INSURANCE-RELATED COURT CASES
Digested from case reports published online
COURT DECISIONS
When seizure transforms into theft
DS Avionics Unlimited LLC (DSA) found itself in an unusual situation. DSA delivered its 1964 Piper PA-30 aircraft to a plane mechanic in order to perform maintenance. The plane was held in a hangar that the mechanic rented. DSA’s plane, at the time of the incident, was insured under a policy issued by U.S. Specialty Insurance Company (USSIC).
DSA’s problem was initiated by a dispute between its chosen mechanic and the airport owner. Apparently, the mechanic was in arrears on his hangar rental fees. The airport owner locked the hangar, barring the mechanic’s access. This occurred while the hangar still held DSA’s plane. Later, when the mechanic regained access, he moved the plane outside the hangar. However, as rent was still overdue, the airport owner parked a truck in a manner that prevented any movement of the plane.
After refusing to pay any money to the airport owner to retrieve its plane, DSA filed a claim with USSIC. In their proof of loss statement, the company alleged that the constraining of property was, essentially, a theft. DSA requested payment of the policy’s limits of $50,000. USSIC denied the claim and provided a letter (per DSA’s request) explaining its reason for the denial. At the same time, the insurer filed for a summary judgment asking for a ruling that it had no coverage obligation. DSA countered with a breach of contract and bad faith action. DSA appealed when the lower court ruled in favor of USSIC.
USSIC’s aviation policy protected against accidental loss or damage to aircraft while it was not in motion. The policy included a limiting provision that was also relevant to the matter. A “conversion exclusion” barred protection involving conversion, or secretion, of the aircraft as well as embezzlement by any party to whom the insured (DSA) has relinquished its property (aircraft). Per the policy, accidents referred to sudden events that, from the point of view of the insured, were unintended or unexpected. The above applied to events that took place within a policy period.
The lower court viewed the matter the same way as USSIC. Eventually it ruled that the seizure of the plane did not meet the definition of an accident. Rather, the court reasoned that the airport owner’s act in seizing the plane in order to collect an unpaid storage debt was intentional, rather than accidental. Further, it also ruled that the policy’s conversion exclusion applied to the situation because the aircraft conversion could be attributed to failure of proper care of the plane by the mechanic. Therefore, USSIC neither breached their contract nor acted in bad faith.
During the appeal, USSIC ended up conceding that their policy’s conversion exclusion did not apply to the incident. Therefore, the higher court turned its attention to the matter of whether the loss was eligible for coverage and if the insurer acted in bad faith.
The higher court found that it merely needed to adhere to the USSIC policy’s wording. In its view, the lower court erred. It did not agree with the finding that the loss was ineligible. Instead, it found that the lower court interpreted “accident” through the wrong point of view. While the actions of the airport owner in seizing and blocking access to DSA’s property was intentional, they were also irrelevant. The policy language referred to accidents as being sudden, unintended or unexpected from the viewpoint of the insured party. DSA, from its perspective, did suffer a loss because of the actions of another party.
In light of its finding, the lower court ruling in favor of USSIC was reversed and remanded for re-hearing in alignment with the higher court decision.
U.S. Specialty Ins. Co v. DS Avionics Unlimited LLC—Nebraska Supreme Court—Nos. S-24-628, S-24-630, Reversed and Remanded—November 7, 2025.
