When Reginald A. Wood leaped from an airplane he was likely traveling at around 120 miles per hour before he pulled his parachute cord. Unfortunately, Wood did not safely float to the ground but instead careened outside of the established drop zone on the Sussex Airport site and slammed into a parked car.

Wood was badly injured and sued Sussex Airport and others. Sussex Airport did not have any direct involvement in Wood’s skydiving incident. Instead, Wood purchased a tandem skydive from a separate skydiving company that paid a monthly fee to Sussex Airport to operate a parachute jumping concession.

The insurer issued an Airport Liability Policy to Sussex Airport which contained a Parachute Jumping exclusion barring coverage for injuries: “arising out of the conduct of or participation in, or preparation for, any parachuting activities.” The insurer defended Sussex Airport but later commenced a declaratory judgment action against the airport invoking the policy’s Parachute Jumping exclusion. Sussex Airport argued that the exclusion did not apply because it was not directly operating the skydiving activities — an entirely separate entity was responsible for the skydiving operations — and therefore Wood’s accident did not arise out of the airport’s conduct.

The Court rejected Sussex Airport’s argument. Although no court had previously interpreted a parachuting exclusion, the Court looked to other similar exclusions that also contained the phrase “arising out of.” New Jersey courts traditionally apply a broad interpretation of the phrase “arising out of,” only requiring a substantial nexus between the activity and injury. As such, the Court held that the Parachute Jumping exclusion applied broadly to bar coverage for the skydiver’s injuries regardless of whether the insured was “physically conduct[ing] the parachuting activities…”

Thanks to Steve Kaye for his contribution to this post and please write to Mike Bono for more information.