St. Paul Mercury Insurance v. Huitt

FRANK W. WILSON, District Judge.

This appeal presents issues involving the interpretation and construction of casualty insurance policies. The principal issue involved is the interpretation of the often litigated “loading and unloading” clause in an automobile insurance policy. Between the lack of clarity in the wording of the loading and unloading coverage, the lack of uniformity in the decisions of the courts, and the lack of clairvoyance upon the part of both the insurance policy draftsmen and the courts in foreseeing the myriads of factual variations that can arise, the problems here to be dealt with appear to present an inexhaustible source of litigation.¹

This lawsuit was instituted as an action for declaratory judgment. The issues were decided by the trial court upon the motion for summary judgment of the original plaintiff, a general liability in-suror, and the response thereto by one of the defendants, an automobile liability insuror. Each carrier has appealed from the portion of the decision of the trial court adverse to its contentions. The following statement of facts appears undisputed in the record.

Upon August 4, 1958, a ready-mix concrete truck owned by Benjamin G. Waanders & Son and driven by Carl Thomas, an employee, delivered a load of concrete for use in pouring the foundation of a building under construction in Allegan, Michigan. A bucket operated by a crane was used to move the concrete from the ready-mix concrete truck and pour it into the foundation. This crane was owned by Dewey Huitt, an individual doing business as Dewey Huitt & Son, a subcontractor on the job, and was operated by Russell Ontis, an employee of Huitt. During the course of unloading the truck and pouring the concrete in this manner, the boom upon the crane fell and one James A. Withers, an employee of the general contractor upon the job, was struck and injured. At the time of the accident the crane had moved a bucket of concrete from the truck to a point some distance from the truck where it was to be poured into the foundation. Neither Waanders’ truck nor Waanders’ employee was involved in the accident in the sense of having proximately caused or contributed to the accident.

At the time of the accident, Huitt was insured by St. Paul Mercury Insurance Company under a multiple coverage policy commonly known as a general liability policy and having maximum limits of $25,000 for each person injured. The Waanders truck was insured by Auto Owners Insurance Company under an automobile liability policy having maximum limits of $100,000 for each person injured. The relevant portions of the respective policies are admitted in the record.

A suit for $200,000 damages for personal injuries was instituted in the state court upon behalf of James A. Withers by Ruth V. Withers, acting as his guardian. The suit was against Huitt, the owner of the crane, Ontis, the crane operator, and the Clark Equipment Company, the manufacturer of the crane. Upon the institution of this lawsuit, Hu-itt and Ontis each called upon Auto Owners Insurance Company to extend to them coverage under the Waanders automobile liability policy and to undertake their defense, contending that they were each an insured under the loading and unloading provisions of the policy. Auto Owners declined to do so.

Following this, St. Paul, as the general liability carrier upon Huitt, instituted this suit under 28 U.S.C. § 2201, alleging diversity, joining Huitt, Ontis, Mrs. Withers, guardian of James A. Withers, and Auto Owners as defendants, and seeking a declaratory judgment of the rights and liabilities of the respective parties under the above stated insurance policies. After answer was filed on behalf of each defendant, St. Paul moved for a summary judgment upon the basis of the pleadings, the admissions and the affidavits of record. By way of response, Auto Owners filed counter-affidavits disputing the plaintiff’s affidavits only with reference to the inferences and conclusions to be drawn from the facts as stated above. No further response to the motion for summary judgment was filed by any other defendant.

Upon this state of the record the trial court entered an opinion, stating that it was sustaining in part and denying in part the motion for summary judgment and holding that Auto Owners had primary coverage upon Huitt and Ontis by reason of the loading and unloading provision of its policy, that St. Paul had excess coverage upon both Huitt and Ontis by reason of its policy, but declining to rule as to which carrier had the duty to defend.²

Auto Owners has filed an appeal from the action of the trial court in decreeing that Huitt and Ontis were insureds under its policy. It is the contention of Auto Owners that the operation of the Huitt crane could not be considered an insured use under the loading and unloading provision of Auto Owners’ policy upon the Waanders truck and that, in any event, this issue cannot be decided upon a motion for summary judgment as issues of. fact exist as to whether the truck was unloading and as to whether any causal connection exists between the injury and the unloading of the truck. St. Paul has filed a cross-appeal from the action of the trial court in decreeing that Ontis was an insured under its policy and as such would be entitled to excess coverage along with Huitt. St. Paul also complains of the action of the trial court in declining to determine which insurance carrier must provide the defense for Hu-itt and Ontis.

