(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not have been summarized).
Argued October 21, l996 -- Decided February 5, 1997
GARIBALDI, J., writing for a majority of the Court.
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 claim. The
specific 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.”
Joseph Kennedy was the owner of a tractor that was leased to North Operating Company (North).
Pursuant to their agreement, North insured Kennedy's vehicle with New Jersey Manufacturers Insurance
Company (NJM). North entered into a cargo-shipping agreement with Jefferson Smurfit Company
(Jefferson). On February 21, 1991, North dispatched Kennedy 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. After arriving at
Ultra, Kennedy waited in the trailer and observed the unloading procedure. Suddenly, a pallet collapsed and
the cardboard fell on Kennedy, injuring him. According to Kennedy, the pallet was rotted.
Kennedy filed suit against Jefferson, alleging that his injuries were caused by its defective pallet.
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 NJM, North's insurance
carrier, 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 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, concluding that NJM's policy covered Jefferson for
Kennedy's injury because it was causally connected with the complete operation of loading and unloading
North's truck. However, 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. Because of the Appellate
Division's determination that the automobile policy covered Jefferson for Kennedy's injury, it 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.
The Supreme Court granted both petitions.
HELD: Because the selection of the defective pallet was necessary and preliminary to the process of loading
North's trailer, Jefferson is an additional insured under the NJM policy and Jefferson's claim that North
must indemnify it is moot.
1. That the concept of “use of a vehicle” includes the acts of loading and unloading the vehicle is well
settled. (p. 6)
2. In order 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 and unloading the vehicle and must be
causally connected with that act. (pp. 6-7)
3. Under the “complete operation” doctrine, all that is required to establish coverage is that the act or
omission that resulted in the injury was necessary to carry out the loading or unloading. (pp. 7-8)
4. Although the injury occurred during the unloading process, the negligent act of selecting the pallet
occurred before the physical loading of the goods. Therefore, the determination of coverage must depend on
whether selecting the pallet was an integral part of the loading activity, and thus covered under the “use”
provision of the policy. (pp. 9-10)
5. This case is not analogous to those cases denying coverage where the injury occurred as a result of
negligent upkeep of, or defects on, the premises. (pp. 10-12)
6. Maintaining the broad scope of statutorily mandated automobile insurance coverage fosters, rather than
offends, public policy. (pp.12-13)
7. To deny Jefferson coverage would be to change the interpretation relied on in this State by insurance
companies in setting their rates. (p. 14)
Judgment of the Appellate Division is AFFIRMED. The case is REMANDED for a determination
of the reasonableness and good faith of Kennedy's settlement with Jefferson.
JUSTICE O'HERN filed a separate dissenting opinion in which CHIEF JUSTICE PORITZ and
JUSTICE POLLOCK join. The dissent concluded that the accident in which Kennedy was injured was not
causally connected with the loading and unloading, but merely occurred during it, and that the person
charged with the negligent act should not be considered to have been using the vehicle so as to be covered
by the vehicle's liability policy as an additional insured.
JUSTICES HANDLER, STEIN and COLEMAN join in JUSTICE GARIBALDI's opinion.
JUSTICE O'HERN filed a separate dissenting opinion, in which CHIEF JUSTICE PORITZ and JUSTICE
POLLOCK join.
SUPREME COURT OF NEW JERSEY
A-39/
40 September Term 1996
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.
Argued October 2l, l996 -- Decided February 5, 1997
On certification to the Superior Court,
Appellate Division, whose opinion is reported
at 287 N.J. Super. ll7 (l996).
George W. Connell 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 argued the cause for
respondent and cross-appellant Jefferson
Smurfit Company and Container Corp. of
American (DiRienzo & Wallerstein, attorneys;
Mr. DiRienzo and Martin B. Wallerstein, on
the briefs).
Marvin Blakely 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."
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 2l, l99l, 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. ll7, l27 (l996) (citing Drew Chem.
Corp. v. American Fore Loyalty Group,
90 N.J. Super. 582, 59l
(App. Div. l966)). 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 (l995).
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.
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 l20. 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., ll
9 N.J. 402 (l990), 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." ll9
N.J. at 406-07 (citing Maryland Casualty Co. v. New Jersey Mfrs.
(Casualty) Ins. Co.,
48 N.J. Super. 3l4 (App. Div.), aff'd, 28
N.J. l7 (l958); Drew Chem. Corp. v. American Fore Loyalty Group,
90 N.J. Super. 582 (App. Div. l966)). 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, ll9 N.J. at 407 (citing Bellafronte v. General Motors
Corp., l5l N.J. Super. 377 (App. Div.), certif. denied,
75 N.J. 533 (l977)).
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.
