Insurer Off the Hook for Claim Because Pilot Skipped Simulator Training

The co-pilot never attended flight simulator school, but the chief pilot let him take the wheel anyway.

The plane crash-landed at the Aspen, Colorado airport. Nobody was hurt, but the owner of the airplane will not collect on its $5 million insurance claim, if a Thursday decision by the First District of the Illinois Appellate Court stands.

The Appellate Court reversed a trial court decision and ruled that XL Speciality Insurance Co. does not have to pay for the loss of the LearJet 60 because the aircraft’s owner did not make sure its co-pilot got the training required by its insurance policy.

At trial, Cook County Circuit Court Judge Franklin Valderramma had found that the jet was worth about $2.5 million and ordered XL Speciality to pay Performance Aircraft Leasing an extra $700,000 for costs and prejudgment interest — a total judgment of $3,218,145.94. The appellate panel ruling takes all of that away.

Co-pilot Paul Nemetz’s botched approach as he landed the LearJet at the Aspen-Pitkin County Airport on June 7, 2012 embroiled his employer into a years-long legal battle over the exact meaning of an in-artfully written insurance policy.

According to a National Transportation Safety Board accident report, the flight started out in Miami with six passengers aboard. As Nemetz approached the Aspen airport, an air traffic controller reported that another pilot had experienced low-level wind shear that had caused a loss of airspeed. The sky was clear, but winds were gusting up to 16 knots.

With chief pilot Todd Chilton in the seat next to him, Nemetz performed an “S-turn” to correct a too-steep approach. As the plane descended, Chilton called for “power.” Nemetz advanced power slightly, but the jet’s airspeed continued to decrease. Chilton told Nemetz to avert the landing, but he didn’t take control of the aircraft and Nemetz stayed on course.

At about 30 feet above ground, the plane “stopped flying” — as described by the pilots — and pitched to the left, causing one wing to strike the ground short of the runway. It plowed through the dirt, ripping off part of its landing gear and damaging its wings and fuselage before coming to a stop 4,000 feet from the point of impact and 400 feet from the airport fire station.

The two pilots and six passengers evacuated through the main cabin door. No one was injured.

Aircraft insurance policies often contain warrants that the policyholder will meet specific conditions, such as minimum pilot training requirements. The XL policy mentioned each of the policyholder’s pilots by name and designated Chilton as chief pilot and Nemetz as co-pilot.

Interestingly, Performance Aircraft’s policy in 2011 stated that Nemetz would not pilot the LearJet 60 unless he attended flight simulator training. The company persuaded XL to remove that language from the policy, XL’s attorney Tom Orlando said during oral arguments.

However, a second clause remained. That provision stated that any pilot approved by the chief pilot could act as second in command, but added: “with the understanding that: all turbine pilots are going to simulator school for the make and model they are operating annually…”

The definition of “annually” became the central point of debate between XL and its insured.

Judge Valderramma decided that the clause required Nemetz to attend simulator training once during the one-year term of the policy, which incepted in the February before the accident and did not expire until February 2013. Performance Aircraft’s attorney, Steve Wood, said during oral arguments before the appellate court that it didn’t matter that Nemetz had not attended flight simulator school since May 2010.

“To bring into play prior-year compliance, or non-compliance — prior-year conduct — that is to alter the terms of the contract,” he said.

The owner of the company, Edward Wachs, testified at trial that he generally avoids the expense of simulator training for part-time pilots such as Nemetz. Wachs said he thought the flying instruction provided by his chief pilot would suffice.

Orlando argued that the policy had always required pilots to attend flight simulator school once every year. Performance Aircraft was in breach of its insurance contract the moment that the policy incepted, he said, because it had not made sure that Nemetz took that training.

“They warranted that every pilot who flew that plane had the training (within) 12 months before,” Orlando said during oral argument.

The term “annual” was not defined in the policy. What’s more, the requirement that pilots “attend” flight simulator training did not establish any minimum standards. One justice joked during oral argument that a pilot could satisfy the policy terms by having a cup of coffee at the simulator school and going home.

Nevertheless, the three justices on the panel agreed that Nemetz did not qualify as a pilot for the insured aircraft under any sensible definition of the term “annually.”

“The plain and ordinary meaning of the word ‘annually’ is ‘once a year; each year,'” the majority opinion states. “This implies a recurrent action—something that occurs once a year or each year. This implication is reinforced by the requirement that the pilot be ‘going to simulator school’ annually, indicating an ongoing action.”

The court remanded the case to the trial court with instructions that it enter judgment in favor of XL Specialty.

Chilton still holds an air transport pilot certificate and lives in Bristol, Wisconsin, according to Federal Aviation Administration records. Nemetz, who was 68 at the time of the crash, has not held an FAA certificate since 2013.