PACIFIC EMPLOYERS INSURANCE COMPANY v. Maryland Casualty Company, a corporation, Libby, McNeill & Libby, Inc., a corporation, and Underwriters at Lloyd's, London, Defendants and Respondents.

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District Court of Appeal, First District, Division 1, California.

PACIFIC EMPLOYERS INSURANCE COMPANY, a corporation, Plaintiff, Appellant and Respondent, v. AMERICAN MUTUAL LIABILITY INSURANCE COMPANY, a corporation, Defendant, Respondent and Appellant, Maryland Casualty Company, a corporation, Libby, McNeill & Libby, Inc., a corporation, and Underwriters at Lloyd's, London, Defendants and Respondents.

Civ. 21756.

Decided: March 29, 1966

Mento, Buchler & Littlefield, George K. Littlefield, Theodore H. Morrison, Sacramento, for appellant, Pacific Employers Ins. Co. Hersh & Hadfield, James D. Hadfield, San Francisco, Joseph F. Rankin, Oakland, for appellant, American Mut. Liability Ins. Co., Richard G. Logan, Oakland, of counsel. Johnson, Davies & Greve, by Claire H. Greve, Sacramento, for respondents Maryland Cas. Co. and Libby, McNeill & Libby. Sedgwick, Detert, Moran & Arnold, John S. Howell, San Francisco, for respondent, Underwriters at Lloyd's, London.

Plaintiff Pacific Employers Insurance Company (Pacific) and defendant American Mutual Liability Insurance Company (American) have each appealed from a judgment in an action for declaratory relief which was brought to determine the respective rights and obligations of those parties and of the defendants and respondents Maryland Casualty Company (Maryland) and Underwriters at Lloyd's, London (Lloyd's) in regard to a claim for personal injuries arising out of an accident in which named insureds of each insurer were allegedly concerned.

The case was submitted upon an agreed statement of facts and the trial court made its findings of fact and conclusions of law from which the following uncontroverted matters appear: On November 12, 1959, Pacific's named insured, a trucker, sent a truck and two trailers with two employees to the plant of Maryland's1 named insured so that the trailers could be loaded with case goods. Two employees of the plant commenced and conducted the loading operation by moving cases of goods which were inside the building standing on pallets onto the trailers with forklifts which were leased by the plant from American's named insured. During the operation severe injuries were received by one of the trucker's employees. He thereafter filed suit against the plant owner and one of its employees in which he alleged that the latter negligently operated one of the forklifts, causing it to become entangled in a rope which he was using to tie down a portion of the load, and that he was thereby thrown to the floor and received the injuries of which he complained.2

The remaining findings of fact and conclusions of law relate to the coverage and priority of obligation of the respective insurers, and must be reviewed herein in connection with the attack on the judgment. It provides that the policies of American and Pacific are each primary insurance to the extent of the limits of each policy ($100,000 each for injuries to one person) and orders them to pay any loss on an equal basis; and that Maryland's and the attendant Lloyd's insurance are excess and only payable after the total insurance of Pacific and American is exhausted.

American contends that the provisions of its policy do not in fact or in law impose any obligation on it to defend or pay the claims made against the plant owner and its employee; and that, in any event, the coverage of Maryland is not excess.

Pacific, while resisting American's attempt to escape liability, for its part seeks a determination that its coverage is excess over American and Maryland, or that, in any event, the loss should be prorated between all three carriers.

The relevant policy provisions and such additional findings as bear on their interpretation are set forth below.

The provisions of the American policy do not include coverage of the claim against the plant owner and its employee by their express terms

American's policy provides, insofar as is material herein, as follows: ‘Comprehensive General Liability Policy

‘American * * * agrees with the insured, named in the declarations made a part hereof [the owner and lessor of the forklift], * * * and subject to the limits of liability, exclusions, conditions and other terms of this policy:

‘INSURING AGREEMENTS

‘I Coverage A—Bodily Injury Liability

‘To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury [changed to ‘personal injury’ by endorsement], * * * sustained by any person and caused by accident.'

‘III Definition of Insured

‘The unqualified word ‘insured’ includes the named insured and also includes any executive officer, director or stockholder thereof while acting within the scope of his duties as such and any organization or proprietor with respect to real estate management for the named insured. If the named insured is a partnership, the unqualified word ‘insured’ also includes any partner therein but only with respect to his liability as such.'

No definition pertaining to additional insureds, and no provisions which expressly or impliedly refer to lessees or operators of leased equipment or permissive users of owned equipment has been pointed out by Pacific or Maryland, or found on independent review. It is concluded that the findings of the trial court insofar as they limply that American expressly agreed to protect the plant owner and its employee are in error.

The provisions of the American policy do not include coverage of the claims against the plant owner and its employee by operation of law

The trial court also found: ‘that at the time in question the said forklift was an automobile and was insured as such under the * * * American * * * policy; that at the time in question [the plant owner and its employee] were using the said forklift with the permission and consent of [the owner-lessor]; that [they] were not employees of [the owner-lessor], but were using the forklift with the permission and consent of [the owner-lessor] as independent contractors as defined and used in American['s] policy; that [the plant owner and its employee] are insureds under said policy by operation of law; * * * that the liability, if any, arises out of the operation and use of said forklift—automobile owned by [lessor]. That any provisions in American['s] policy which purport to exclude coverage to [plant owner and its employee] is void and against public policy of this State; * * *’ The last sentence was also incorporated in the conclusions of law.

