## Facts

- George A. Steven bought a round-trip airline ticket in Los Angeles and simultaneously purchased a $62,500 airplane trip accident policy for $2.50 from an airport vending machine.
- The policy was dispensed as a standardized form; the record did not clearly establish whether a purchaser could see, before purchase, the warning that coverage applied only to travel on “scheduled air carriers.”
- Steven mailed the policy to his wife, Kathryn E. Steven, the named beneficiary.
- During the return trip, Steven’s scheduled connecting flight from Terre Haute to Chicago was delayed because the scheduled aircraft was grounded.
- The only timely transportation to reach Chicago was an air taxi operated by a nonscheduled carrier; Steven boarded it as a substitute leg of the same journey.
- The air taxi crashed en route, killing Steven.
- The policy’s body contained lengthy fine print limiting coverage to accidents while a passenger on a “scheduled air carrier.”
- The policy expressly addressed certain substitute ground transportation situations but did not clearly address substitute air transportation on a nonscheduled aircraft in connection with delays or cancellations.

## Issues

1. Whether an insurer may deny coverage based on a fine-print “scheduled air carrier” limitation in a mass-distributed vending-machine trip policy when the limitation was not conspicuous, plain, and clear to the purchaser.
2. Whether the policy, viewed as a whole (including its treatment of substitute ground transportation and silence on substitute air transportation), plainly and clearly excluded coverage for death on an emergency substitute nonscheduled air taxi used due to a delay in scheduled service.

## Decision

- The California Supreme Court reversed the judgment for the insurer.
- The court held the insurer liable under the policy for Steven’s death.
- The case was remanded for proceedings consistent with the holding that coverage applied.

## Legal Principles

- Standardized consumer insurance policies sold on a take-it-or-leave-it basis are treated as adhesion contracts; courts closely examine exclusions that defeat an insured’s expected protection.
- Coverage limitations and exclusions must be stated in a manner that is conspicuous, plain, and clear before they will be enforced to defeat coverage an ordinary purchaser would reasonably expect.
- Ambiguities in insurance policies are construed against the drafter-insurer and in favor of coverage.
- Policy interpretation may be guided by the objectively reasonable expectations of the ordinary purchaser in the circumstances of purchase, particularly for impersonal, mass-sale transactions (such as vending-machine trip policies).

## Conclusion

Because the “scheduled air carrier” limitation was not presented in a conspicuous, plain, and clear manner and the policy did not plainly exclude emergency substitute nonscheduled air travel undertaken due to a grounded scheduled flight, the insurer could not rely on fine-print restrictions to deny coverage that an ordinary traveler would reasonably expect for the trip.


Steven v. Fid. & Cas. Co. of N.Y., 58 Cal. 2d 862 (Cal. 1962)