and/or indemnify the Knezovich estate in the underlying lawsuits.
¶ 12       Hallmark timely appealed.


                                                 -5-
¶ 13                                        II. ANALYSIS
¶ 14        Before addressing the merits of this appeal, we address the appellees’ argument that
       Hallmark has forfeited its ability to rely upon the renter pilot policy exclusion because it
       breached its duty to defend the Knezovich estate and is now estopped from raising policy
       defenses. The appellees, however, failed to raise this argument as part of their summary
       judgment motion and argument before the trial court.
¶ 15        Such forfeiture notwithstanding, the appellees’ estoppel argument lacks merit. Under
       Illinois law, if an insurer contends that a complaint does not allege a covered claim and the
       insurer neither defends the lawsuit under a reservation of rights nor seeks a declaratory
       judgment that there is no coverage, then the insurer may be estopped from raising policy
       defenses to coverage if the insurer is later found to have wrongfully denied coverage.
       Employers Insurance of Wausau v. Ehlco Liquidating Trust, 186 Ill. 2d 127, 151 (1999)
       (“estoppel doctrine applies only where an insurer has breached its duty to defend”). First, the
       record establishes that Hallmark sought a declaration of noncoverage by filing a declaratory
       judgment action in Wyoming, but that case was ultimately dismissed after the Knezovich
       estate filed the instant coverage action in Illinois. Furthermore, Hallmark is not raising a
       policy defense to coverage but, rather, is asserting that Mr. Knezovich is not even an insured
       under the policy. Finally, as discussed below, we conclude that Hallmark has no duty to
       defend and/or indemnify the Knezovich estate in the underlying lawsuit. See Steadfast
       Insurance Co. v. Caremark Rx, Inc., 373 Ill. App. 3d 895, 900 (2007) (where the only basis
       for an insurer’s alleged duty to defend is a trial court’s erroneous ruling, the purported
       insured is not entitled to the payment of defense costs).
¶ 16        The purpose of summary judgment is to determine whether a genuine issue of material
       fact exists. Bagent v. Blessing Care Corp., 224 Ill. 2d 154, 162 (2007). Summary judgment
       is appropriate only where “the pleadings, depositions, and admissions on file, together with
       the affidavits, if any, show that there is no genuine issue as to any material fact and that the
       moving party is entitled to a judgment as a matter of law.” 735 ILCS 5/2-1005(c) (West
       2010). An appellate court reviews de novo an appeal from a summary judgment ruling.
       Horwitz v. Holabird & Root, 212 Ill. 2d 1, 8 (2004). Specifically, the construction of an
       insurance policy is a question of law, which is reviewed de novo. Central Illinois Light Co.
       v. Home Insurance Co., 213 Ill. 2d 141, 153 (2004).
¶ 17        Hallmark contends the trial court erroneously granted summary judgment in favor of the
       appellees because the unambiguous terms of the policy issued to Franklin Aviation exclude
       renter pilots from protection and Mr. Knezovich was a renter pilot.
¶ 18        Appellees respond that the policy’s definition of a renter pilot is circular and, thus,
       indisputably ambiguous and subject to a court’s narrow construction because the
       inadequately defined term is contained in a provision that excludes coverage. Appellees
       argue that Mr. Knezovich was not at Franklin Aviation to rent aircraft but, rather, was there
       to receive flight training, and Franklin Aviation’s accounting methods should not determine
       whether he was a student or a renter pilot.
¶ 19        Specifically, the appellees argue that the policy intended to provide coverage for student
       pilots because: the policy recognizes that flight instruction and rental are distinct and