The foregoing is predicated upon the law of this state as declared in Wildman v. Government Employees' Ins. Co. (1957) 48 Cal.2d 31, 307 P.2d 359. There the court struck down an endorsement that attempted to limit general provisions of the policy, which covered use by the named insureds an anyone with their consent, to use by the named insureds and members of their immediate family. The opinion concluded: ‘Inasmuch as sections 402 and 415 of the Vehicle Code set forth the public policy of this state such laws must be considered a part of every policy of liability insurance even though the policy itself does not specifically make such laws a part thereof. We have here, however, a policy containing a clause which provides that the insurance afforded by the policy shall comply with the provisions of the motor vehicle financial responsibility law ‘of any state * * *’ wherein the liability arising out of the ownership, maintenance or use of the automobile may occur. We conclude that the restrictive endorsement hereinbefore set forth and discussed is ambiguous; that the construction thereof urged by defendant insurance carrier would be violative of the sections of the Vehicle Code heretofore discussed; and that said sections were intended by the Legislature to be, and are, a part of every policy of motor vehicle liability insurance issued by an insurance carrier authorized to do business in this state.' (48 Cal.2d 31 at p. 40, 307 P.2d 359 at p. 364; and see cases collected: Interinsurance Exchange etc. v. Ohio Cas. Ins. Co. (1962) 58 Cal.2d 142, 150, 23 Cal.Rptr. 592, 373 P.2d 640 and in Bohrn v. State Farm etc. Ins. Co. (1964) 226 Cal.App.2d 497, 501–504, 38 Cal.Rptr. 77; and also Clark v. Universal Underwriters Ins. Co. (1965) 233 Cal.App.2d 746, 748, 43 Cal.Rptr. 822; Pacific Indem. Co. v. Universal etc. Ins. Co. (1965) 232 Cal.App.2d 541, 543, 43 Cal.Rptr. 26.)3

An examination of Wildman and the cases applying it reflects that in all cases the policy unquestionably covered the vehicle involved, and the issue resolved itself into whether restrictions relating to the person who could operate the vehicle or relating to the manner of its use would be enforced. The basic issue herein is whether or not the forklift involved in the accident was insured by American's policy. (See Pacific Indemnity Co. v. Liberty Mutual Ins. Co. (1966) 239 A.C.A. 365, 367, 48 Cal.Rptr. 667 and passim.)

The pertinent provisions, in addition to those set forth above, read as follows:

‘EXCLUSIONS

‘This policy does not apply:

‘(c) except with respect to operations performed by independent contractors and except with respect to liability assumed by the insured under a contract as defined herein, to the ownership, maintenance, operation, use, loading or unloading of * * automobiles if the accident occurs away from such premises [‘owned by, rented to or controlled by the named insured’] or the ways immediately adjoining, * * *

‘CONDITIONS

‘3. Definitions

‘(b) Automobile. The word ‘automobile’ means a land motor vehicle, trailer or semitrailer, provided: [There follows other provisions which are not material here, because, it is agreed by all parties and was found by the court that the forklift in question was an automobile as defined in American's policy. (Cf. Pacific Indemnity Co. v. Liberty Mutual Ins. Co., supra, 239 A.C.A. 365, 373 [48 Cal.Rptr. 667])]' There is also a reference to automobiles in an endorsement relating to operations performed by independent contractors, which will be hereinafter noted, and, in the title of an endorsement which gives discounts for ‘the premium for Liability, Elevator Collision, and Medical Payments insurance.’ It refers to ‘(Automobile and General Liability Insurance)’.

The matter came before the lower court on an agreed statement of facts including copies of the respective insurance policies involved. Construction of the meaning to be given to the provisions of the policies is therefore a matter of law. (Continental Cas. Co. v. Phoenix Constr. Co. (1956) 46 Cal.2d 423, 429–430, 296 P.2d 801, 57 A.L.R.2d 914; and see Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865–866, 44 Cal.Rptr. 767, 402 P.2d 839.) The rules to be applied in interpreting insurance contracts were reviewed by this court in Jarrett v. Allstate Ins. Co. (1962) 209 Cal.App.2d 804, at pp. 809–810, 26 Cal.Rptr. 231, and need not be repeated here. Suffice it to say that Pacific and Maryland rely upon the rule that requires liberal construction in favor of the insured—or an injured third person, or one seeking to be indemnified by the terms of the policy; whereas American contends that the applicable rule is that which recites: ‘when the terms of the policy are plain and explicit the courts will not indulge in a forced construction so as to fasten a liability on the insurance company which it has not assumed.’ (Id., p. 810, 26 Cal.Rptr. p. 234.)

The concession and the finding that the definition of ‘automobile’ in American's policy includes the forklift is not a concession of coverage. Maryland and Pacific must show that the forklift is an automobile in order to come within the Wildman doctrine, because there is no general principle that the insurance of the owner on any power tool or equipment must cover all users of such equipment regardless of the policy terms and restrictions. On the other hand, American wants to show that its agreement does not cover the forklift because its policy does not cover hazards created by the general ownership or operation of automobiles.

It is first asserted that since the provisions set forth under ‘Coverage A—Bodily Injury Liability’ are broad enough to cover loss from any cause, they cover loss from the operation or use of motor vehicles, and any attempt to limit the coverage is illegal. This construction fails to give any effect to the words preceding those provisions which subject the general clause to the exclusions of the policy. The exclusions must be examined to determine their content before a determination can be made as to their legality. Examination of the exclusion set forth above reflects that the parties agreed that ‘the policy does not apply: * * * to the ownership, maintenance, operation, use, loading or unloading of * * automobiles,’ with three exceptions:

(1) ‘if the accident occurs [on] such premises [‘premises owned by, rented to, or controlled by the named insured’] or the ways immediately adjoining.'

(2) ‘the ownership, maintenance, operation, use, loading or unloading of * * * automobiles * * * with respect to operations performed by independent contractors.’

(3) ‘the ownership [etc.] * * * with respect to liability assumed by the insured under a contract as defined [in the policy].

It is asserted that because the foregoing exceptions to the general automobile liability exclusion contemplate some liability on account of injuries resulting from the ownership, maintenance, operation, use, loading or unloading of automobiles, the provisions of the Vehicle Code, as then extant, required the extension of coverage to the plant owner and its employee as permissive users of the forklift. The provisions of the Vehicle Code require no such result. Section 16450 stated: ‘A ‘motor vehicle liability policy,’ * * * means an owner's policy or an operator's policy, or both, of liability insurance, * * * issued * * * to or for the benefit of the person named therein as assured.' Section 16451 referred to an owner's policy as follows: ‘An owner's policy of liability insurance shall: (a) Designate by explicit description or by appropriate reference all motor vehicles with respect to which coverage is thereby intended to be granted. (b) Insure the person named therein and any other person, as insured, using any described motor vehicle with the express or implied permission of said assured, against loss from the liability imposed by law for damages arising out of ownership, maintenance, or use of such motor vehicle * * *.’ (Emphasis added.)4 Inquiry is therefore directed to a determination of whether the forklift is designated as a motor vehicle to which coverage was intended to be granted by American's policy.

