McDonald Industries, Inc. v. Rollins Leasing Corp., 47205-0

Citation95 Wn.2d 909,631 P.2d 947
Decision Date30 July 1981
Docket NumberNo. 47205-0,47205-0
PartiesMcDONALD INDUSTRIES, INC., also known as McDonald Cranes Company, also known as Cranes Company, also known as Crane Rentals; Gene Lange; and Safeco Insurance Company of America, Respondents, v. ROLLINS LEASING CORPORATION, Petitioners, John Doe Insurance Company; Thomas G. Spiller and Sharon Spiller, his wife; Defendants, and Margaret Workman and Victor D. Workman, her husband, Respondents.
CourtUnited States State Supreme Court of Washington

Moriarty, Mikkelborg, Broz, Wells & Fryer, Robert O. Wells, Seattle, for petitioners.

R. Scott Fallon, Seattle, for respondents.

STAFFORD, Justice.

This is an action to determine the extent of insurance coverage. The Court of Appeals held that coverage provided by petitioner Rollins Leasing Corporation insured respondents McDonald Industries, Inc., up to the policy limits. 26 Wash.App. 376, 613 P.2d 800. We affirm.

Respondent McDonald rented a tractor (the portion of a tractor-trailer combination which includes the engine and driver's compartment) from Rollins. The rental agreement stated that Rollins would provide insurance coverage for liability "arising from the ownership, maintenance or use" of the rented vehicle. The rental agreement further stated on the reverse side, in conspicuous type, "said policy (of insurance) does not cover ... liability arising from loading or unloading of said vehicle".

Employees of McDonald attached the rented tractor to a trailer owned by McDonald and loaded an 11-ton steel crane counterweight onto the trailer. The weight was secured by only one chain, which the trial court found to be violative of a federal regulation 1 and thus negligence per se. While a McDonald employee was driving the tractor-trailer combination through an "S" curve, at 40 m.p.h., the counterweight slid under the retaining chain and fell off the trailer. Two vehicles collided with the counterweight, resulting in three separate bodily-injury claims. Although substantial damages were incurred, they are covered by insurance regardless of the outcome of this decision.

McDonald and Safeco Insurance Co., which had issued a policy to McDonald covering such liability, brought a declaratory judgment action requesting that Rollins' insurance coverage under the rental agreement be deemed primarily liable and that the Safeco policy be held to provide only secondary coverage.

The trial court dismissed the complaint with prejudice, holding the accident did not arise from "ownership, maintenance or use" of the rented vehicle, but instead was "caused by negligent loading of the trailer in question". The trial court held the accident was excluded from coverage by the "loading and unloading" clause of the insurance policy.

The Court of Appeals reversed. It found the exclusionary clause to be ambiguous, and thus strictly construed it against Rollins. Since the accident did not occur during the "loading and unloading" process, the exclusionary clause was held not to apply. We granted review to determine whether an insurance policy which covers liability arising from the ownership, maintenance or use of a vehicle but which excludes coverage for liability arising from loading or unloading of the vehicle, covers liability arising from an accident caused by improper loading.

Before this issue can be resolved two other matters must be discussed. First, the rental agreement makes it clear that the parties intended that liability insurance coverage was to be provided by Rollins. It had a liability policy on the rented vehicle under which the renter became an insured unless he opted out of the coverage. This was explained on the rental agreement form, and McDonald did not opt out of the coverage. The rental agreement also stated the limits of the liability insurance policy, including the fact that it excluded "liability arising from loading or unloading of said vehicle". It repeatedly referred to this as liability insurance, and contained a "hold harmless" clause whereby the renter was obligated to indemnify Rollins from any loss in excess of the liability insurance provided. Furthermore, Rollins does not contend this was not a liability insurance policy. Further, there is an undisputed finding of fact that Rollins provided liability insurance. 2

