Granite State Ins. Co. v. Transamerica Ins. Co., 1

• Decision Date: 12 September 1985
• Docket Number: No. 1,CA-CIV,1
• Citation: 713 P.2d 312,148 Ariz. 111
• Parties: GRANITE STATE INSURANCE COMPANY; Del E. Webb Development Co.; Terry Hanaberg, Plaintiffs-Appellants, v. TRANSAMERICA INSURANCE COMPANY, Defendant-Appellee. 7042.
• Court: Arizona Court of Appeals

Page 312

713 P.2d 312

148 Ariz. 111

GRANITE STATE INSURANCE COMPANY; Del E. Webb Development Co.; Terry Hanaberg, Plaintiffs-Appellants, v. TRANSAMERICA INSURANCE COMPANY, Defendant-Appellee.

No. 1 CA-CIV 7042.

Court of Appeals of Arizona,

Division 1, Department C.

Sept. 12, 1985.

Motion for Reconsideration Denied

Oct. 18, 1985.

O'Connor, Cavanagh, Anderson, Westover, Killingsworth & Beshears, P.C. by Larry L. Smith and Lisa M. Sommer, Phoenix, for plaintiffs-appellants.

Gust, Rosenfeld, Divelbess & Henderson by Richard A. Segal and Fred Cole, Phoenix, for defendant-appellee.

OPINION

EUBANK, Judge.

Two issues are presented in this appeal from a summary judgment granted in an action seeking a declaratory judgment as to which of two insurance companies was primarily liable for coverage and defense in a negligence action:

(1) Whether, as a matter of law, the injury occurred during the unloading of the truck, such that the injury arose out of the use of the truck?

(2) Whether an automobile insurance policy may exclude coverage where the employee of the named insured is injured by a negligent third party who is an omnibus insured under the policy?

We find that the trial court erred in its analysis of both issues. Thus, we reverse and remand for entry of judgment in favor of the plaintiffs-appellants.

The facts here are not in dispute. Appellant Del Webb Development Company (Del Webb) was constructing an apartment complex. Appellant Terry Hanaberg was an employee of Del Webb. Del Webb was insured by a general liability policy with appellant, Granite State Insurance Company (Granite). Del Webb purchased carpet supplies from North Brothers (North). Donald G. Clark was an employee of North and in the course of his employment he drove the truck delivering carpet supplies to the construction site. The truck was insured by North under a comprehensive business automobile insurance policy by appellee, Transamerica Insurance Company (Transamerica).

After parking the truck at the spot to which Clark was directed by a Del Webb employee, Hanaberg began using a forklift to unload the supplies. Clark was also helping in the unloading of the truck. During the course of the unloading activity, Clark was injured by the forklift.

Thereafter, Clark and his wife filed a negligence suit against Del Webb and Hanaberg. The appellants tendered the defense of the action to Transamerica, which they viewed as having the primary coverage and insurance. Transamerica refused the tender of defense. Appellants then filed an action for declaratory relief requesting that Transamerica be adjudged primarily liable for coverage and defense of the suit. Appellants moved for summary judgment, and appellee filed a cross-motion for summary judgment. After considering the motions, the trial court granted the motion of Transamerica and denied appellants' motion. The judgment was filed and appellants have timely appealed from it to this court.

Appellants' first argument is that the trial court erred by finding that the injury did not arise out of the use of the vehicle. Both parties recognize the general principle that loading and unloading of a vehicle constitute use of the vehicle. Mission Ins. Co. v. Aid Ins. Services, 120 Ariz. 220, 585 P.2d 240 (1978). However, appellees argued, and the trial court found, that "the rule of law involving 'loading and unloading' does not apply in a case where the commercial delivery of the product had already occurred and the product was in the possession of the recipient." In reaching its conclusion, the court relied on Fireman's Fund Ins. Co. v. New Zealand Ins. Co., 103 Ariz. 260, 439 P.2d 1020 (1968). The trial court's reliance upon Fireman's Fund was misplaced. In that case, a concrete company agreed with a general contractor to deliver premixed concrete to the construction site in mixer trucks. Delivery was to be made by emptying concrete from the trucks into a steel bucket. Thereafter, the bucket was to be moved by a crane, operated by the employee of a third company, to the second floor. After the concrete had been unloaded into the bucket, as it was being moved by the crane, part of the crane touched a high tension wire and electrocuted the crane operator. The issue was whether the concrete company's truck insurer provided coverage for the loss as arising out of the use of the cement truck.