It nowhere appears that the accident occurred on premises owned by, rented to, or controlled by the named insured. Maryland complains that this provision is ambiguous and that the entire exclusion should be declared void. The efficacy of such provision has been upheld (Employers etc. Ins. Co. v. Pac. Indem. Co. (1959) 167 Cal.App.2d 369, 374–375, 334 P.2d 658). The insurer may limit the territorial extent of the coverage in its inception (Mc-Farland v. New Zealand Ins. Co. (1959) 176 Cal.App.2d 422, 424–425, 1 Cal.Rptr. 482) even though it may not by a partial exclusion territorially restrict an attribute of the general coverage which is required by statute (see Mission Ins. Co. v. Brown (1965) 63 A.C. 532, 533–535, 47 Cal.Rptr. 363, 407 P.2d 275).

It is not contended that the plant owner or its employee are entitled to coverage by reason of any terms of its lease contract between the insured lessor, and plant ownerlessee.5

The trial court did find that the lessee-plant owner and its employer ‘were using the said forklift * * * as independent contractors as defined and used in American['s] * * * policy.’ The words ‘independent contractors' are not included within the portion of the policy relating to ‘Definitions,’ so it must be assumed that the reference is to the exception to the exclusionary clause which has been noted above. In a sense a lessee of equipment may be considered as an independent contractor as distinguished from an agent or employee of his lessor. The phrase in question, however, does not purport to restrict the exclusion by leaving within the general coverage liability for accidents involving the use of automobiles owned by the named insured and used by its lessee as an independent contractor. It plainly states that the liability, if any, of the named insured for operations performed by independent contractors, which is ostensibly within the general coverage, is not affected by the exclusion, and shall apply even though it may arise from the ownership, maintenance, operation, use, loading or unloading of automobiles. There is no designation of any particular or general class of motor vehicles in this coverage. The vehicle involved may belong to the named insured, the independent contractor, or a third person. The predicate of the liability which is referred to in the exception is not the vicarious liability attached to the ownership of a motor vehicle under California law, but the liability which one contracting party may have to bear because of the acts or omissions of the party with whom he has contracted. (Cf. Kuntz v. Del E. Webb Constr. Co. (1961) 57 Cal.2d 100, p. 107, with pp. 104–105, 18 Cal.Rptr. 527, 368 P.2d 127; McDonald v. Shell Oil Co. (1955) 44 Cal.2d 785, pp. 788–790, with pp. 790–791, 285 P.2d 902; and Woolen v. Aerojet General Corp. (1962) 57 Cal.2d 407, pp. 412–413; and dissent pp. 413–414 with pp. 410–411, 20 Cal.Rptr. 12, 369 P.2d 708; and see Employers etc. Ins. Co. v. Pac. Indem. Co., supra, 167 Cal.App.2d 369, 375, 334 P.2d 658.) The owner and lessor of the forklift in no sense contracted with the lessee-plant owner for any particular operation of the forklift. The lessee's actual use and operation of the forklift was dictated by its desires and needs, and not by the necessity of fulfilling any contractual obligations to the lessor. The facts, if they be facts, that the plant owner and its employee were using the forklift as an independent contractor in performing an obligation to the trucker to load the truck, or, contrariwise, that the trucker was an independent contractor in respect to the obligation to the plant owner to load and haul the case goods, are completely irrelevant and immaterial insofar as the obligations of the lessor and American, as its insurer, are concerned.

Pacific and Maryland have failed to show that the vehicle involved was covered by American's policy. ‘The general rule clearly is that the insurer may limit the risks as to which the policy is written. (7 Appleman, Insurance Law and Practice, § 4255, p. 17.) In Continental Cas. Co. v. Phoenix Constr. Co., 46 Cal.2d 423, 432, 296 P.2d 801, 57 A.L.R.2d 914, the technique applicable to restrictions of coverage in an insurance policy is thus formulated: ‘An insurance company has the right to limit the coverage of a policy issued by it and when it has done so, the plain language of the limitation must be respected.’ San Pedro Properties, Inc. v. Sayre & Toso, Inc., 203 Cal.App.2d 750, 754, 21 Cal.Rptr. 844, 847, States: ‘The insurer had the right to limit the coverage of the policy in plain understandable language and in conformity with standard practices. [Citing authorities.] It is stated in 27 Cal.Jur.2d section 267, pages 757–758, as follows: “The purpose of an insurance contract is contingently to provide the insured with indemnity for losses that may arise from a particular risk or risks, which should be specified in the policy. The insurance company is at liberty to select the character of the risk it will assume; and it is not liable except on proof that the loss was within the terms of the policy, for these terms determine the measure of the insurer's liability.” [Citations]’ (Fullerton v. Houston Fire & Cas. Ins. Co. (1965) 234 Cal.App.2d 743, 750–751, 44 Cal.Rptr. 711; and see United Services Auto. Ass'n v. Fidelity & Cal. Co. (1964) 225 Cal.App.2d 573, 575–577, 37 Cal.Rptr. 583; Industrial Indem. Co. v. General Ins. Co. (1962) 210 Cal.App.2d 352, 361, 26 Cal.Rptr. 568; Employers etc. Ins. Co. v. Pac. Indem. Co., supra, 167 Cal.App.2d 369, 374–375, 334 P.2d 658; and Amer. Auto. Ins. Co. v. Amer. Fid. & Cas. Co. (1951) 106 Cal.App.2d 630, 636, 235 P.2d 645.) The fact that the plant owner through its employee was using the forklift as lessee of the owner and lessor, American's insured, and therefore with the permission and consent of the owner, is not enough to fasten liability on the insurer unless it undertook to insure that owner's liability.

The reference to automobiles in the endorsement referring to independent contractors further narrows that exception to the exclusion which has just been reviewed. It provides that such liability as might be imposed from automobiles through operations of an independent contractor will not be covered if ‘the named insured [the lessorowner] has other valid and collectible insurance against such hazard.’ This endorsement in no sense restricts the application of the general automobile exclusion. It does not increase, but rather decreases the scope of the exception to that exclusion, and does not in any way affect the conclusion that the coverage remaining is not motor vehicle coverage within the scope of Wildman and the provisions of the California Vehicle Code.

Nor can a title on an endorsement which indicates its applicability to ‘Automobile and General Liability Insurance’ Change the coverage of the policy when the provisions contained therein have no possible relationship to the scope of the coverage in dispute.