Second, it is apparent that, in the case at hand, the covered vehicle was in "use" when the accident occurred. Indeed it was being used for the sole purpose for which it had been rented. See Mays v. Aetna Cas. & Sur. Co., 242 So.2d 264 (La.App.1970). The "use" was, in fact, a causative factor in the accident. Without the motive power of the insured tractor the trailer would not have been able to negotiate the "S" curve on the highway at 40 m.p.h. The tractor was more than a mere coincidental place in which the injury occurred. Without question its use "contributed in some way to produce the injury". Transamerica Ins. Group v. United Pac. Ins. Co., 92 Wash.2d 21, 593 P.2d 156 (1979); Handley v. Oakley, 10 Wash.2d 396, 116 P.2d 833 (1941). Thus, the accident was covered by the insurance unless excluded by the "loading and unloading" exemption.

In determining the meaning of the "loading and unloading" clause the normal rules of construing insurance policies must be employed. Much depends upon whether there is an ambiguity in the language of the contract. Coverage is considered ambiguous "when, on its face, it is fairly susceptible to two different interpretations, both of which are reasonable". Morgan v. Prudential Ins. Co., 86 Wash.2d 432, 435, 545 P.2d 1193 (1976) and cases cited therein. If ambiguous it should be interpreted

in accordance with the way it would be understood by the ordinary man buying insurance, "even though a different meaning may have been intended by the insurer." It is fundamental that ambiguities in the policy must be construed against the insurer and in favor of the insured. This rule applies with added force in the case of exceptions and limitations to the policy's coverage.

(Citations omitted.) Witherspoon v. St. Paul Fire & Marine Ins. Co., 86 Wash.2d 641, 650, 548 P.2d 302 (1976); accord, Shotwell v. Transamerica Title Ins. Co., 91 Wash.2d 161, 167-68, 588 P.2d 208 (1978), and cases cited therein. Ambiguities need not be interpreted the same when they are used to extend coverage rather than to except coverage, due to the rule of strict construction against the insurer. See 7 Am.Jur.2d, Automobile Insurance § 205 (1980); 12 G. Couch, Cyclopedia of Insurance Law 2d § 45:125 (1964); cf. Aetna Ins. Co. v. Kent, 85 Wash.2d 942, 540 P.2d 1383 (1975). In any event insurance contracts should be given a fair, reasonable and sensible construction which fulfills the apparent object of the contract rather than a construction which leads to an absurd conclusion or renders a policy nonsensical or ineffective. Morgan v. Prudential Ins. Co., supra. Ambiguity should be resolved so that a doubtful provision in a contract will not unfairly devour the whole policy or relieve the insurer from liability fairly within the spirit of the policy. Riordan v. Commercial Travelers Mut. Ins. Co., 11 Wash.App. 707, 525 P.2d 804 (1974).

In this case there is an obvious ambiguity regarding the meaning of the clause "arising from the loading and unloading of said vehicle". One cannot determine whether the clause was intended to apply only during the actual process of loading or unloading, whether it was to apply to the result of negligent loading operations that occurred well after accomplishment of the actual loading, or whether it was to apply to any incident in which the load was a causal factor. All interpretations are within the realm of reasonableness.

Furthermore, a reading of standard treatises would have put the drafter of a contract, such as this, on notice that the clause "arising from the loading and unloading" is ambiguous. Normally the clause is used to extend coverage for "use". Indeed we are aware of no reported cases which treat this clause as a limitation of coverage in an instance such as this. Nevertheless, there is a split of authority as to whether "loading and unloading" extends coverage to include that time when the goods are "at rest" or until there is a "completed operation". 3 See Transamerica Ins. Group v. United Pac. Ins. Co., supra 92 Wash.2d at 24-25, 593 P.2d 156; see generally 6B J. Appleman, Insurance Law & Practice § 4322 (1979); 1 R. Long, The Law of Liability Insurance §§ 6.01 et seq. (1980); 12 Couch §§ 45:123 et seq. Both theories...

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