Kennedy v. Jefferson Smurfit Co.

• Decision Date: 05 February 1997
• Citation: 688 A.2d 89,147 N.J. 394
• Parties: Joseph KENNEDY, Plaintiff, v. JEFFERSON SMURFIT COMPANY and Container Corp. of America, Defendant and Third Party Plaintiff-Respondent and Cross-Appellant, v. NORTH OPERATING COMPANY, Third Party Defendant-Respondent and Cross-Respondent, and Ultra Packaging and Dauman Pallets, Third Party Defendants. JEFFERSON SMURFIT COMPANY AND CONTAINER CORP. OF AMERICA, Plaintiff-Respondent and Cross-Appellant, v. FIREMAN'S FUND INSURANCE COMPANY, The American Insurance Company, Defendants, and New Jersey Manufacturers Insurance Company, Defendant-Appellant.
• Court: New Jersey Supreme Court

Page 394

147 N.J. 394

688 A.2d 89

Joseph KENNEDY, Plaintiff, v. JEFFERSON SMURFIT COMPANY and Container Corp. of America, Defendant and Third Party Plaintiff-Respondent and Cross-Appellant, v. NORTH OPERATING COMPANY, Third Party Defendant-Respondent and Cross-Respondent, and Ultra Packaging and Dauman Pallets, Third Party Defendants.

JEFFERSON SMURFIT COMPANY AND CONTAINER CORP. OF AMERICA, Plaintiff-Respondent and Cross-Appellant, v. FIREMAN'S FUND INSURANCE COMPANY, The American Insurance

Company, Defendants,

and

New Jersey Manufacturers Insurance Company, Defendant-Appellant.

Supreme Court of New Jersey.

Argued Oct. 21, 1996.

Decided Feb. 5, 1997.

George W. Connell, Roseland, argued the cause for appellant New Jersey Manufacturers Insurance Company (Connell, Foley & Geiser, attorneys; Richard T. Bayer and William J. Gross, on the briefs).

Joseph DiRienzo, Fanwood, argued the cause for respondent and cross-appellant Jefferson Smurfit Company and Container Corp. of America (DiRienzo & Wallerstein, attorneys; Mr. DiRienzo and Martin B. Wallerstein, on the briefs).

Marvin Blakely, Rutherford, argued the cause for respondent and cross-respondent North America Operating Company (De Veaux & Seidman, attorneys).

The opinion of the Court was delivered by

GARIBALDI, J.

This appeal presents a narrow, legal issue regarding an insurer's obligation to provide coverage to an additional insured in a "loading and unloading" case under an omnibus automobile-insurance clause. Specifically, the question presented is whether the selection of a defective pallet is part of the loading process, and thus arises out of the "use of a motor vehicle."

I

The facts are substantially undisputed. Joseph Kennedy was the owner of a tractor that was leased to North Operating Company (North). North insured Kennedy's vehicle pursuant to the agreement between Kennedy and North. North entered into a cargo-shipping agreement with Jefferson Smurfit Company (Jefferson). On February 21, 1991, Kennedy was dispatched by North to Jefferson's facility to pick up a loaded trailer (owned by North) filled with cardboard, which he was to deliver to Ultra Packaging Corporation (Ultra). The cardboard was on wood pallets in bundles weighing hundreds of pounds. Kennedy testified that before leaving Jefferson for Ultra, he visually inspected the load and found everything in order. After arriving at Ultra, Kennedy waited in the trailer and observed the unloading procedure. Suddenly, a pallet collapsed, and the cardboard fell on Kennedy, causing injuries. According to Kennedy, the collapsed pallet was rotted.

Kennedy filed suit against Jefferson, alleging that his injuries were caused by the defective pallet used by that company. Jefferson filed an Answer and Third-Party Complaint against North, the owner of the trailer, and others. Jefferson, a self-insured company, then filed a declaratory judgment action against New Jersey Manufacturers Insurance Company (NJM), the motor vehicle insurance carrier for North, seeking coverage under the "use" provision of its "Trucker's Policy," and Fireman's Fund, North's comprehensive general liability carrier. Jefferson conceded its own negligence and settled Kennedy's personal-injury claim for $750,000.

Thereafter, the Third-Party Complaint was consolidated with the declaratory judgment action, and both NJM and North filed motions for summary judgment. Jefferson opposed the motions, and cross-moved for summary judgment. The trial court denied NJM's motion for summary judgment, but granted Jefferson's cross-motion for summary judgment against NJM in the amount of $750,000. The court also granted North's motion for summary judgment, thereby preventing Jefferson from seeking indemnification from North.