                                                 -6-
       permissible uses of the covered aircraft; the policy broadly defines who is covered as “any
       person you [the insured] permit to operate the aircraft”; a distinction is made between renter
       and student pilots because the term renter pilot is defined in the policy separate and apart
       from the term student pilot, and the definition of a renter pilot makes no mention of student
       pilots; and the only coverage exclusion for student pilots is for flights in which a student pilot
       is operating the aircraft and carrying passengers but no passenger is a pilot acting as the pilot
       in command. Appellees argue that if Hallmark intended to deny coverage to students pilots,
       it could have said so explicitly.
¶ 20        When construing the language of an insurance policy, a court’s primary objective is to
       ascertain and give effect to the intentions of the parties as expressed by the words of the
       policy. Hobbs v. Hartford Insurance Co. of the Midwest, 214 Ill. 2d 11, 17 (2005). Because
       the court must assume that every provision was intended to serve a purpose, an insurance
       policy is to be construed as a whole, giving effect to every provision (Central Illinois Light
       Co., 213 Ill. 2d at 153), and taking into account the type of insurance provided, the nature of
       the risks involved, and the overall purpose of the contract (American States Insurance Co.
       v. Koloms, 177 Ill. 2d 473, 479 (1997)). If the words used in the policy are clear and
       unambiguous, they must be given their plain, ordinary, and popular meaning, and the policy
       will be applied as written, unless it contravenes public policy. Hobbs, 214 Ill. 2d at 17.
       “Although policy terms that limit an insurer’s liability will be liberally construed in favor of
       coverage, this rule of construction only comes into play when the policy is ambiguous.” Id.
¶ 21        With respect to the nature of the risk insured against, Hallmark’s policy makes a critical
       distinction between who is protected under Franklin Aviation’s liability coverage and what
       types of uses and risks are covered under the policy. See Rusk Aviation, Inc. v. Northcott, 151
       Ill. App. 3d 126, 129 (1986) (holding that the insurer of the aircraft did not owe a duty to
       defend the student pilot who rented the plane, and there was no inconsistency between a
       declaration permitting use by renter or student pilots and a clause excluding renter pilots
       from coverage). In addition to covering Franklin Aviation as the named insured, the policy
       also provides coverage to “someone we[, i.e., Hallmark] protect.” Persons included within
       that someone we protect category are determined by looking under the provisions entitled
       “Who Is Protected” and “Who Is Not Protected.” The clear language of the policy protects
       any person riding in the aircraft with Franklin Aviation’s express permission and any
       employee of Franklin Aviation acting within the scope of his employment, but renter pilots
       are specifically excluded from protection under the policy. A renter pilot is simply any
       person or organization who rents the aircraft from Franklin Aviation. Furthermore, the policy
       defines instruction and rental as Franklin Aviation’s use of the aircraft for the instruction of,
       or rental to, others for their pleasure and business purposes.
¶ 22        Here, the affidavit of Mr. Verheydt established that Mr. Knezovich paid money to
       Franklin Aviation to rent its aircraft for a solo flight. The fact that Mr. Knezovich was
       operating the aircraft as a student pilot in no way negated the fact that he was renting the
       aircraft from Franklin Aviation while he was furthering his training as a pilot. Renter pilot
       and student pilot are not mutually exclusive designations. We conclude that Mr. Knezovich
       is specifically excluded from being an insured because he was a person who was renting the
       aircraft from Franklin Aviation.

                                                  -7-
¶ 23       A court must not strain to find an ambiguity where none exists (Rich v. Principal Life
       Insurance Co., 226 Ill. 2d 359, 372 (2007)), and the appellees’ attempt to read some
       ambiguity into the provisions concerning policy coverage and the renter pilot exclusion is
       unavailing. Specifically, the appellees rely upon the policy provisions concerning the
       permitted use of the aircraft for instruction and rental, the definition of someone we protect,
       and the discussion of student pilots under part 3, paragraph 4(f), of the policy to suggest that
       student pilots fit within the someone we protect category under the policy. The appellees’
       interpretation of the policy, however, ignores the very clear provisions in part 3, paragraphs
       2 and 3(b), of the policy, which establish that renter pilots are excluded from the someone
       we protect category and, thus, have no coverage under the policy. See Hermitage Insurance
       Co. v. Action Marine, Inc., 816 F. Supp. 1280, 1284 (N.D. Ill. 1993) (a policy will not be
       deemed ambiguous merely because it initially states a broad coverage and then excludes
       coverage for specific hazards).
¶ 24       The appellees also misconstrue the unambiguous provision in part 3, paragraph 4(f), of
       the policy, which simply restricts Franklin Aviation’s coverage by the use made of its rented
       aircraft and does not extend liability coverage to persons not defined as an insured. Each
       section of the policy serves a different purpose and must be construed accordingly (Rusk
       Aviation, Inc., 151 Ill. App. 3d at 128), and part 3, paragraph 4(f), addresses what is covered
       by the policy, not who is covered. Specifically, paragraph 4(f) provides that Franklin
       Aviation will lose its protection if it allows a student pilot to operate the aircraft while
       carrying passengers, unless one of the passengers is a properly certified pilot and is acting
       as the pilot in command. The plain language of paragraph 4(f) decreases Franklin Aviation’s
       coverage under certain conditions; it does not create coverage, increase the scope of
       coverage, or operate to add new insureds to the policy beyond those enumerated by that part
       of the policy that identifies who is insured. See Continental Casualty Co. v. Pittsburgh
       Corning Corp., 917 F.2d 297, 300 (7th Cir. 1990) (applying the principle that an exclusion
       from insurance coverage does not create coverage). Paragraph 4(f), simply by referring to and
       using the term student pilot, does not negate the purpose and effect of the provision of the
       policy that clearly states that renter pilots are not protected persons.
¶ 25       Because Mr. Knezovich, as a renter pilot, is not an insured under the terms of the policy,
       other provisions concerning the scope of Franklin Aviation’s coverage are not implicated and
       are not taken into consideration to determine the identity of who is insured under the terms
       of the policy. Finally, there was no need for Hallmark to expressly exclude coverage for
       student pilots because any student pilot renting a covered aircraft falls within the definition
       of renter pilots and does not constitute a protected person under the policy. Nothing in the
       provisions relied upon by appellees establishes that Mr. Knezovich was entitled to liability
       protection under the policy Hallmark issued to Franklin Aviation.

¶ 26                                    III. CONCLUSION
¶ 27       Because Mr. Knezovich was not a protected person under the policy, Hallmark does not
       owe a duty to defend the Knezovich estate. Accordingly, we reverse the judgment of the
       circuit court that denied Hallmark’s motion for summary judgment and granted the appellees’


                                                 -8-
       cross-motion for summary judgment. We remand this cause for further proceedings
       consistent with this opinion.

¶ 28      Reversed and remanded.




                                         -9-