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 3l7-l8. 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.
In Drew, supra, 90 N.J. Super. 582, 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. 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
(quoting Employers' Liability Assurance Corp. v. Indemnity Ins.
Co.,
228 F. Supp. 896, 899-900 (D. Md. l964)).
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 judgment of the trial
court, concluding that "the process of unloading the acid
necessitated the very act (the clearing of the line) which, in
turn, caused the accident." Drew, supra, 90 N.J. Super. at 59l.
Under the "complete operation" doctrine, as defined by the Drew
court, the distinction between preparations for loading and the
act of loading is obliterated. Id. at 587; l2 Couch on Insurance
2d § 45:l28, at 376-77 (rev. ed. l98l).
In Cenno v. West Virginia Paper and Pulp Co., l
09 N.J.
Super. 4l (App. Div.), certif. denied,
56 N.J. 99 (l970), the
court outlined the inquiry courts must make in determining
whether a particular act can be considered part of the loading or
unloading operation.
[T]he pertinent inquiry is whether the acts of
negligence charged to defendants were a part of
the overall loading or unloading operation so
that, in the commission of the negligent acts
charged, defendants can be said to have been using
the vehicle and thereby became additional insureds
under the policy. In other words, did the
negligent act which caused the injury or is
alleged to have caused it constitute a part of the
loading and unloading process?
Applying the structure for analyzing a claim for coverage in the "unloading and loading" context first set out in Maryland Casualty, the critical issue is whether Jefferson's selection of the defective pallet was an integral part of the loading activity, and thus covered under the "use" provision. The injury occurred during unloading, but the negligent act occurred before the physical loading of the goods. Therefore, the question becomes whether selecting the pallet was an act in preparation of loading the vehicle or an unrelated act.
No party disputes that the injury occurred during the unloading process. See supra at ___ (slip op. at 2). Since New Jersey is a "complete operation" jurisdiction, we must determine whether the selection of the pallet falls within the complete operation of transporting the goods. All that is required is that the act which resulted in the injury was necessary to carry
out the loading or unloading. Drew, supra, 90 N.J. Super. at
589.
NJM concedes that pallets were necessary to load the cargo
onto the truck. In shipping, pallets are a common technique used
to facilitate the movement of goods. Indeed, the pallet was
selected in preparation for the loading and shipping of the
cardboard. As in Drew where cleaning the clogged line to unload
the acid became a necessary and integral part of the unloading
activity, here the selection of pallets was necessary in order to
load the goods onto North's trailer. As Drew states, there is no
distinction between preparations for loading and the act of
loading. Drew, supra, 90 N.J. Super. at 587. The selection of
the defective pallet, therefore, was an integral part of the
loading operation.
We reject NJM's argument that this case can be analogized to a line of cases denying coverage under the omnibus automobile insurance clause, when the injury occurred as a result of negligent upkeep of, or defects on, the premises. The premises liability cases deny coverage under the automobile policy for accidents occurring during loading and unloading activities because the accident arose not from the loading or unloading activities, but from the negligent acts of the owner of the premises where the accident occurred, prior to the loading or unloading of the vehicle. See, e.g., Forsythe v. Teledyne Turner
Tube,
209 N.J. Super. 608 (App. Div. l986) (finding truck
driver's injuries caused by defective docking plate during
process of unloading not covered under truck's automobile
liability policy); Neuman v. Wakefern Foods,
205 N.J. Super. 263,
266 (App. Div. l985) (agreeing with trial court that accident not
covered by automobile insurance policy, because alleged defect in
design or maintenance of hand truck "not directly dependent upon
the loading or unloading of the . . . truck [but] . . . more
analogous to the independent negligence of the owner of the
premises regarding maintenance of the loading platform");
Wakefern Food Corp. v. General Accident Group, l
88 N.J. Super. 77, 84 (App. Div. l983) (holding that "the cause of the accident,
the hazardous condition of debris permitted by Wakefern to exist,
was not, `within reason,' a condition necessary to the act of
unloading nor had it any reasonable connection to that work");
Atlantic Mut. Ins. Co. v. Richards, l00 N.J. Super. l80, l83 (Ch.