With respect to the contention of Auto Owners that unresolved issues of fact exist in the ease, this Court is of the opinion that this contention is without merit. The facts with reference to the existence and terms of the insurance policies involved, the operations conducted, the equipment and parties involved in the unloading of the concrete truck and in the movement of the concrete, the manner and means by which injuries were inflicted, and the state of the operations at which they were inflicted, as well as the existence of the lawsuit upon behalf of the injured claimant are all undisputed. The alleged issues of fact asserted by Auto Owners as to (a) whether the truck was in the process of unloading, (b) whether the unloading was completed before the infliction of injuries, and (c) whether any causal connection existed between the unloading and the injuries are in reality conclusions of law that must be drawn from the undisputed facts. The issues presented upon the motion for summary judgment were solely matters of the interpretation of the subject insurance policies in light of the undisputed facts. As stated in Couch On Insurance, 2d, Sec. 15.3:

“As a general rule, the construction and effect of a written contract of insurance is a matter of law to be determined by the court and not by the jury where there is no occasion to resort to extrinsic evidence for the purpose of resolving ambiguities. The construction of a particular word in a policy is for the court where its meaning is not dependent upon disputed facts. If the facts are admitted, it is the province of the court to determine whether they come within clear and unambiguous terms of the policy.”

The Auto Owners policy contains the usual insuring clauses for an automobile liability insurance policy. With reference to whether Huitt and Ontis are insured under the terms of this policy, the pertinent language, reduced to its essence, is as follows:

“To pay on behalf of the assured all sums which the assured shall become obligated to pay by reason of the liability imposed upon him by law for damages because of bodily injury * * * arising out of the ownership, maintenance or use of the automobile.

****** “The unqualified word 'assured* * * * includes not only the named assured but also any person while using the automobile and any person or organization legally responsible for the use thereof provided the actual use of the automobile is with the permission of the named assured. * * *

******

“ * * * Use of the automobile for the purposes stated includes the loading and unloading thereof.” '

In determining whether Huitt and On-tis fall within the definition of “the assured,” it is apparent that a determination must be made as to whether their actions were within the ambit of the use of the insured vehicle with the express or implied permission of the named assured in the unloading thereof. If their actions were encompassed within the meaning of the term “unloading” and their participation was with the express or implied permission of the named insured, i. e., Waanders, then they would acquire the rights of an assured under the policy.

In determining the meaning and scope of the words “loading and unloading,” the courts have not spoken with one voice. See annotations 160 A.L.R. 1259 and 95 A.L.R.2d 1114. Two principal rules of interpretation have developed in the cases, one being called the “coming to rest” rule and the other being called the “complete operation” rule. See Risjord, “Loading and Unloading,” 13 Vanderbilt L.Rev. 903. The “coming to rest” rule essentially interprets loading as beginning only after the object to be transported has come into the immediate vicinity of the insured vehicle and unloading to cease when the object transported first comes to immediate rest upon removal from the vehicle. This was the early and now clearly the minority rule. Stammer v. Kitzmiller, 226 Wis. 348, 276 N.W. 629 (1937); Jackson Floor Covering, Inc. v. Maryland Casualty Co., 117 N.J.L. 401, 189 A. 84 (1937); Franklin Co-Op Creamery Association v. Employers’ Liability Assurance Corp., 200 Minn. 230, 273 N.W. 809 (1937).

The “complete operation” rule essentially interprets loading as beginning when the object to be transported leaves its original location and starts toward the insured vehicle for the purpose of loading, and unloading to cease when the object transported reaches its final point of delivery toward which the transportation by the insured vehicle was directed. State ex rel. Butte Brewing Co. v. District Court, 110 Mont. 250, 100 P.2d 932 (1940) ; Bobier v. National Casualty Co., 143 Ohio St. 215, 54 N.E.2d 798 (1944); Maryland Casualty Co. v. Tighe, 9 Cir., 115 F.2d 297; Wagman v. American Fidelity & Cas. Co., 304 N.Y. 490, 109 N.E.2d 592 (1952); Raffel v. Travelers Indemnity Co., 141 Conn. 389, 106 A.2d 716 (1954).

