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August 7, 1969

CROWLEY'S MILK CO. Inc., Plaintiff,

The opinion of the court was delivered by: DOOLING


In this action for a declaratory judgment on issues of liability insurance coverage and of the effect of 'other insurance' clauses in the contracts of the insurers involved, the dispositive facts have been stipulated.

It is concluded that plaintiff is an insured under defendant's contract with Samuel Products Corp. entitled to be indemnified by defendant against the claim of Ludwig Kuerner and to have defendant defend Kuerner's suit against plaintiff. It is further concluded that, subject to further review of the facts, the coverage of defendant is primary and that of plaintiff's casualty insurer is excess, and that defendant could, in certain circumstances, be liable for the cost of the excess carrier's efforts of defense on plaintiff's behalf from and after the date on which there was a demand by the excess carrier that defendant cover the case and a refusal by defendant to do so.

 Kuerner was an employee of Walter Pape, Inc., and he allegedly sustained injuries while unloading a truck owned by Samuel Products Corp. and loaded with plaintiff's products. The truck was loaded at Le Fargeville, New York by plaintiff's employees with plaintiff's products, which had been sold to Walter Pape, Inc. The doors of the truck were then closed, and plaintiff and its employees had no further sight of or control over the truck and its contents. The truck was driven 325 miles to the Pape plant in Queens by persons who were not employees of plaintiff. At Pape's plant Pape employees -- among them Kuerner -- unloaded the truck. During the unloading the accident upon which Kuerner sued allegedly occurred.

 Kuerner claimed in his action that plaintiff had loaded the Samuel truck negligently, and that the consequence was that Kuerner was injured when the negligently stowed cans and cartons toppled over on him. He sued for $ 350,000.

 Samuel had a liability insurance contract with defendant under which defendant agreed to pay 'on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury * * * sustained by any person, caused by accident and arising out of the ownership, maintenance or use of any automobile.' A 'condition' of the contract provided that, 'Use of an automobile includes the loading and unloading thereof.' The 'insured' is defined thus in the insuring agreements (emphasis added), 'The unqualified word 'insured' includes the named insured (Samuel) and also includes any person while using an owned automobile * * * provided the actual use of the automobile is by the named insured or with his permission. * * *' A 'condition' of the contract defined 'owned automobile' as 'an automobile owned by the named insured.'

 1. Plaintiff contends and defendant denies that plaintiff is covered as an (unnamed) insured in respect of the Kuerner claim and the defense against it. The dispute centers on defendant's contention that plaintiff under the express wording of the definition of the insured was an insured only 'while using' an insured vehicle owned by Samuel; defendant argues that it is not enough that the injurious accident arises out of plaintiff's use of the vehicle, it must also occur while plaintiff is still 'using' the vehicle in one of the senses of the word 'use' defined in the policy; to hold otherwise, it is urged, will subvert the New York 'complete operation' doctrine, which, it is argued, depends on a timebounded concept of liability for negligently caused accidents occurring at any time during, but only if occurring during, the loading or unloading operation. No New York case passing directly on the point has been turned up. It would be fair to say that the New York cases finding coverage under the loading and unloading clause have in general involved accidents occurring during loading or unloading and that the language of decision is either neutral or tends to assimilate a finding of coverage to a finding that the negligent act took effect during the loading or unloading period. See, e.g., Cosmopolitan Mut. Ins. Co. v. Baltimore & Ohio R.R., 1st Dept. 1963, 18 A.D.2d 460, 240 N.Y.S.2d 88. It might be argued that plaintiff's permitted use of the truck was broader than the bare loading and embraced the carrying of the load to destination and its unloading particularly since the 'loading' was a dangerous condition installed and continuing in the truck with the assent of Samuel, cf. Ar-Glen Corp. v. Travelers Ins. Co., Monroe 1957, 8 Misc.2d 589, 167 N.Y.S.2d 332; but apart from that, analysis requires the conclusion that the present case is unrelated to the 'complete operation' doctrine and that coverage is present.

 The present case deals explicitly with liability for negligent loading. No extension of the definition of 'loading' to ancillary and preparatory stages removed in place, time and superficial function is required to reach the simple putting of the products in the truck. The problem in the cornerstone 'complete operation' decision, Wagman v. American Fidelity & Casualty Co., 1952, 304 N.Y. 490, 109 N.E.2d 592, was to extend 'unloading' to include a seemingly remote and unrelated act. No resort need be had in this case to the 'complete operation' doctrine there redefined and adopted, for the act was 'loading' even in the narrowest imaginable definition of the term. Nor does the 'complete operation' doctrine imply a principle that makes critical the time when the damage (as distinguished from the negligent conduct) occurs. The 'complete operation' doctrine applies whether the alleged negligence during loading or unloading is that of a third party or that of the insured. Cf. Hudson River Concrete Products Corp. v. Callanan Road Improv. Co., 3rd Dept. 1957, 5 A.D.2d 49, 168 N.Y.S.2d 801. And the principle of Wagman is essentially that loading and unloading relate not to the immediate handling in and out of the truck but to the whole commercial delivery by consignor to carrier and by carrier to consignee.