Div. l968), aff'd, l
05 N.J. Super. 48 (App. Div. l969) (finding
loading dock owner not covered under truck owner's automobile
policy for death of truck driver while loading truck because
"[t]o construe the maintenance of the loading platform as a `use
of the automobile' in unloading would be to extend automobile
liability coverage to negligence occurring prior to the arrival
of a truck, that is, failing to remove dunnage from proximity to
the open stairwell, and to a nuisance grounded in negligence,
that is, the stairwell without guardrail").
Even applying the legal reasoning in those cases, Jefferson
would be covered by the NJM policy. Atlantic Mutual, supra,
states that automobile liability coverage extends "to negligence
in loading or unloading the automotive vehicle, including
preliminary and subsequent measures proximate in time related to
its loading or unloading." l00 N.J. Super. at l85. As did the
Appellate Division in Forsythe, supra, we distinguish between
cases where there is negligence in the actual
loading and unloading operation, such as by an
employee of a warehouse in loading a truck, and
those cases where the negligence is not directly
related to the loading and unloading process, such
as where there is a dangerous condition on the
premises of the warehouse.
Because the selection of the pallet was necessary and preliminary
to the process of loading North's trailer, Jefferson is an
additional insured under the NJM policy. That decision neither
expands the scope of liability under "use" provisions nor limits
the effect of the premises-liability cases. Instead, it follows
the legal reasoning set forth both in the "loading and unloading"
cases and the premises-liability cases.
In reaching that decision, we reject NJM's assertion that public policy necessitates finding that Jefferson is not covered by the North policy. Relying on the public policy rationale supporting the premises-liability cases, NJM contends that interpreting the omnibus clause to cover Jefferson "reallocates
the ultimate financial risk for Jefferson's negligence, relieves
Jefferson from any incentive to maintain its pallets in a safe
condition, and inevitably results in increased premiums to the
motor vehicle operator."
The Legislature mandated omnibus coverage for "loss
resulting from liability imposed by law for bodily injury, death
and property damage sustained by any person arising out of the
ownership, maintenance, operation or use of an automobile . . .
." N.J.S.A. 39:6A-3; see also N.J.S.A. 39:6B-l. "Use"
explicitly denotes "something other or more comprehensive than
either maintenance or operation." Bellafronte, supra, l5l N.J.
Super. at 382; see Indemnity Ins. Co. v. Metropolitan Casualty
Ins. Co.,
33 N.J. 507, 5l3 (l960) ("Use is . . . broader than
operation. . . . One who operates a car uses it, . . . but one
can use a car without operating it.") Mandatory "use" coverage
in New Jersey "must be broadly construed in order to effectuate
the overriding legislative policy of assuring financial
protection for the innocent victims of motor vehicle accidents."
Bellafronte, supra, l5l N.J. Super. at 382. In Ryder, supra,
referring to Bellafronte, we made clear our commitment to the
"broad scope of coverage that an insurer must provide for
accidents arising during loading and unloading." ll9 N.J. at
408. Maintaining the broad scope of statutorily mandated
automobile insurance coverage fosters, rather than offends,
public policy.
Further, we do not agree with NJM's assertion that finding
Jefferson covered by the omnibus liability clause increases the
cost of insurance. For more than forty years, our courts have
found coverage under "use" provisions where the negligent act was
intimately connected with the loading and unloading process.
Insurance companies have set their rates based on that
interpretation of "use." To deny Jefferson coverage would be to
change the interpretation relied on in this State by insurance
companies in setting their rates.
Finally, we do not agree that our holding is inconsistent
with Cenno, supra. Indeed, based on the standard for inquiry set
forth by the Cenno court, supra at ___ - ___ (slip op. at 7-8),
the selection of the pallet was an integral part of the loading
process. In Cenno, the plaintiff, a truck driver, was injured
while delivering a load of baled cardboard manufactured by the
West Virginia Paper and Pulp Company (West Virginia). "The
cardboard had been baled by West Virginia at its Hoboken plant
using metal bands and clips manufactured by defendant Acme Steel
Company." Cenno, supra, l09 N.J. Super. at 43. After arriving
at the Allied Paper plant in Brooklyn, the plaintiff attempted to
move one of the bales to the rear of the truck by pulling on the
metal band securing the bale. The band broke, causing the
plaintiff to lose his balance and fall out of the truck. Id. at
44. The Appellate Division found that West Virginia was not an
additional insured under the comprehensive automobile-liability
policy, on the grounds that the negligent banding of the bales
did not "constitute a part of the loading or unloading process .
. . ." Id. at 45. It is unclear whether the cardboard was baled
with metal bands solely to facilitate its shipment or whether
that was a requirement of West Virginia's customer. If there had
been a factual basis for concluding that the baling was done
solely to enable shipment of the goods, the Cenno court would
have found West Virginia to be an additional insured.
