Fidelity & Cas. Co. of New York v. North Carolina Farm Bureau Mut. Ins. Co.

• Decision Date: 25 October 1972
• Docket Number: No. 7210SC529,7210SC529
• Citation: 192 S.E.2d 113,16 N.C.App. 194
• Court: North Carolina Court of Appeals
• Parties: The FIDELITY & CASUALTY COMPANY OF NEW YORK v. NORTH CAROLINA FARM BUREAU MUTUAL INSURANCE COMPANY et al.

Page 113

192 S.E.2d 113

16 N.C.App. 194

The FIDELITY & CASUALTY COMPANY OF NEW YORK v. NORTH CAROLINA FARM BUREAU MUTUAL INSURANCE COMPANY et al.

No. 7210SC529.

Court of Appeals of North Carolina.

Oct. 25, 1972 Certiorari Denied by Supreme Court Dec. 13, 1972.

Teague, Johnson, Patterson, Dilthey & Clay by Ronald C. Dilthey, Raleigh, for plaintiff appellant.

Dees, Dees, Smith & Powell, by William W. Smith, Goldsboro, for defendant appellants.

CAMPBELL, Judge.

The widespread enactment of financial responsibility and compulsory insurance laws has caused a decided trend in the courts toward liberal construction of omnibus clauses. It is the purpose of the Financial Responsibility Act to provide protection for persons injured or damaged by the negligent operation of automobiles. Hawley v. Indemnity Insurance Co., 257 N.C. 381, 126 S.E.2d 161 (1962); Swain v. Nationwide Mutual Insurance Co., 253 N.C. 120, 116 S.E.2d 482 (1960). Generally, an omnibus clause should be construed liberally in favor of the insured and in accordance with the policy of the clause to protect the public. Chatfield v. Farm Bureau Mut. Auto. Ins. Co., 208 F.2d 250 (4th Cir. 1953). The terms 'ownership, maintenance or use' should not be treated as mere surplusage. They were placed in the policy in order to cover situations distinct and separate from any other term. Absent specific language to the contrary, they must be given effect in accordance with their common, daily, non-technical meaning. Ambiguity in a policy which requires interpretation as to whether the policy provisions impose liability requires construction in favor of coverage and against the company. Williams v. Nationwide Mutual Insurance Co., 269 N.C. 235, 152 S.E.2d 102 (1967).

It is a matter of normal construction to hold that 'use' means the loading and unloading of motor vehicles within the terms of the omnibus insurance clause which insures against loss arising out of the ownership, maintenance and use of a motor vehicle, especially when the motor vehicle is a truck designed to transport goods. There is adequate precedent, and we so hold, that when the policy is silent on the point, loading and unloading is using an insured motor vehicle. Liberty Mutual Ins. Co. v. Truck Insurance Exch., 245 Or. 30, 420 P.2d 66 (1966); Red Ball Motor Freight v. Employers Mut. Liability Ins. Co., 189 F.2d 374 (5th Cir. 1951); Travelers Insurance Co. v. American Fidelity & Cas. Co., 164 F.Supp. 393 (D.Minn.1958).

Farm Bureau urges this Court, however, to hold that although use does include loading and unloading operations, a third person who has no connection with a vehicle and who is only participating in the loading or unloading activities is not an additional insured under the vehicle liability policy. This is the view taken by the Ohio Court. Travelers Ins. Co. v. Buckeye Union Casualty Co., 172 Ohio St. 507, 178 N.E.2d 792, 95 A.L.R.2d 1114 (1961). (A bulk oil tank employee, while loading customer's oil tank truck, spilled some of the oil on the truck driver to his injury. It was held that the bulk oil tank employee was not an insured under the truck policy even though engaged in a loading operation.) Buckeye Union Cas. Co. v. Illinois National Ins. Co., 2 Ohio St.2d 59, 206 N.E.2d 209 (1965). (In this case a bag boy at a grocery store loaded the groceries in the trunk of a customer's automobile. After doing so he injured the customer when shutting the trunk lid. It was held the bag boy was not an insured under the automobile policy.)

This Ohio rule may be summarized as follows: (1) A third party not connected with the vehicle must be shown to have been an actual user with the named insured's permission before he will become an additional insured under the vehicle policy; (2) Loading and unloading are but component parts of an overall use; (3) The loader or unloader is covered by the policy only if he has first qualified as an insured by some other use of the vehicle. The Ohio view has not been followed by a majority of the states. This is pointed out in the dissenting opinion in Buckeye Union Cas. Co. v. Illinois National Ins. Co., Supra.

An insurance policy is a contract between the parties, and the intention of the parties is the controlling guide in its interpretation. It is to be construed and enforced in accordance with its terms insofar as they are not in conflict with pertinent statutes and court decisions. Hawley v. Indemnity Insurance Co., Supra.