It may be assumed, as was done by the trial court, that if the policy insured the vehicle and the owner's liability for its operation and use, that a provision which purported to exclude liability from permissive use by a lessee would be against the public policy of this state. (See Financial Indem. Co. v. Hertz Corp. (1964) 226 Cal.App.2d 689, 695–700, 38 Cal.Rptr. 249.) Here, however, there is an absence of an agreement to furnish any coverage to the owner for the vehicle in question.

The foregoing conclusions are buttressed by examination of the policies issued by Pacific and Maryland. The former is entitled ‘Comprehensive Liability Policy,’ and includes both as to bodily injury and death, and as to property damage three categories: ‘Division 1—Automobiles: The ownership, maintenance or use including loading and unloading thereof; Division 2—Products: * * *; Division 3—Other than Automobile or Products.’ The policy purports to cover permissive users of owned or hired automobiles and recites that it shall comply with the provisions of financial responsibility laws. Significantly, the policy contains an exclusion for the coverage under Divisions 2 and 3 (non-automobile) which is strikingly similar to that in the American policy which has been reviewed herein.

The Maryland policy is entitled ‘Comprehensive Liability Policy (Automobile and General Liability).’ The coverage by endorsement is divided into four categories: ‘A—Bodily Injury Liability—Automobile; B—Property Damage Liability—Automobile; C—Personal Injury Liability—Except Automobile; D—Property Damage Liability—Except Automobile.’ This policy also purports to cover permissive users of owned or hired vehicles, and has a clause referring to its applicability under financial responsibility laws. Here again there is an exclusion which applies to the non-automobile coverage and it is worded in similar fashion to that in the American policy.

The American policy on the other hand is entitled ‘Comprehensive General Liability Policy’ as distinguished from the qualifying ‘(Automobile and General Liability)’ found in Maryland's policy, and the unqualified ‘Comprehensive Liability Policy’ which identifies both Maryland's and Pacific's policies. It only has two categories of coverage, ‘Bodily Injury Liability’ and ‘Property Damage Liability,’ and both are subject to the general automobile exclusion.

The record further reflects that in a first amended complaint another insurance company was named as the liability insurer of the lessor-owner. This company answered and admitted that it had insured specific automobiles of the lessor-owner but denied other allegations of the amended complaint. It joined in a stipulation for the filing of a second amended complaint, but was not named therein. Whether this insurer covered the forklift or whether the lessor-owner was satisfied to rely on an alleged indemnity agreement with its lessee without insuring its possible liability is not disclosed by the record.6 It is uncontrovertible, however, that American did not agree to cover the liability of the lessor which might arise from the ‘ownership, maintenance, operation, use, loading or unloading of’ the forklift. Under these circumstances, and, in the absence of any policy provision to the contrary, there is no warrant for imposing derivative coverage for the acts or omissions of those who might use the forklift with the express or implied permission of the owner.

The policies of Pacific and Maryland are each primary and must prorate the liability

Consideration of the remaining points raised on this appeal leads to what a former member of this court termed ‘the legalistic labyrinth of the provisions of the policies' when he noted that ‘each case apparently presents a particularistic and unique problem.’ (American Auto. Ins. Co. v. Transport Indem. Co. (1962) 200 Cal.App.2d 543, 554, 19 Cal.Rptr. 558, 559.)

Before examining the provisions of the policies which purport to control the situation where other insurance exists, it is necessary to review just what insurance coverage the respective policies purport to furnish.

It has been determined that American furnished no coverage at all in respect to either the plant owner or its employee.7

Pacific's policy, issued to the trucker, expressly covers the loading and unloading of the vehicle in question. Its definition of insured includes ‘any person [the plant owner's employee] while using [‘including loading and unloading’] an owned * * * automobile [the truck and two trailers] and any * * * organization [the plant owner] legally responsible for the use [loading and unloading] thereof, provided the actual use * * * is with his [the named insured's] permission.'8

Maryland's policy purports to cover the plant owner as named insured for any liability ‘arising out of the ownership, maintenance or use of any automobile’ (Coverages A and B), and, as well, all liability for personal injuries and property damage ‘Except Automobile’ (Coverages C and D). Its definition of insured under the automobile coverage includes ‘any person [plant owner's employee] while using * * * a hired automobile [the forklift] * * * with his [the named insured's] permission.’ Under the general liability coverage—‘Except Automobile’—the coverage does not include the liability of an ordinary employee.9 The latter coverage apparently includes liability for ‘loading or unloading of automobiles if the accident occurs [on the] premises owned by, rented to, or controlled by the named insured or the ways immediately adjoining’ because accidents involving automobiles which occur away from that location are excluded from the general liability coverage as was the case in the American policy.

From the foregoing it is clear that the plant owner is entitled to coverage under Pacific's policy, and under coverages A and C of the Maryland policy. The employee is entitled to be protected as an insured under Pacific's policy and under coverage A of the Maryland policy. The question of which insurance is primary and which is excess or whether the liability should be proportioned between the insurers involves consideration of the provisions of the policies which purport to cover the situation. The Pacific policy provides: ‘Other Insurance. If the insured has other insurance against a loss covered by this Policy, the Company shall not be liable under this Policy for a greater proportion of such loss than the applicable limit of liability stated in the Declarations bears to the total applicable limit of liability of all valid and collectible insurance against such loss; provided, however, the insurance under this Policy shall be excess insurance with respect to (1) loss arising out of the use of any non-owned or hired automobile * *’ The Maryland policy provisions are as follows: ‘Other Insurance. The insurance afforded by this policy shall be excess insurance over any other valid and collectible insurance available to the insured against any loss covered hereunder.’

If the loss was simply one arising out of the operation by the plant owner and its employee of the truck insured by Pacific the general rule would recognize Maryland's excess clause and place primary coverage on Pacific as insurer of the owner.10 Conversely, if the loss arose solely out of the joint operation of the forklift by Pacific's insured and Maryland's insured the excess clause in Maryland's policy would be balanced by the nonowned excess clause in Pacific's policy and the loss would be prorated.11

The situation is complicated by the unusual nature of the use of a vehicle owned by the named insured which the loading clause imparts, and the fact that a second vehicle is involved. In the usual case the vehicle owned by the named insured is the instrumentality which effects the damage and injury, but in the loading and unloading situation the owned vehicle may or may not be such an instrumentality.

