American Auto. Ins. Co. v. American Fidelity & CasualtyCo. of Richmond, Virginia

• Decision Date: 26 September 1951
• Citation: 235 P.2d 645,106 Cal.App.2d 630
• Court: California Court of Appeals Court of Appeals
• Parties: AMERICAN AUTO. INS. CO. V. AMERICAN FIDELITY & CASUALTY CO. OF RICHMOND, VA., et al. Civ. 18289.

Page 645

235 P.2d 645

106 Cal.App.2d 630

AMERICAN AUTO. INS. CO.

V.

AMERICAN FIDELITY & CASUALTY CO. OF RICHMOND, VA., et al.

Civ. 18289.

District Court of Appeal, Second District, Division 3, California.

Sept. 26, 1951.

Rehearing Denied Oct. 23, 1951.

McBain & Morgan, Angus C. McBain, Los Angeles, for appellant.

Parker, Stanbury & Reese, J.H. Peckham, Jr., Los Angeles, for respondent.

VALLEE, Justice.

Appeal by defendant American Fidelity and Casualty Company from a judgment in a declaratory relief action decreeing that under a motor vehicle liability policy it was liable for damages caused by its assured arising out of the use of a motor vehicle.

Exeter Oil Co., Ltd., a corporation, and two of its affiliated enterprises (all referred to as Exeter), operated an oil terminal in the Los Angeles Harbor area. Plaintiff's policy insured Exeter against liability imposed upon it by law for damages arising out of the ownership, maintenance and use of its property, both real and personal, at its marine terminal, but specifically excluded any loss or damage arising out of the operation, maintenance or use of its motor vehicles. (It is conceded that in excluding loss or damage arising out of the operation, maintenance or use of motor vehicles, plaintiff was excluding loss or damage arising out of the loading or unloading of motor vehicles.) Defendant-appellant's policy insured Exeter against liability imposed upon it by law for damages arising out of the ownership, maintenance and use of its motor vehicles. It contained the following provision: "The purposes for which the automobile is to be used are Commercial * * * (b) The term 'commercial' is defined as use principally in the business occupation of the named insured * * * (c) Use of the automobile for the purposes stated includes the loading and unloading thereof." The occupation of insured was listed as "Commercial Truckmen."

On June 15, 1947, and while both policies were in force, a quantity of Diesel oil escaped from a partially open valve on the unloading rack of Exeter's marine terminal, spilled into the waters of the harbor, and caused damages for which claims have been presented to Exeter. Exeter has requested that plaintiff and defendant pay these claims.

The circumstances surrounding the escape of the Diesel oil were established at the trial by the following stipulated facts: The unloading rack was a stationary part of the terminal, with a pair of intake risers, A-1 and B-2, for unloading Diesel oil. The risers, with intake valves, were joined to an underground pipe which conducted oil entering the risers to storage tanks. A hose was attached to each intake riser, and in unloading a truck or trailer was attached to an outlet on the truck or trailer. A pump on the loading rack, operated by an employee of Exeter known as a pumper, was used to pump oil from trucks and trailers to the storage tanks. When the intake riser hose was connected to a truck or trailer, it was the practice of the driver thereof to open the valve on the truck or trailer when told to do so by the pumper. At the same time the pumper opened the valves on the intake risers and put the pump in operation. As unloading neared completion it was the practice of the driver to assume a position on top of the truck or trailer where he could look through the open dome and, as the truck or trailer emptied or sucked air, turn off the valve, whereupon the pumper would turn off the valve on the intake riser and stop the pump.

Approximately one-half to one hour before the accident, a tank truck and trailer, owned by Exeter and carrying Diesel oil, was unloaded as was the practice through intake risers A-1 and B-2. After unloading, the truck and trailer drove away. A half hour later a tractor and semi-trailer, owned by Exeter, driven by its employee, and covered by defendant's policy, arrived with a load of Diesel oil. The semi-trailer only was to be unloaded. The driver connected the hose from intake riser A-1 with the metal outlet on the semi-trailer and, when told to do so by the pumper, opened the valve on the trailer. At the same time, the pumper opened the valve on intake A-1 and put the pump in operation. The two men then went to a shack some 20 feet away and some minutes later, while the unloading was proceeding, noticed Diesel oil running from the hose on intake riser B-2. It was this oil which drained into the harbor and caused the damages for which claims have been filed. The pumper had, apparently, failed to entirely close the valve on intake riser B-2 after the unloading of the truck and trailer which preceded the semi-trailer, and the oil which was pumped from the semi-trailer through intake riser A-1 entered the pipe joining intake risers A-1 and B-2 and was forced through the B-2 open valve.