The selection of the pallet was an act in preparation of and integral to the loading process. Therefore, Jefferson is an additional insured under NJM's policy. Accordingly, Jefferson's claim that North must indemnify it is moot.
The judgment of the Appellate Division is affirmed and the case is remanded for a determination of the reasonableness and good faith of Kennedy's $750,000 settlement with Jefferson.
JUSTICES HANDLER, STEIN and COLEMAN join in JUSTICE GARIBALDI's opinion. JUSTICE O'HERN filed a separate dissenting opinion, in which CHIEF JUSTICE PORITZ and JUSTICE POLLOCK join.
SUPREME COURT OF NEW JERSEY
A-39/ 40 September Term 1996
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.
O'HERN, J., dissenting.
I disagree that the defective condition in the shipper's
loading pallet constituted a "use" of the trucker's vehicle that
required the trucker's automobile insurance policy to indemnify
the shipper for damages caused by the pallet's defective
condition.
The essential predicate to find coverage under the truck
policy is whether the negligent act of the party to be covered
constituted a "use" of the motor vehicle. Motor vehicle
insurance policies insure against damages arising out of the
ownership, maintenance, or use of a vehicle. Under policy
language or statutory requirement, the "use" of a vehicle
includes the loading and unloading of a vehicle. In New Jersey,
the obligation to provide coverage in a motor vehicle liability
policy for loading and unloading operations derives from the
statutes requiring insurance covering use of a vehicle and cannot
be limited by contract. N.J.S.A. 39:6A-3; 39:6B-1. See also
Bellafronte v. General Motors Corp.,
151 N.J. Super. 377 (App.
Div.), certif. denied,
75 N.J. 533 (1977).
Thus, when a defendant in a negligence action seeks
coverage, "the pertinent inquiry is whether the acts of
negligence charged to defendants were part of the overall loading
or unloading operation so that, in the commission of the
negligent acts charged, defendants can be said to have been using
the vehicle and thereby became additional insureds under the
policy." Smithbower v. Navistar Int'l Transp. Corp., 265 N.J.
Super. 119, 124 (1993) (quoting Cenno v. West Virginia Paper &
Pulp Co.,
109 N.J. Super. 41, 45 (App. Div.), certif. denied,
56 N.J. 99 (1970)). That the plaintiff may have been "using" the
truck at the time he sustained his injuries is simply not
relevant to the question of whether the act of defendant that
caused his injuries was a use of the truck. Halifko v. Cities
Service Oil Co.,
510 F. Supp. 1131, 1134 (D.N.J. 1981), aff'd,
676 F.2d 684 (3rd Cir. 1982). Our inquiry should focus on the
act of negligence charged: whether Jefferson Smurfit was engaged
in the loading or unloading of the truck when it selected or
provided the defective pallet, not on whether Kennedy was engaged
in unloading the truck at the time he was injured. In that
latter instance the truck may have merely been the situs of the
accident.
Assume that propane gas fumes had escaped from a leaking
tank that had been loaded on the truck. If the leaking propane
had caused an accident and injury while en route to its
destination, would the shipper's act of negligence in defectively
packing its product be considered a use of the vehicle? I should
think not. Should it make a difference that the accident
occurred during the unloading of the truck? Again, I think not.
There is an insufficient relationship between the act of
negligence charged and the act of loading and unloading.
This case is most similar to that involving a defect in a
hand truck used in the loading and unloading operation. Neuman
v. Wakefern Foods,
205 N.J. Super. 263 (App. Div. 1985). A hand
truck is a device that is used in the loading and unloading
operation. A pallet is a device that is used in a loading and
unloading operation. In Neuman, the accident and the plaintiff's
injuries resulted from a defect in an electric hand truck, which
defect was allegedly due to improper design or improper
maintenance. The Neuman court found no coverage under the
trucker's policy for the party causing the defect in the hand
truck. "That defect was not directly dependent on the loading or
unloading of the . . . truck." Id. at 266. Such an analysis is
consistent with those cases that hold that a defective condition
existing at the shipper's location at the time of the loading and
unloading -- due, for example, to negligent maintenance of a
loading platform -- is not a "use" of the vehicle within the
scope of the vehicle owner's insurance coverage. Atlantic Mutual
Ins. Co. v. Richards,
100 N.J. Super. 180 (Ch. Div. 1968), aff'd,
105 N.J. Super. 48 (App. Div. 1969). See also Wakefern Food
Corp. v. General Accident Group,
188 N.J. Super. 77 (App. Div.
1983) (holding act of leaving debris on loading dock that caused
accident not covered by vehicle insurance policy).