The court held that "when the goods have been delivered in the possession of the consignee or his agent or employee and have reached the place designated by the parties, whether by agreement or custom of the business, the responsibility of the consignor terminates and so likewise does liability under the policy of insurance." 103 Ariz. at 263, 439 P.2d 1020. The court concluded that the unloading was complete when the concrete was put into the steel bucket.

Appellee argues that the agreement was that Del Webb took possession of the goods on the truck, according to the custom between the parties, and thereupon assumed possession and the responsibility of unloading them by forklift. Therefore, appellee argues that "unloading" was completed when the truck stopped on Del Webb property. We cannot agree.

It would strain the use of the word "unloading" beyond all meaning to hold that the truck had been "unloaded" when, in fact, it had not been unloaded. In Fireman's Fund, supra, the concrete had clearly been unloaded from the truck. The question there was whether to extend the concept of unloading even further. Here, the appellee seeks to "back up" the concept of unloading prior to the vehicle being unloaded. This is not reasonable. Fireman's Fund is simply not applicable here.

More on point is Mission Ins. Co., supra. There a truck was delivering hot oil to the premises of a contractor. During the unloading of the oil into the contractor's storage tank, an employee of the contractor negligently closed a valve on the truck causing hot oil to be sprayed on the truck driver. The court held that the operation of the shut-off valve "was an integral part of the unloading process." 120 Ariz. at 222, 585 P.2d 240. The court concluded that the injury was sustained during unloading and that unloading must be considered to have occurred during the use of a motor vehicle under the Financial Responsibility Act (A.R.S. §§ 28-1170 et seq.).

Under the facts here, the use of the forklift was clearly an integral part of unloading the goods. It makes no difference whether Clark or Hanaberg was unloading the vehicle, or if they were acting in concert. Clark was an additional insured as an employee of the named insured, North Brothers. Hanaberg was a permissive user, i.e., an omnibus insured involved in the task of unloading the truck.

Also, instructive is Farmers Ins. Group v. Home Indemnity Co., 108 Ariz. 126, 493 P.2d 909 (1972). There the employee (Daly) of an independent contractor was using a crane to load equipment onto a truck. An employee of the company owning the truck was killed as he assisted in the loading. Our Supreme Court noted "[o]rdinarily, Home Indemnity (the truck owner's insurer) would cover for the negligence of Daly while loading and unloading the truck." 108 Ariz. 127, 493 P.2d 909. The court, however, was faced with an exclusion (further examined, infra ), which arguably altered the general rule. If we were to apply appellee's reasoning sub judice to the Farmers case, there would have been no loading until the crane had finished putting the goods in the truck, i.e., when the truck company had assumed control over the goods. Such a construction is contrary to the above quotation of the general rule. Accordingly, we conclude that the injury to Clark occurred during unloading of the vehicle, that the unloading constituted use of the vehicle, and that therefore he was covered by Transamerica, absent an applicable exclusion. See generally Annot. 6 A.L.R.4th 686, § 11(a) (1980).

This brings us to the second issue on appeal, i.e., whether an exclusion clause of the Transamerica policy excludes coverage for an injury to an employee (Clark) of the named insured where that injury is caused by a third person who is an omnibus insured under the policy. The exclusion states:

This insurance does not apply:

* * *

* * *

(b) to any obligation for which the insured or any carrier as his insurer may be held liable under any workmen's compensation, ... (c) to bodily injury to any employee of the insured arising out of and in the course of his employment by the insured or to any obligation of the insured to indemnify another because of damages arising out of such injury....

Also pertinent is A.R.S. § 28-1170(E), which states:

The motor vehicle liability policy need not insure ... liability on account of bodily injury to ... an employee of the insured while engaged in the employment....

The trial court found:

The policy of Defendant Transamerica Insurance Company clearly excludes the employees of its insured from coverage as they were already covered by workmen's compensation. On the face of the policy therefore there would be no coverage. While a proper public policy reason, like omnibus coverage, might invalidate such an exclusion, there is no reason for that here. It is hardly in the public interest to force an insurance company to provide liability coverage on the employee's claim when it already provides compensation coverage....

The trial court's conclusion, however, is contrary to a case precisely on point, Farmers Insurance Group, supra. There the facts, as set forth previously, were similar to those here. In that case, the truck insurer relied on the following exclusion to negate coverage:

This insurance does not apply:

* * *

* * *

(c) to bodily injury to any employee of the insured arising out of and in the course of his employment by the insured....

The court considered both the meaning of the term "insured" and the effect of A.R.S. § 28-1170(E), concluding "that the exclusion is not applicable to the...