The contract for insurance in the present case having apparently been issued in Michigan and jurisdiction being here based upon diversity, the Court must look to the law of the State of Michigan to determine the appropriate rule to follow in the interpretation of the loading and unloading clause in this contract. In the absence of a precedent in the state courts, the Federal District Courts in Michigan are committed to the “complete operation” rule. Allstate Ins. Co. v. Valdez, 190 F.Supp. 893 (E.D. Mich., 1961); Selective Ins. Co. v. Hartford Accident & Indemnity Co., 213 F.Supp. 3 (E.D.Mich., 1963).

It is readily apparent under the facts of the instant case that the final point of delivery of the concrete was the foundation where it was to be poured at the construction site, not the bucket attached to the crane. Defining the word “unloading” in terms of the complete operation of unloading the concrete from the concrete truck and moving it to its final point of delivery in the foundation, the use of the crane and bucket would be a part of the complete operation and the crane operator and his employer would each be an “assured” as defined in the policy. That Huitt and Ontis were stran- ( gers to Waanders, the named insured, would not be significant, since Auto Owners expressly insured against liability arising out of the unloading, without regard to who was doing the unloading. No claim is made that the truck was being unloaded without the permission of the named insured.

We are of the opinion that the District Court was correct in its application of the Michigan complete operations rule to the facts of this case and in holding that Ontis was unloading the Waanders truck at the time of the accident and within the meaning of the word “unloading” as used in the automobile liability policy. Courts from other jurisdictions following the complete operation rule have imposed liability upon the automobile liability carrier under somewhat analogous circumstances. In Bituminous Casualty Corp. v. Travelers Ins. Co., D.C., 122 F.Supp. 197, the Court extended coverage to a power shovel operator engaged in loading the insured vehicle. In Lamberti v. Anaco Equipment Corp., 16 A.D.2d 121, 226 N.Y.S.2d 70 (1962), the Court extended coverage to a crane operator who dropped concrete upon the driver of the insured truck while engaged in unloading the concrete. In Indemnity Ins. Co. of North America v. Old Dominion Hoist Service, 102 U.S.App.D.C. 141, 251 F.2d 382 (1958) the Court extended coverage to a crane operator when a workman was electrocuted as a result of the crane coming into contact with the power line after lifting a steel beam from the insured vehicle and while moving the beam to its position in the new structure. See also Kemnetz v. Galluzzo, 8 Misc.2d 513, 163 N.Y.S.2d 998, involving a pay-loader used in the process of unloading the insured truck.

Auto Owners relies principally upon the case of Travelers Ins. Co. v. Buckeye Union Casualty Co., 172 Ohio St. 507, 178 N.E.2d 792, 95 A.L.R.2d 1114 (1961). That case involved an injury inflicted upon the driver of the insured oil tank truck during the preparations for loading it at a bulk oil station. The driver was caused to fall from the truck when residue oil spilled upon him from the overhead loading line as it was being swung into position in preparation for loading the truck. The trial court held that the loading of oil begins only when the flow in the hose or pipe begins. The appellate court held that where the injury was caused by a third party having no legal relationship to the named insured, there was no permissive use until a particular use of the vehicle gave on opportunity for the named insured to acquiesce in or refuse its use. To the extent that the case may be construed as a departure from the complete operation rule followed in Michigan, it would not be persuasive in this case. To the extent that it would impose special restrictions upon persons not bearing a legal relationship to the named insured not otherwise imposed upon persons that might come within the omnibus coverage, the Court there appears to have read conditions into the definition of the insured not contained in the policy. The policy, in defining “the insured,” makes no distinction between employees of the named insured and strangers to the named insured, stating only that “the insured” includes “any person” while loading or unloading the insured vehicle with the permission of the named insured.

It is the further contention of Auto Owners that before coverage would be extended there must appear a causal relationship between the accident and the use of the insured vehicle as a vehicle. The case of Pacific Auto Ins. Co. v. Commercial Casualty Co. (1945) 108 Utah 500, 161 P.2d 423, 160 A.L.R. 1251, is cited as so holding. It must be borne in mind that in construing the language of the policy we are not dealing with the problem of proximate cause of the accident. The question is not one in the field of torts of proximate cause of the accident, but one in the field of contracts of coverage under the wording of an insurance contract. While there must be a causal relationship between the insured use, that is unloading, and the accident,³ the question is not whether the insured truck was the cause of the accident. As stated in the case of Federal Ins. Co. v. Michigan Mutual Liability Co., 277 F.2d 442 (C.C.A. 3, 1960), where a somewhat similar contention was made by the automobile liability insurance carrier to the claim of coverage under the loading and unloading clause by a crane operator:

“Appellant confuses the basis for finding liability for the purpose of recovery with the basis for finding the extent of coverage of the insurance contract.”