The policy provision in question speaks of liability 'arising out of the ownership maintenance or use' of the truck. The words 'arising out of' are not words of narrow and specific limitation but are broad, general, and comprehensive terms effecting broad coverage. They are intended to, and do, afford protection to the insured against liability imposed upon him for all damages caused by acts done in connection with or arising out of such use. They are words of much broader significance than 'caused by'. They are ordinarily understood to mean 'originating from', 'having its origin in', 'growing out of', or 'flowing from', or in short, 'incident to', or 'having connection with' the use of the automobile. Red Ball Motor Freight v. Employers Mut. Liability Ins. Co., Supra; Schmidt v. Utilities Ins. Co., 353 Mo. 213, 182 S.W.2d 181 (1944); Merchants Co. v. Hartford Accident & Indemnity Co., 187 Miss. 301, 188 So. 571 (1939). The act of loading and unloading a truck is not an act separate and independent of the use and is an act necessary to accomplish the purpose of using the truck.

The parties do not, however, contemplate a general liability insurance contract. There must be a causal connection between the use and the injury. This causal connection may be shown to be an injury which is the natural and reasonable incident or consequence of the use, though not foreseen or expected, but the injury cannot be said to arise out of the use of an automobile if it was directly caused by some independent act or intervening cause wholly disassociated from, independent of, and remote from the use of the automobile. Bituminous Casualty Corp. v. Hartford Accident & Indem. Co., 330 F.2d 96 (7th Cir. 1964).

We find better reasoning in the view that the 'use' of a vehicle includes its loading and unloading, and that all persons actively engaged in the loading and unloading with the permission of the named insured are additional insureds under policy omnibus clauses. This view has been referred to as being followed in the majority of states and is well summarized in Fireman's Fund Insurance Co. v. Canal Insurance Co., 411 F.2d 265 (5th Cir. 1969).

This opinion was by Judge Orie L. Phillips of the Tenth Circuit sitting by assignment with the Fifth Circuit. The facts in this case were that Canal Insurance Company had a policy on a truck. The truck owner drove it to an ice house platform and ordered ice. The ice company employees, while loading the ice, negligently dropped a block of ice on the truck owner causing extensive personal injuries. Fireman's Fund had issued a comprehensive liability policy to the ice company. When Canal refused to defend, Fireman's Fund paid out nearly $30,000 to settle the loss and brought this action to recover from Canal for that the ice company was an unnamed insured under the Canal policy pertaining to loading the vehicle. The court allowed recovery against Canal and the following is a summary of the decision:

(1) Loading and unloading coverage is an expansion of the term 'use'; a more liberal concept of causation is imparted than 'proximate cause' in its traditional legal sense.

(2) If the accidental injury arises out of the loading of the insured vehicle, persons engaged in such loading operations were using the vehicle within the meaning of that phrase of the coverage provision of such policy.

(3) Causal relationship between the accident and the use of the insured vehicle as a vehicle is not necessary.

(4) It is not necessary that either the insured vehicle itself or the driver thereof be involved in the accident.

(5) Loading begins when the object to be loaded leaves its original location and starts toward the insured vehicle, to be placed therein.

(6) If the bodily injuries were caused by accident and resulted from the manner in which the party loading the insured vehicle carried out an essential part of the loading operations, that is, if they were caused by what he did or failed to do in carrying out an essential part of the loading operations, the party doing the loading was using the insured vehicle and is an unnamed insured within the coverage of the policy, if such use thereof was with the consent of the named insured.

The holding that all persons, whether the named insured, his agent, or a third party, engaged in loading and unloading operations are covered by the vehicle's insurance policy under the 'use' provision is amply supported by precedent from other jurisdictions.

In Liberty Mutual Ins. Co. v. Truck Insurance Exch., Supra, a truck driver delivered a load of logs to a pond operated by U.S. Plywood, and through negligence of employees of U.S. Plywood, a log was caused to roll off the truck while it was being unloaded, and the truck driver, who was walking by, was injured. It was held that U.S. Plywood was an insured under the truck policy since it was engaged in an unloading of the truck and hence was a permissible user under the truck policy. The insurance carrier of the truck was held to be primarily liable. The same holding in a similar type case is found in Travelers Insurance Co. v. American Fidelity & Cas. Co., Supra.

In the case of St. Paul Mercury Insurance Company v. Huitt, 336 F.2d 37 (6th Cir. 1964), a ready-mix concrete truck took a load of concrete to a job site. A crane operator manipulated a bucket to the truck, received a bucket full of concrete and then manipulated the bucket to the building foundation where it was dumped into the foundation. During the...