                                       ___________

                                       No. 96-1122
                                       ___________

RLI Insurance Company                         *
                                              *
              Appellant,                      *   Appeal From the United States
                                              *   District Court for the
       v.                                     *   Eastern District of Missouri
                                              *
Julia Drollinger, Personal                    *
Representative of the Estate                  *
of Richard E. Brown, Deceased;                *
and Janet K. Brown,                           *
                                              *
              Appellees,                      *


                                       ___________

                        Submitted:      June 13, 1996

                              Filed:   October 1, 1996
                                       ___________

Before RICHARD S. ARNOLD, Chief Judge, F. GIBSON, Senior Circuit Judge,
     and KORNMANN,* District Judge.
                            ___________

KORNMANN, District Judge.

       RLI Insurance Company ("RLI"), plaintiff, brought a declaratory
judgment action pursuant to 28 U.S.C. § 2201 to determine the coverage
provided under an insurance contract issued by RLI to Richard E. Brown
(“Richard”).       Having concluded the policy language was ambiguous and
liability coverage existed, the District Court1 granted summary judgment
in favor of Julia Drollinger ("Drollinger"), the personal representative
of the estate of Richard, and in favor of Janet K. Brown ("Brown"), widow
of Richard.     RLI appeals, claiming no liability coverage is




        *
         The Hon. Charles B. Kornmann, United States District Judge for the District of South
Dakota, sitting by designation.
       1
        The Hon. Stephen N. Limbaugh, United States District Judge for the Eastern District of
Missouri, Southeastern Division.
provided by the policy because the policy language is unambiguous and it
clearly excludes coverage for Brown.


                          I.   Factual Background
     The facts are essentially undisputed.      Brown was a passenger in an
aircraft piloted by her husband, Richard, on September 20, 1992, when the
aircraft crashed, causing injuries to Brown and fatal injuries to Richard.
RLI had issued an insurance policy to Richard on the involved aircraft.
The policy was in effect at the time of the crash.
     Brown brought an action in state court against Drollinger, as
personal representative of Richard's estate, seeking the policy limits for
her injuries.    RLI then brought this declaratory judgment action to
determine whether liability coverage, including the duty to defend, existed
under the policy.


                               II.   Decision
     We review the District Court's grant of summary judgment de novo and
will affirm only if the record, viewed in the light most favorable to RLI,
shows there is no genuine issue of material fact and the defendants are
entitled to judgment as a matter of law.   Fed. R. Civ. P.   56(c); Allen v.
United Transp. Union, 964 F.2d 818, 820 (8th Cir. 1992).     The question of
whether an insurance policy is ambiguous is a matter of state law.   Sargent
Const. Co., Inc. v. State Auto Ins. Co., 23 F.3d 1324, 1326 (8th Cir.
1994).
     Under Missouri law, if an exclusionary clause is ambiguous, the court
must adopt a construction favorable to the insured. Southern General Ins.
Co. v. WEB Associates/Electronics, Inc., et al., 879 S.W.2d 780, 782
(Mo.App. E.D. 1994).    An insurance policy is ambiguous when there is
"duplicity, indistinctness, or uncertainty in the meaning of words used in
the policy".    State Farm Fire & Cas. Co. v. Berra, 891 S.W.2d 150, 152
(Mo.App. E.D. 1995).    Missouri law further provides that an ambiguity
exists in an insurance policy when "it is fairly susceptible of multiple
interpretations."   Southern General, 879 S.W.2d at 782.     The court




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must view the instrument as a whole in determining whether it is ambiguous.
Id.    Missouri law further provides that "policy provisions designed to cut
down, restrict or limit insurance, or imposing exceptions or exemptions,
will be strictly construed against the insurer."       Universal Underwriters
Ins. Co. v. Dean Johnson Ford, Inc., 905 S.W.2d 529, 533 (Mo.App. W.D.
1995).     “In   reviewing insurance policies, the policies will be given a
reasonable construction and interpreted so as to afford coverage rather
than defeat coverage.    Nixon v. Life Investors Ins.      Co., 675 S.W.2d 676,
679 (Mo. App. 1984).”     Id.
             The “INTRODUCTION” section of the policy states, inter alia:
“We have attempted to make this policy as clear as possible and to avoid
the use of words and phrases that do not have everyday meaning . . . we
have to be certain that the meaning of certain words and phrases are
clearly defined.”    Although the insured is then referenced to the section
called “DEFINITIONS”, a reader might be surprised to learn that the
definitions section defines the word “you” to include a resident spouse.
Few words would have a more everyday and commonly understood meaning than
“you.”
       The “INTRODUCTION” section of the policy further assures the insured:
“The     Endorsements   change   the   basic   insurance   agreement   to     more
appropriately insure your risk.”         The insured is thus told that the
endorsements are very important.       Paragraph 9 of Section 6 of the policy
deals with changes and states: “The only way that this policy can be
changed is to have an endorsement changing the policy issued by us.”
         Endorsement No. SLL-1-1000 as issued by RLI recites that the
endorsement applies to the policy only if the endorsement number is shown
in item 4 of the insurance coverage schedule.     It is so shown in item 4 of
both the original and the amended insurance coverage schedules.             Before
further discussion of     the endorsement, we note that item 4 in both the
original and the amended coverage schedules includes “liability protection”
(Section l) and this section refers to Endorsement No. SLL-1-1000.             The
liability protection section also contains the printed language “cluding
passengers,” preceded