The general approach to multiple coverage when only one operator and one vehicle are involved in the act or omission which causes liability has been noted above. (See Fns. 10 and 11.) Several different approaches have been advanced to solve the problem engendered by the complex factors arising from additional insurance under the loading and unloading clause.

The pragmatic approach which treats the situation as though the liability arose from the operation of the trucker's vehicle by the plant owner's employee is evidenced by the latest pronouncement on the subject.

Miller v. Western Pioneer Ins. Co. (1965) 237 A.C.A. 145, 46 Cal.Rptr. 579 involved an action by the truck driver against an unloading subcontractor and his employees. The court found that the trucker's insurance covered the subcontractor and his employees as permissive users unloading the truck. The subcontractor had comprehensive liability insurance which covered his general business risks and automobile liability. His employees, however, were not covered as a named insured. Each policy had an ‘other insurance’ clause which included provisions for prorating coverage and for excess insurance when other automobiles or nonowned automobiles were involved. The court applied the rule in American Automobile Ins. Co. v. Republic Indemnity Co. (1959) 52 Cal.2d 507, 341 P.2d 675; Continental Cas. Co. v. Zurich Ins. Co. (1961) 57 Cal.2d 27, 17 Cal.Rptr. 12, 336 P.2d 455, and other cases which have applied the nonowned excess provision to insurance covering the driver of a vehicle as against the owner's insurer. It concluded that the trucker's insurance was primary, and reversed the judgment of the lower court which had prorated the liability. Having so concluded it did not discuss the principle that since there was only one coverage afforded the negligent employee, it necessarily would be primary. Other cases have reached the same general result where the trucker's insurance was prorated and the loader's or unloader's policy had an excess clause. (Travelers Ins. Co. v. Norwich Union Fire Ins. Soc. (1963) 221 Cal.App.2d 150, 153, 34 Cal.Rptr. 406; Industrial Indem. Co. v. General Ins. Co. (1962) 210 Cal.App.2d 352, 359 and 362, 26 Cal.Rptr. 568; American Auto. Ins. Co. v. Transport Indem. Co. (1962) 200 Cal.App.2d 543, 550–551, 19 Cal.Rptr. 558; and Pleasant Valley, etc. Ass'n v. Cal-Farm Ins. Co. (1956) 142 Cal.App.2d 126, 135–137, 298 P.2d 109.) The foregoing cases have not, however, all reached that result by the same approach, and in other cases the application of a different approach has led to a different result.

In Pleasant Valley etc., Ass'n, supra, the court applied the excess-prorate formula to the dual coverage afforded the plant owner. It additionally noted, however, that the plant owner, which was covered by its own insurance as well as the additional insurance furnished by the unloading trucker, was only liable under the doctrine of respondeat superior; and that its employee was not covered by two insurances but only by that furnished by the trucker. There was nothing therefore to prorate in regard to the employee, and it may be inferred, as noted in later cases, that the right of the employer to reimbursement from the employee, made the employee, and consequently his insurer, subject to the primary liability (142 Cal.App.2d at pp. 135–136, 298 P.2d 109). In Standard Acc. Ins. Co. v. Hartford Acc. & Indem. Co. (1962) 206 Cal.App.2d 17, the above concept was advanced (id., p. 21, 23 Cal.Rptr. 424), but the count found double coverage for the employer and failed to consider the point further. Industrial Indemnity Co., supra, analyzes the coverage to the unloader and his employee and flatly states: ‘Industrial concedes that the general liability provisions of its policy cover the crane owners as named insured for liability arising from activities of the crane. It argues however, that the negligent crane operator employee is not covered by its policy as an additional insured. It therefore concludes that General, under whose policy the crane operator is covered, is primary, since the insurance alone covering the negligent employee is deemed primary over a policy covering a person vicariously liable. (See Continental Cas. Co. v. Phoenix Constr. Co., 46 Cal.2d 423, 428–429, 296 P.2d 801, 57 A.L.R.2d 914; Pleasant Valley [etc.] Assn. v. Cal-Farm Ins. Co., supra, 142 Cal.App.2d 126, 136, 298 P.2d 109.) Under the cases just cited, Industrial's conclusion must be sustained if the crane operator is not an additional insured within the meaning of the Industrial policy.’ (210 Cal.App.2d at p. 359, 26 Cal.Rptr. at p. 572.) The court then determined that the crane was not an automobile within the automobile liability coverage of the crane owner's policy and that therefore the employee was not covered. (Id., pp. 359–361, 26 Cal.Rptr. 568.) Presumably, if he had been covered, and if the crane were a vehicle, certain partial escape and excess provisions of the trucker's policy would come into play. The court concluded: ‘Therefore, since Industrial's policy does not cover the crane operator, and General's does, the General policy is primary with respect to coverage and it then follows that General is also obligated to furnish a defense to the action against the crane operator and its owners. [Citing again the cases last mentioned.]’ (Id., p. 362, 26 Cal.Rptr. p. 574.)