Turning now to the issues'raised in the cross-appeal by St. Paul, the trial court held that St. Paul under its general liability insurance coverage would have excess coverage upon both Huitt, the named insured, and Ontis, his employee. No issue exists with regard to St. Paul’s coverage being excess to the coverage here found to be imposed upon Auto Owners, but an issue is raised by St. Paul as to the employee Ontis being insured under its policy. In determining whether an employee of the named insured is an insured under the general liability policy, the relevant language of the policy, reduced to its essence, is as follows :

“The Company agrees to pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury * * * sustained by any person.

“The unqualified word ‘insured’ includes not only the named insured but also * * * any executive officer, director or stockholder thereof while acting within the scope of his duties as such. * * * If the named insured is an individual, this insuring agreement applies only in connection with the conduct of a business of which the named insured is sole owner. * * * ”

The trial court held that the last sentence quoted above was sufficient to make Ontis, the employee, an insured, as he was employed in a business in which the named insured was sole owner. In this we believe the trial court misconstrued the language of the policy and was in error. The omnibus coverage is defined in the phrase “any executive officer, director or stockholder thereof while acting within the scope of his duties as such.” The sentence limiting coverage where the named insured is an individual solely to the business of which he is the sole owner does not broaden the omnibus coverage, but further restricts it. Bituminous Casualty Corp. v. American F. & C. Co., 22 Ill.App.2d 26, 159 N.E.2d 7 (1959); Fidelity Ins. Co. v. Michigan Mutual Liability Co., 277 F.2d 442 (C.C.A. 3, 1960).

Finally, St. Paul complains of the action of the District Court in deciding that both St. Paul and Auto Owners are obligated to provide a defense for Huitt and Ontis. This Court having determined that Ontis is not an additional insured under the St. Paul policy, the decision of the trial court has been modified to that extent. We are of the opinion that the trial court was correct, however, in holding that Huitt was entitled to be provided with a defense by both Auto Owners and St. Paul. The obligation to defend is separate and distinct from the duty to provide coverage and to pay. West American Ins. Co. v. Allstate Ins. Co. (C.C.A. 10, 1961) 295 F.2d 513; United States F. & G. Co. v. Tri-State Ins. Co. (C.C.A. 10, 1960), 285 F.2d 579; 8 Appleman Insurance Law and Practice, Sec. 4685. This is a contractual right of the insured irrespective of other insurance and irrespective of primary or excess coverage. American F. & C. Co. v. Pennsylvania Threshermen & Farmers' Mut. Casualty Ins. Co. (C.C.A. 5, 1960), 280 F.2d 453. The controversy between the two insurance carriers who have no contractual relationship to each other cannot operate to alter the obligation that each owes unto the insured, with whom they each have a contract. With regard to the providing of a defense, Huitt has double insurance and may call upon either or both carriers to fulfil their policy obligations in this respect. Whether after fulfilment of their contractual obligations to defend the insurance carriers may have some right of contribution as between themselves was not ruled upon by the trial court. The trial court having exercised its discretion that declaratory relief was not appropriate upon this speculative issue, we see no cause to disturb that exercise of discretion. 16 AmJur., “Declaratory Judgments,” Sec. 14.

The judgment of the District Court is accordingly affirmed except insofar as it held Russell Ontis to be an insured under the St. Paul Mercury Insurance Company policy, and the judgment is reversed to that extent only.

1 . The draftsmen have now apparently attempted to narrow the field by an endorsement, promulgated by the Joint Forms Committee of the National Bureau of Casualty Underwriters and the Mutual Insurance Rating Bureau, to be used witb most automobile policies written on or after December 1, 19,63, which purports to eliminate coverage under the automobile policy for persons, who may be loosely described as strangers to the truck crew.

2 . St. Paul Mercury Insurance Co. v. Huitt, D.C., 215 F.Supp. 709 (1963).

3 . See Handley v. Oakley, 10 Wash.2d 396, 116 P.2d 833 (1941), where a customer making a purchase at the insured ice cream truck at a ball game was struck by a baseball; and Hartford A. & I. Co. v. Fireman’s Fund Indemnity Co., 298 F.2d 423 (C.C.A.7, 1962), where a bottled gaa deliveryman, after making delivery to one location, opened a valve on a tank at another location, thereby causing an explosion.