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by the typed insert “IN”.        It is thus obvious that the insured had the
choice    of   including   or   excluding   passengers   and   chose   to   include
passengers.
         Returning to Endorsement No. SLL-1-1000, the insured was told that
the endorsement “changes your policy only as stated below.”            The insured
was then told: “The most we will pay for all bodily injury for any one
person (including any passenger) who is injured in any one accident is:
$100,000.”     Obviously, the words “any passenger” are all inclusive and
could easily be construed as changing the policy to cover all passengers,
including Brown.    The words “any passenger” are not defined in the policy
but “passenger” is defined as “any person in the aircraft, including crew,
while they are in, on or getting into or out of the aircraft.”                  The
endorsement document is without limiting language and makes no reference
to “you” or to a resident spouse.
        Section 1 of the policy is entitled “LIABILITY PROTECTION.”              It
contains the following language immediately after the section heading:
"(This Section provides you with protection for claims made against you by
other persons.)".     In section 1, under a subsection entitled “TYPES OF
DAMAGES,” the policy states, "C.       Passenger - This coverage protects you
or any permissive user for your or their legal responsibility for bodily
injury to passengers in the insured aircraft."           In section 1, under a
subsection entitled “WHAT IS NOT INSURED IN THIS SECTION,” the policy
states, "4.     The policy does not insure for any bodily injury to you."
Section 5 of the policy, entitled "DEFINITIONS", provides in one relevant
part:

        You, Your and Yours means the persons or organizations who are
        named in Item 1 on your Insurance Coverage Schedule. These
        words also include the spouse of any person named in Item 1 if
        that spouse resides in the same household as the person.
Item 1 on the Insurance Coverage Schedule names "Rich Brown."                It is
undisputed that Brown was the spouse of Richard and they resided in the
same household during the relevant time period.




                                       -4-
       RLI contends that the policy generally includes coverage for claims
by passengers and then specifically and unambiguously excludes claims if
the passenger is the spouse residing in the same household as the person
named in the coverage schedule.       Thus, RLI contends there is no ambiguity.
       Brown contends that the spousal exclusionary clause is        ambiguous for
two reasons:    (1) the word "you" is used in the policy at times to refer
only to Richard and at other times to refer to Richard and his wife; and
(2) the special passenger liability endorsement specifically provides for
liability coverage for "any passenger" and Brown was clearly a "passenger"
in the insured aircraft at the time she was injured.         Alternatively, Brown
argues the severability of interest clause limits the exclusionary language
to only an "insured claiming coverage" and Brown is not an "insured
claiming coverage."
       The District Court found the insurance policy was ambiguous in that
it failed to contemplate the dual status of a person, such as Brown, as a
resident spouse (referred to in the policy as "you, your and yours") and
as a "passenger", or, more correctly, as “any passenger.”          Because of this
ambiguity, the court adopted a construction of the policy favorable to
Richard, the insured, holding that RLI was liable for the policy limits of
$100,000.00, and further holding that RLI had a duty to defend the state
lawsuit brought by Brown against Drollinger.          Summary judgment was granted
in favor of Brown and Drollinger and against RLI.
       We agree with the District Court that the language of the insurance
policy issued by RLI to Richard is ambiguous.          Comparing the basic policy
itself on the one hand with, on the other hand,           the endorsement and the
two coverage schedules makes it obvious that there is inconsistency.         There
are policy provisions (by virtue of amendments or changes) which are
“fairly susceptible” of at least two interpretations.                 See Southern
General, 879 S.W.2d at 782.     One interpretation is that Brown is excluded
from   making   a   claim   because   she   was   a   resident   spouse.   Another
interpretation is that liability coverage exists because she comes within
the meaning




                                        -5-
of “any passenger”.     The policy in all its parts is ambiguous and we are
compelled to adopt a construction favorable to the insured and, indirectly,
to Brown.     The effects of any similar endorsement, if it existed at all,
and the coverage schedules were never discussed or raised as an issue in
RLI Ins. Co. v.    Kary, 779 F.Supp. 1300 (D.Kan. 1991), a case cited by RLI.
Such case, although not binding on us, is easily distinguishable.        RLI
could have easily excluded Richard and Brown by stating that coverage is
provided for “any one person (including any passenger but excluding
you) . . . .”
       We hold that coverage exists under the policy issued by RLI to
Richard for the bodily injuries suffered by Brown, up to the policy
limit of $100,000.00.         Under the terms of the policy, RLI is
obligated to defend the state lawsuit initiated by Brown against
Drollinger.     Summary judgment was properly granted to Brown and to
Drollinger.       Because we hold that liability coverage exists, we
need    not   address   Brown's   alternative     argument   regarding   the
severability of interest clause.


                              III.   Conclusion
       We affirm the District Court's grant of summary judgment in
favor of Brown and Drollinger and against RLI.
       A true copy.

              Attest:

                  CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT




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