Another approach to the question of multiple coverage is that which found expression in Amer. Auto. Ins. Co. v. Seaboard Surety Co. (1957) 155 Cal.App.2d 192, 318 P.2d 84. The case involves the relative responsibility of a lessor's insurer, and a lessee's insurer, admittedly both furnishing coverage to the lessor, for injuries suffered by an employee of the lessee from the negligence of an employee of the lessor. The court observed as follows: ‘The reciprocal tights and duties of several insurers who have covered the same event do not arise out of contract, for their agreements are not with each other. See Offer v. Superior Court, 194 Cal. 114, 118, 228 P. 11; Fireman's Finance Co. v. Palatine Ins. Co., 150 Cal. 252, 256, 88 P. 907. Their respective obligations flow from equitable principles designed to accomplish ultimate justice in the bearing of a specific burden. As these principles do not stem from agreement between the insurers their application is not controlled by the language of their contracts with the respective policy holders.’ (155 Cal.App.2d at pp. 195–196, 318 P.2d at p. 86.) It then determined that an alleged indemnity agreement could not give the negligent lessor's insurer any special rights and turned to the provisions of the policy— ‘the problem becomes one of adjusting the insurers' equities in the light of the ‘other insurance’ provisions of their respective policies. That of American [the lessee] provides for proration except in circumstances not here pertinent, as follows: ‘If the insured has other insurance against a loss covered by this policy, the Company shall not be liable under this policy for a greater proportion of such loss than the applicable limit of liability stated in the declarations bears to the total applicable limit of liability of all valid and collectible insurance against such loss * * *’ The Seaboard [lessor's] policy contains an excess clause as follows: ‘In the event that there shall be in effect any other good, valid and collectible insurance insuring to the benefit of the insured, or any additional insurance hereunder with respect to loss or claim covered hereby, then this insurance shall be excess insurance only, over and above the amount of any such other good, valid and collectible insurance.’ The limits of the two policies are the same and substantially in excess of the amount of the Whaley judgment. This case lends itself to solution upon the basis of these policy provisions independently of the equities which in proper cases, as in subrogation instances, override the exact terms of the policies in the interest of substantial justice. The American provision renders it liable for its pro-rata portion of the loss, in this case one-half, and the insured after paying can collect that much and no more from that insurer. [Citation.] Hence the policy is to that extent ‘good, valid and collectible’ other insurance within the purview of the Seaboard policy, which in that event protects the insured with excess insurance ‘over and above the amount of any such other good, valid and collectible insurance’,—namely, to the extent of one-half of the total loss.' (Id., pp. 198–199, 318 P.2d pp. 88–89; fn. omitted.)12 The foregoing principles were applied in Truck Ins. Exchange v. Torres, (1961) 193 Cal.App.2d 483, 14 Cal.Rptr. 408. In that case the conditional vendee who had his own insurance proved to be an additional insured under the policy of the conditional vendor who was still liable as an ‘owner’ because of a failure to comply with statutory requirements for transfer of registration and ownership. The vendee's policy had a straight excess claus (see Maryland's herein) and the vendor policy provided for prorating or excess if the liability was for a nonowned car (see Pacific's herein). The court quoted from American Auto. Ins. Co., supra, and concluded ‘that [vendor's insurer's] coverage is ‘available to the insured’ to the extent of [vendor's insurer's] share of a prorated loss based upon the policy limits; hence, the [vendee's insurance] excess insurance becomes operative with respect to the balance of the loss and the net result is proration in accordance with the terms of the [vendor's insurer's] policy.' (193 Cal.App.2d at p. 490, 14 Cal.Rptr. at p. 412.)13

The two concepts which have just been examined were brought together in Colby v. Liberty Mutual Ins. Co. (1963) 220 Cal.App.2d 38, 33 Cal.Rptr. 538. The Claimant as in this case and Industrial Indem. co., supra, was the truck driver. The court found, as is conceded in this case, and as was found in Industrial Indem. Co., that the trucker's insurance covered the equipment operator and his employer by virtue of the additional insurance furnished those using the truck in unloading operations. (220 Cal.App.2d at pp. 42–44, 33 Cal.Rptr. 538.) The opinion there referred to those portions (210 Cal.App.2d at pp. 359 and 362, 26 Cal.Rptr. 568) of Industrial Indem. Co., which are set forth above in this opinion, and recited: ‘The problem which must be resolved is whether the crane operator is afforded coverage by the policy issued * * to [the equipment owner].’ (Id., 220 Cal.App.2d p. 44, 33 Cal.Rptr. p. 542.) The court found that on the facts presented the crane was an automobile within the terms of the crane owner's automobile liability policy and that the operator was covered by virtue of the provisions of the Vehicle Code and Wildman, supra, (48 Cal.2d 31, 307 P.2d 359). (Id., 220 Cal.App.2d pp. 44–45, 33 Cal.Rptr. 538.) Herein it is conceded that the forklift is an automobile and, as has been noted, Maryland's automobile coverage expressly includes permissive use by its employees of hired automobiles. Having determined the applicable coverages, the court in Colby examined the respective other insurance clauses and found that the trucker's policy, as does the one herein, had a prorate clause with excess if loss arose out of use of a nonowned vehicle, and that the crane owner's policy purported to be excess to any other insurance (id., pp. 45–46, 33 Cal.Rptr. 538), a situation which parallels that in this case. The court rejected the contention of the trucker's insurer that the excess insurance clause of its policy should apply because the crane was a nonowned vehicle, and related its coverage to the truck of the named insured (id., p. 46, 33 Cal.Rptr. 538). It refused, however, to approve the finding of the lower court that the excess provision of the crane owner's policy should be given effect. After quoting extensively from it the opinion concludes: ‘The reasoning of American Auto. Ins. Co. v. Seaboard Surety Co., supra, 155 Cal.App.2d 192, 318 P.2d 84, is applicable to the present case and requires the determination that each insurer is liable for its pro rata portion of the loss.’ (Id., at p. 48, 33 Cal.Rptr. at p. 544.) It is obvious that the court considered the case as one, which in the words of Justice Bray ‘involved a conflict between two primary policies' (fn. 12, supra). A similar observation was made in Miller in which it is stated: ‘In other words, Colby presents a situation where the use of two vehicles concurs to cause an injury and it was therefore proper to prorate the liability between the two insurers.’ (237 A.C.A. at p. 154, 46 Cal.Rptr. at p. 585; and cf. Bigge Drayage Co. v. National Indem. Co. (1966) 239 A.C.A. 1033, 1035, 49 Cal.Rptr. 287.)

The foregoing comments serve also to distinguish Colby and the instant case from the other authorities cited as supporting Miller. There remains for consideration Pacific's contention that it should be excess to Maryland's coverage.