The superintendent of the terminal testified that it was not possible for oil to run out of the storage tanks because of a check valve in the line, and that if any oil spill occurred during an unloading operation the oil could come only from the unloading of the truck. There was testimony that the oil which leaked "spilled during the process of the unloading" of the semi-trailer.

Plaintiff filed the present action for declaratory relief, seeking to have determined whether both of the insurance policies, or only one of them, covered the claims for damages. The court found that any loss arising as a result of the accident, occurred during the unloading of the oil from Exeter's semi-trailer, and concluded that its liability for the damages caused by the overflow was covered by defendant's, and not by plaintiff's, policy.

Defendant contends the evidence does not support the finding that the damages were caused during the unloading of the semi-trailer, arguing that the oil had been delivered to the marine terminal when it entered the intake valve provided to receive the oil for the pipe line; that it was the use and maintenance of the terminal's properties while transporting oil from the unloading rack to the storage tanks, which caused the escape of the oil and, therefore, any damages caused thereby were not covered by its policy but were covered by plaintiff's policy.

Counsel have cited no case in which the scope of a "loading and unloading" provision in an insurance contract, similar to the one involved here, has been considered by the California courts, and so far as we have been able to ascertain the case is one of first impression in this State. The provision has, however, been considered by courts in other jurisdictions, with the result that there is a decided conflict with respect to the construction to be given the "loading and unloading" provision. Generally speaking, in determining whether the accident occurred during the unloading of a motor vehicle within the meaning of a "loading or unloading" provision in a liability policy, the courts have adopted one of two theories, the "coming to rest" or the "complete operation" doctrine.

Of the two, the "coming to rest" doctrine gives the more limited construction to the "loading and unloading" provision. Under this doctrine, "unloading" includes only the actual removing or lifting of the article from the motor vehicle up to the moment when it has actually come to rest and has started on its course to be delivered by other powers and forces independent of the motor vehicle, and the motor vehicle itself is no longer connected with the process of unloading. The motor vehicle is then said to be no longer in use. ¹

Under the "complete operation" doctrine, which is the broader of the two, "unloading" is regarded as embracing all the operations which are required in any specific situation to effect a completed delivery of the article. For practical purposes, this doctrine makes no distinction between "unloading" and "delivery." ²

It has uniformly been held that the "loading and unloading" provision in insurance contracts, such as involved here, is one of extension. It expands, rather than limits, the term "the use of" the motor vehicle somewhat beyond its usual connotation so as to bring within the policy some acts in which the motor vehicle itself does not play any part. ³

In Pacific Automobile Ins. Co. v. Commercial Casualty Ins. Co., 108 Utah 500, 161 P.2d 423, at page 427, 160 A.L.R. 1251, the court adopted the "complete operations" doctrine, and reviewed at great length many of the cases cited here, and others, and from them formulated the following rules:

"1. The intention of the parties to the insurance contract should be kept constantly in mind by the court in determining the scope of coverage brought within 'loading and unloading' clauses or 'ownership, maintenance and operation' clauses.

"2. Loading and unloading include more than mere placing the goods on the truck or removal of the goods from the truck, so that when they are taken directly from the truck, and in one continuous operation carried into the customer's place of business, they are still in the process of being unloaded when set down therein.

"3. There must be some causal relationship between the use of the insured vehicle as a vehicle and the accident for which recovery is sought."

The court concluded, 161 P.2d at page 428: "that the proper rule of construction of policies such as here involved is that the mission, or transaction, or function being performed by the insured's employees at the time of the accident is the controlling element in determining whether the situation from which the accident occurred is included in loading and unloading. The job being performed here, that part of the insured's business functioning at the time of the accident was that of making a proper commercial delivery. The policy of plaintiff included and the policy of defendant excluded the business of...