In contrast, when the act of negligence constitutes a use of
the vehicle in the sense of actually loading or unloading a
truck, the vehicle's insurance policy will provide coverage.
Parkway Iron & Metal Co. v. New Jersey Mfr's Ins. Co.,
266 N.J.
Super. 386 (App. Div. 1993), certif. denied,
135 N.J. 302 (1994)
(holding negligent use of crane covered by vehicle's insurance
policy); see also Bellafronte, supra,
151 N.J. Super. 377
(holding negligent use of crane magnet during unloading
constitutes use of vehicle). Thus in Neuman, supra,
205 N.J.
Super. 263, had the operator of the hand truck negligently driven
into the plaintiff, there would have been coverage under the
trucker's policy.
The lines drawn are subtle and present varying ranges of
difficulty in the proper determination of which liability
insurance policy should cover the risk, the comprehensive general
liability insurance of the shipper or the automobile liability
insurance policy of the truck owner. One theory for allocating
responsibility among liability insurance companies that provide
overlapping coverage for the same loss would require us to
consider which risk-bearer was in the best position to avert the
harm:
[M]arket coordination aims at appropriate and
efficient functioning of the industry,
allocating responsibility based upon the risk
undertaken by the insurer. If the market
operates efficiently, primary responsibility
for a loss will fall on the insurer who was
in the best position to classify and rate the
risks accepted. Such allocation guarantees
that the insurer which receives premium
payments most accurately reflecting insured
risks also bears the loss. That insurer is
also in the best position to predict loss.
Appropriate allocation of loss thus increases
accuracy in loss prediction, enhancing
industry efficiency, with obvious benefits
for insurance consumers in the form of lower
costs, and for society generally in the form
of added financial stability of the insurance
industry. Misallocation of losses to
insurers with less information about the risk
causing loss ensures that actual losses will
vary from predicted losses to a greater
degree, upsetting the foundation of the
industry.
[Susan Randall, Coordinating Liability
Insurance, 1
995 Wis. L. Rev. 1339, 1368
(footnotes omitted).]
Obviously, the party with the most information about the
risk of defect in a pallet was Jefferson Smurfit and Jefferson
Smurfit's insurance company was in the best position to assess
the risks relevant to that conduct.See footnote 1 In the usual
straightforward loading and unloading case, the trucker is
present at the time of loading and unloading and has some ability
to manage the risk at the scene by observation of the loading and
unloading operations and by intervention if an actor does not
exercise due care during the loading or unloading of the vehicle.
In this case, the trucker had absolutely no ability to control
the risk from the defective pallet.
In Cenno, one of the earliest loading and unloading
decisions of New Jersey and one almost identical to this, a truck
driver was delivering a load of baled cardboard. While
attempting to pull a bale from the rear of the truck, the band
securing the bale came apart and injured the truck driver. The
shipper of the goods sought coverage as an additional insured
under the motor vehicle liability policy issued by the trucker.
The court's opinion by Justice Sullivan, then sitting in the
Appellate Division, stated: "The policy affords coverage as an
additional insured to one while using the vehicle and specifies
that . . . `use of an automobile includes the loading and
unloading thereof.'" Cenno, supra, 109 N.J. Super. at 45. The
court concluded that because the commission of the negligent act
(the provision of a defective baling band) did not occur during
the use of the vehicle, the shipper could not be considered an
additional insured for an act that preceded the loading and
unloading of the vehicle.
So too here. The negligent act of providing a defective
pallet did not occur during the use of the vehicle. The
negligent act occurred at Jefferson Smurfit's facility. The
North truck, therefore, became the situs of the damage due to a
prior negligent act.
We thus have in this case an accident that was not causally
connected with the loading and unloading, but merely occurred
during it. The person charged with the negligent act is not to
be considered to have been using the vehicle so as to be covered
by the vehicle's liability policy for such act as an additional
insured.
The Chief Justice and Justice Pollock join in this opinion.
NO. A-39/40 SEPTEMBER TERM 1996
ON APPEAL FROM
ON CERTIFICATION TO Appellate Division, Superior Court
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.
DECIDED February 5, 1997
Chief Justice Poritz PRESIDING
OPINION BY Justice Garibaldi
CONCURRING OPINION BY
DISSENTING OPINION BY Justice O'Hern
Footnote: 1In this case, the shipper, Jefferson Smurfit, was in fact self-insured for these risks.