It first contends that the Pacific excess clause applies because the forklift was a nonowned automobile. This contention was advanced and rejected in Colby wherein the court stated: ‘It is asserted that the ‘crane operations, being carried out by a ‘nonowned’ vehicle, if covered at all, are covered by Liberty only as excess over all other valid and collectible insurance.' But Liberty's liability is based not upon the use of the crane as such but rather upon the fact that the accident occurred in the course of unloading the truck of Western. The truck could only be unloaded by the aid of some outside instrumentality.' (220 Cal.App.2d at p. 46, 33 Cal.Rptr. at p. 543.) Pacific urges reconsideration of the foregoing, and seeks a different construction of the word ‘use’ as set forth in the phrase ‘loss arising out of the use of any nonowned or hired automobile,’ and as set forth in the insuring agreement: ‘Automobile: The ownership, maintenance or use including loading and unloading thereof.’ It apparently seeks to have the former restricted to an actual use or operation of the instrumentality which effects the injury. This overlooks the phraseology set forth in the definition of insured ‘any person while using an owned or hired automobile’ etc. Throughout that section of the policy the word use designates a relationship between a person of a certain status and a vehicle of a designated class of ownership. It is similarly a relationship, and not an activity, which is referred to in the excess clause. It is true, as Pacific contends, that the tort liability did not arise out of ‘unloading of the truck,’ but the liability of the insurer to defend and indemnify the tortfeasor did so arise, and it is proper, as was done in Colby, to relate the conditions regulating the insurer's liability as prorate or excess to that event. Finally, it is claimed that Colby errs in not giving effect to the word any as used in the phrase. In short, if any non-owned vehicle contributes to the loss, the excess provision should apply. What has been said in regard to the purpose of the clause to set forth a relationship rather than an activity is pertinent here.

Pacific further seeks a determination that its coverage is excess on general equitable grounds because Maryland's insured was the employer of the tortfeasor. The cases hereinabove referred to dealing with the loading and unloading coverage clearly demonstrate that liability for the indemnity arises regardless of the manner in which the vehicle unloaded was operated, and that in the usual case where the vehicle is the only one involved the loss will fall on the insurer covering its owner despite the negligence of others who may be covered by general insurance (see fns. 8 and 9, supra).

It is concluded that the Pacific and Maryland insurance should be prorated. The Lloyd's insurance has provisions similar to those found in McConnell v. Underwriters at Lloyd's (1961) 56 Cal.2d 637, 646, 16 Cal.Rptr. 362, 365 P.2d 418, and Peerless Cas. Co. v. Continental Cas. Co. (1956) 144 Cal.App.2d 617, 623–626, 301 P.2d 602. Those cases indicate that the true excess insurance furnished by those policies is not to be computed in the original prorate because no liability can attach until the underlying (here Maryland) insurance is exhausted. Pacific and Maryland must therefore share the first $125,000 of the loss and expense14 in the proportion of 80 per cent for Pacific and 20 per cent for Maryland. If that insurance is exhausted before all liability is discharged, the excess Lloyd's insurance will then be chargeable.

The judgment is reversed with directions to the trial court to amend its findings of fact and conclusions of law and enter judgment declaring the respective rights and obligations of the parties in accordance with the views expressed in this opinion. American to recover all costs of its appeal from respondents Maryland and Pacific. Pacific to recover its costs as appellant from Maryland.

FOOTNOTES

1.  The insurance issued to the owner of the plant consisted of a $25,000 policy from Maryland and two policies from Lloyd's covering losses in the range of $25,000 to $100,000 and $100,000 to $1,000,000 respectively. The rights and obligations of Lloyd's are concededly dependent on the status of Maryland and will only be separately mentioned in connection with the necessity of contributing to the loss.

2.  The plant owner, the lessor of the forklifts, the operator of the forklift, and the injured party by his guardian, were all made parties to the present action, but it was subsequently dismissed as to all but the plant owner. The tort action was reportedly settled by the payment of $100,000 with apportionment and contribution to await the outcome of this action.

3.  The provisions formerly found in sections 402 and 415 of the Vehicle Code were reenacted as sections 17150 and 16450–16455, respectively, without substantial change in 1959. (Stats.1959, ch. 3, § 2, pp. 1645 and 1649, effective September 18, 1959.) The affect of 1963 amendments (Stats.1963, ch. 1259, §§ 1 and 3, pp. 2780 and 2781) which added section 11580.1 to the Insurance Code and amended section 16450 of the Vehicle Code is not at issue in this case. (See Bohrn v. State Farm etc. Ins. Co. (1964) 226 Cal.App.2d 497, 504—505, 38 Cal.Rptr. 77.)

4.  The provisions requiring the description of the vehicle or vehicles insured was deleted effective as of January 1, 1966 (Stats.1965, ch. 2003, § 2, p. 4531), but an ‘owner's policy’ must still cover the vehicle involved. Although an operator's policy (Veh.Code § 16452) by the terms of the statute cannot be limited in its territorial scope, it did not confer derivative rights on others. (See Wisdom v. Eagle Star Ins. Co. (1963) 211 Cal.App.2d 602, 605–606, 27 Cal.Rptr. 599; and cf. Mission Ins. Co. v. Feldt (1964) 62 Cal.2d 97, 41 Cal.Rptr. 293, 396 P.2d 709; and note amendments effective Jan. 1, 1966 by Stats.1965, ch. 2003, § 3, p. 4532.)

5.  The lessor-owner was not a party to the tort action. No question is raised herein, or opinion expressed as to the possible liability of the lessor-owner for breach of an express or implied warranty of the fitness of the forklift for the purpose for which it was leased, or the related question of whether American's policy would cover such a claim.

6.  Compare Pacific Indemnity Co. v. Liberty Mutual Ins. Co. (1966) 239 A.C.A. 365, 370, fn. 4, 48 Cal.Rptr. 667.

7.  Under the theory advanced by Maryland and Pacific, the American policy, if it had covered the owner of the forklift, would have covered the plant owner and its employee under the statutory provision which required indemnity for ‘any other person * * * using any described motor vehicle with the express or implied permission of said assured.’ (Veh.Code § 16451.)