 The loading here was, thus, a covered 'use' of the vehicle, and the insured' (when identified) was indemnified against liability for damages arising out of any of his negligence in the loading. The question then is simply quite without reference to Wagman and its progeny, whether the contract definition of 'insured' as including 'any person' -- not excluding the insured himself -- 'while using an owned * * * or a hired automobile' means that the named or additional insureds are not indemnified against liability arising out of their negligent use of any automobile unless both their negligence and the accidental consequence of it occur during the use. Since the function of the insurance contract is to indemnify the insured against tort claims based on his alleged negligence in the use of the vehicle, the sense of the words would seem necessarily to be that the named and additional insureds are 'insureds' (i.e., are 'covered') in respect of, and only in respect of, their acts 'while using' the vehicle, to the extent that those acts give rise to a duty to pay damages for bodily injuries caused by accident and arising out of the use of the vehicle. Putting to one side the imaginable extreme case of a long-delayed consequence as not present here and not so significantly likely to occur as to dictate an interpretation of the contract that would impose on it a limitation at war with its basic purpose of indemnifying against the consequences of tortious misconduct in the use of vehicles, there is no reason or purpose for limiting coverage to accidents occurring during use and caused by negligence during use, and such a limitation would require plain speaking in the contract language.

 The only cases -- and they are out-of-state cases -- in which the precise point has come up under similar contract language have resolved it in favor of finding coverage even though the negligence in loading or unloading produces the accident only after the loading or unloading has been completed. See Gulf Ins. Co. v. Mack Warehouse Corp., E.D.Pa.1962, 1962, 212 F.Supp. 39, 41; American Auto Ins. Co. v. Master Bldg. Supply & Lumber Co., D.Md.1959, 179 F.Supp. 699, 703; Maryland Casualty Co. v. Dalton Coal & Material Co., W.D.Mo.1949, 81 F.Supp. 895, 898-899, modified on other grounds, 8th Cir. 1950, 184 F.2d 181; Panhandle Gravel Co. v. Wilson, Tex.Civ.App.1952, 248 S.W.2d 779; cf. American Motorists Ins. Co. v. Nashua Lumber Co., 1961, 103 N.H. 147, 167 A.2d 681; Employers' Liability Assur. Corp. v. Indemnity Ins. Co., D.Md. 1964, 228 F.Supp. 896, 899 col. 2, last par.

 2. Plaintiff had a contract of insurance with Insurance Company of North America (INA) entitled 'Comprehensive Liability Policy.' The Coverage A undertaking of that contract ('Bodily Injury Liability') was, in the language of Insuring Agreement No. 1, 'To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury * * * sustained by any person and caused by accident.' Endorsement #8 deleted the words 'caused by accident' from Coverage A and provided that wherever 'accident' was used in the policy 'occurrence' should be substituted. Endorsement #14, applicable to Coverage A, imposed a $ 100,000 limitation on the insurer's liability 'for all damages on account of injury sustained by one person,' and further stipulated that the limit applied 'to all damages covered by this endorsement'; the endorsement supplied 'coverage' only with respect to certain intentional torts (e.g., false arrest and libel). However, the INA contract included several apparently affiliated companies and the individual declaration pages forming part of the contract show that the policy limit for Coverage A under the Comprehensive General Liability Policy as applicable to plaintiff's New York locations was $ 100,000 per person. The contract advertently provided no Comprehensive Automobile Liability Policy for plaintiff, and the applicable individual declaration states that 'Bodily Injury Liability (Coverage A)' is 'Not Covered.' Plaintiff is named in the individual declaration of Quality Dairy, Gloversville, on the Comprehensive Automobile Liability Policy covering certain units, but neither the units nor the coverage ($ 500,000 each person under Coverage A) appears to be involved in the present case.

 Plaintiff was, therefore, covered by INA to the extent of $ 100,000 against liability in Kuerner's case and INA undertook plaintiff's defense; it is said that INA did not put plaintiff on notice that it covered Kuerner's $ 350,000 claim to the extent only of $ 100,000, and it is said that such conduct is a defense without reservation and waived the policy limit. The limit in defendant's contract with Samuel is $ 250,000 a person.

 Both the INA and defendant's contract contain the ...

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