On appeal, the Appellate Division affirmed, "conclud[ing] that NJM's policy covers Jefferson for Kennedy's injury, because the injury was causally connected with the complete operation of loading and unloading North's truck." Kennedy v. Jefferson Smurfit Co., 287 N.J.Super. 117, 127, 670 A.2d 577 (1996) (citing Drew Chem. Corp. v. American Fore Loyalty Group, 90 N.J.Super. 582, 591, 218 A.2d 875 (App.Div.1966)). The Appellate Division remanded the case for a determination of the reasonableness and good faith of Jefferson's $750,000 settlement with Kennedy, because there had been no showing that the settlement fairly reflected the seriousness of the injuries suffered. Finally, because of the panel's determination that the automobile policy covered Jefferson for Kennedy's injury, the panel declared moot Jefferson's appeal of the trial court's judgment that North owed Jefferson no indemnification under the trucking agreement. NJM filed a petition for certification to review the decision that its automobile insurance policy provided coverage to Jefferson for Kennedy's injuries. Contingent on a grant of NJM's petition, Jefferson filed a cross-petition to appeal the issue of North's obligation to indemnify Jefferson. We granted both petitions. 144 N.J. 585, 677 A.2d 759 (1995).

II

NJM concedes in its petition that the use of pallets is a standard technique in shipping goods, but asserts that in this case the selection of the pallet was not an integral part of the loading or unloading process, and is a "separate act" that does not trigger motor vehicle insurance coverage. We disagree.

A.

The "Trucker's Policy," issued by NJM to North, provides that NJM "will pay all sums the insured legally must pay as damages because of bodily injury or property damage to which this insurance applies, caused by an accident and resulting from the ownership, maintenance or use of a covered auto." (Emphasis added). The parties concede that North's trailer was a "covered auto" under the policy, and that North and its employees were covered by the policy. Kennedy, supra, 287 N.J.Super. at 120, 670 A.2d 577. The policy also contained an "omnibus" clause, purporting to include all parties who use or operate a covered auto, as insureds: "Anyone else is an insured while using with your [North's] permission a covered auto you own, lease or borrow...."

That the concept of "use of a vehicle" includes the acts of loading and unloading the vehicle is well settled. In Ryder/P.I.E. Nationwide, Inc. v. Harbor Bay Corp., Inc., 119 N.J. 402, 575 A.2d 416 (1990), we recognized that "[t]he obligation to provide coverage to an additional insured in a loading and unloading case can arise from the explicit language in a liability policy." 119 N.J. at 406-07, 575 A.2d 416 (citing Maryland Casualty Co. v. New Jersey Mfrs. (Casualty) Ins. Co., 48 N.J.Super. 314, 137 A.2d 577 (App.Div.), aff'd, 28 N.J. 17, 145 A.2d 15 (1958); Drew Chem. Corp. v. American Fore Loyalty Group, 90 N.J.Super. 582, 218 A.2d 875 (App.Div.1966)). We also emphasized that New Jersey courts have found that "the obligation to provide coverage in a 'loading and unloading' accident arises from statute and therefore cannot be limited by contract." Ryder, supra, 119 N.J. at 407, 575 A.2d 416 (citing Bellafronte v. General Motors Corp., 151 N.J.Super. 377, 376 A.2d 1294 (App.Div.), certif. denied, 75 N.J. 533, 384 A.2d 513 (1977)).

Maryland Casualty, supra, first provided a framework for determining coverage for loading and unloading activities. In that case, the court determined that for an accident to be covered by the "loading and unloading" clause in an automobile-insurance policy, the injury "must have occurred during the process of loading or unloading the vehicle and be causally connected with that act." 48 N.J.Super. at 320, 137 A.2d 577.

In Maryland Casualty, the driver of a truck owned by William H. Bair Company was injured when an employee of the Camden Marine Terminal, who was using a forklift to load the Bair truck with rolls of paper taken from a barge, negligently loaded a roll of paper so that it struck the driver. Id. at 317-18, 137 A.2d 577. Contrary to the insurer's allegation that the forklift operator was not "using" the truck within the meaning of the "loading and unloading" clause of the policy, the court found that

[t]he Bair truck was unquestionably being used with the permission of its owner, the named insured under Manufacturers' policy. Not only was Kelly, its driver, so using it, but every employee of the terminal who was assigned to loading the truck with the rolls of paper brought from the barge. Cherry was such an employee, and it matters not the slightest that he may have stopped his fork lift just short of the back of the truck and from that point raised the roll of paper to the loading point. What he was doing was part of the complete operation of loading.

[Id. at 321, 137 A.2d 577 (emphasis added).]

In Drew, supra, 90 N.J.Super. 582, 218 A.2d 875, the court extended the concept of causation in loading and unloading cases. The "coming to rest" doctrine of unloading, in which coverage exists only from the time the goods are removed or lifted from the truck to the moment the removed goods come to rest, was rejected by the Drew court in favor of the more "modern and enlightened" "complete operation" doctrine. Id. at 586-87, 218 A.2d 875. In "complete operation" jurisdictions, "all that is required to establish coverage is that the act or omission which resulted in the injury was necessary to carry out the loading or unloading." Id. at 589, 218 A.2d 875 (quoting Employers' Liability Assurance Corp. v. Indemnity Ins. Co., 228 F.Supp. 896, 899-900 (D.Md.1964)).

In Drew, the driver of a tank truck owned by Nappi Trucking Corporation was injured after driving his truck, loaded with liquid fatty acid, to the premises of Drew Chemical Corporation. The hose used to transfer the acid from the truck to Drew's vats was clogged, and the Drew employee attempted to unclog the line by running air pressure through it. During that procedure, the hose suddenly whipped about, striking and injuring the driver of the Nappi truck.

The Appellate Division reversed the...