8.  The following cases review the coverage for loading and unloading: Continental Cas. Co. v. Zurich Ins. Co. (1961) 57 Cal.2d 27, 33, 17 Cal.Rptr. 12, 366 P.2d 455; General Pump Service, Inc. v. Travelers Ins. Co. (1956) 238 A.C.A. 85, 89–92, 47 Cal.Rptr. 533; Miller v. Western Pioneer Ins. Co. (1965) 237 A.C.A. 145, 148–149, 46 Cal.Rptr. 579; San Fernando valley Crane Service, Inc. v. Travelers Ins. Co. (1964) 229 Cal.App.2d 229, 234–237, 40 Cal.Rptr. 165; Travelers Ins. Co. v. Norwich Union Fire Ins. Soc. (1963) 221 Cal.App.2d 150, 153, 34 Cal.Rptr. 406; Colby v. Liberty Mutual Ins. Co. (1963) 220 Cal.App.2d 38, 42–44, 33 Cal.Rptr. 538; Industrial Indem. Co. v. General Ins. Co. (1962) 210 Cal.App.2d 352, 356–358, 26 Cal.Rptr. 568; Standard Acc. Ins. Co. v. Hartford Acc. & Indem. Co. (1962) 206 Cal.App.2d 17, 21–22, 23 Cal.Rptr. 424; American Auto. Ins. Co. v. Transport Indem. co. (1962) 200 Cal.App.2d 543, 549–550, 19 Cal.Rptr. 558; Columbia Southern Chemical Corp. v. Manufacturers & Wholesalers Indem. Exch. (1961) 190 Cal.App.2d 194, 202–203, 11 Cal.Rptr. 762; Pleasant Valley etc. Ass'n v. Cal-Farm Ins. Co. (1956) 142 Cal.App.2d 126, 131, 298 P.2d 109; Amer. Auto. Ins. Co. v. Amer. Fid. & Cas. Co. (1951) 106 Cal.App.2d 630, 635–638, 235 P.2d 645; and see Suter, Loading and Unloading (1946) 31 Ins. Counsel J. 112; Brown & Risjord (1962) Loading and Unloading: The Conflict Between Fortuitous Adversaries (1962) 29 Ins. Counsel J. 197; Risjord, Loading and Unloading (1960) 13 Vanderbilt L. Rev. 903.

9.  The applicable provision is, ‘The unqualified word ‘insured’ includes the named insured and also includes (1) under coverages A and C, * * * any executive officer, director or stockholder thereof while acting within the scope of his duties as such and any organization or proprietor with respect to real estate management for the named insured, and if the named insured is a partnership, the unqualified word ‘insured’ also includes any partner therein but only with respect to his liability as such.‘

10.  See American Automobile Ins. Co. v. Republic Indemnity Co. (1959), 52 Cal.2d 507, 511–513, 341 P.2d 675; Pacific Indemnity Co. v. Liberty Mutual Ins. Co., (1966), 239 A.C.A. 365, 371–372, 48 Cal.Rptr. Ins. Co. (1965), 232 Cal.App.2d 541, 543, 43 Cal.Rptr. 26; Bohrn v. State Farm etc. Ins. Co. (1964), 226 Cal.App.2d 497, 505–506, 38 Cal.Rptr. 77; Fireman's Fund Indemnity Co. v. Prudential Assurance Co. (1961), 192 Cal.App.2d 492, 494, 13 Cal.Rptr. 629; Pac. Indem. Co. v. Cal. State Auto. Ass'n (1961), 190 Cal.App.2d 293, 295–296, 12 Cal.Rptr. 20; Royal Exchange Assur. v. Universal Underwriters Ins. Co. (1961) 188 Cal.App.2d 662, 665 and 667, 10 Cal.Rptr. 686; Firemen's Ins. Co. v. Continental Cas. Co. (1959), 170 Cal.App.2d 698, 705, 339 P.2d 602; and see Barksdale, Conflicting Decisions of Primary and Excess Coverage Under Automobile Liability Policies (1965) 32 Ins. Counsel J. 158; Risjord, Other Insurance or the Tortuous Channels of Litigation Involving the Conflict Between Fortuitous Adversaries (1962) 29 Ins. Counsel J. 612; Annotation, Apportionment of Liability Between Automobile Liability Insurers, etc. (1961) 76 A.L.R.2d 502; Russ, The Double Insurance Problem—A Proposal (1961) 13 Hastings L.J. 183; Note, Insurance: ‘Other Insurance’ Clauses: Reconciling Conflicting Provisions (1958) 5 U.C.L.A. L.Rev. 157.

11.  See American Motorists ins. Co. v. Underwriters at Lloyd's London etc. (1964), 224 Cal.App.2d 81, 86–87, 36 Cal.Rptr. 297; Farmers Ins. Exch. v. Continental Nat. Group (1963), 213 Cal.App.2d 91, 94–95, 28 Cal.Rptr. 613; continental Cas. Co. v. Hartford Acc. & Indem. Co. (1963), 213 Cal.App.2d 78, 88, 28 Cal.Rptr. 606; Athey v. Netherlands Ins. Co. (1962), 200 Cal.App.2d 10, 13 and 16, 19 Cal.Rptr. 89; Oil Base, Inc. v. Transport Indem. Co. (1956), 143 Cal.App.2d 453, 467–468, 299 P.2d 952; and see note, Automobile Liability Insurance—Effect of Double Coverage and ‘Other Insurance’ Clauses (1954) 38 Minn.L.Rev. 838; Comment, ‘Other Insurance’ Clauses Conflict (1952) 5 Stan.L.Rev. 147.

12.  The foregoing portion of the American Auto. Ins. Co. opinion was referred to by the Supreme Court, without qualification, as bearing on the proposition that the excess insurance does not attach until all primary insurance has been exhausted. (McConnell v. Underwriters at Lloyds (1961) 56 Cal.2d 637, 646, 16 Cal.Rptr. 362, 365 P.2d 418.) The case has been distinguished by this court as follows: ‘It should be noted that this was not a case involving liability insurance on a nonowned car on which ‘excess' insurance was issued. It involved a conflict between two primary policies.’ (Firemen's Ins. Co. of Newark, N. J. v. Continental Cas. Co. (1959) 170 Cal.App.2d 698, 702, 339 P.2d 602, 604; and see Apparel Mfrs.' Supply Co. v. National Auto. & Cas Ins. Co. (1961) 189 Cal.App.2d 443 472–474, 11 Cal.Rptr. 380, wherein it was applied.)

13.  Torres is alluded to without comment or qualification in Continental Cas. Co. v. Zurich Ins. Co. (1961) 57 Cal.2d 27, 35, 17 Cal.Rptr. 12, 366 P.2d 455, wherein the court applied the prorate-excess doctrine of American Automobile Insurance Co. v. Republic Indemnity Co. (1959) 52 Cal.2d 507, 511–513, 341 P.2d 675 (see fn. 10, supra) to an unloading situation where, as in Miller (237 A.C.A. 145, 46 Cal.Rptr. 579), there was only one vehicle involved and covered by insurance.

14.  See Continental Cas. Co. v. Zurich Ins. Co. (1961) 57 Cal.2d 27, 35–38, 17 Cal.Rptr. 12, 366 P.2d 455.

SIMS, Justice.

SULLIVAN, P. J., concurs.