INTERNATIONAL BUSINESS MACHINES CORPORATION v. Zurich Insurance Company, Cross-Defendant and Appellant.

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Court of Appeal, First District, Division 2, California.

INTERNATIONAL BUSINESS MACHINES CORPORATION, Plaintiff and Appellant, v. TRUCK INSURANCE EXCHANGE, a corporation, Defendant, Cross-Complainant and Respondent, Zurich Insurance Company, Cross-Defendant and Appellant.

Civ. 25718.

Decided: November 25, 1969

Russ & Benson, by Wilbur J. Russ, San Francisco, Cal., for appellants. Campbell, Custer, Warburton & Britton, by Alfred B. Britton, Jr., San Jose, for respondent.

Plaintiff, International Business Machines Corporation (hereafter IBM) and its insurer, cross-defendant Zurich Insurance Company (hereafter Zurich), appeal from a judgment in declaratory relief denying coverage and defense under a trucker's comprehensive liability policy issued by defendant and cross-complainant, Truck Insurance Exchange1 (hereafter Truck Exchange), to Red Line Carriers, Inc. (hereafter Red Line), for an injury incurred by one of Red Line's employees on IBM premises. Appellants contend that: 1) the trial court erred in finding that IBM was not ‘using’ the Red Line truck at the time of the accident; 2) the employee exclusion clause of the Truck Exchange policy applied only to Red Line's own employees; and 3) the coverage offorded by the Truck Exchange policy was primary or excess to that afforded by the Zurich policy.

The record reveals the following undisputed facts: prior to October 1, 1963, Truck Exchange sold and issued to Red Line a policy of liability insurance which provided coverage for Red Line trucks and to all persons using Red Line trucks with the permission of Red Line. On October 1, 1963, IBM asked Red Line to come to its premises to move some furniture. A Red Line truck with driver, John Mazzullo, and helper, Sheldon Hatton, were sent to IBM premises on the morning of October 1. Red Line instructed them to take directions from IBM as to what furniture and equipment was to be moved.

During the morning, Hatton and Mazzullo moved various pieces of furniture and equipment around the IBM premises pursuant to IBM'S instructions and supervision. About 3:00 p.m., they were directed by the IBM coordinator to move a chair and empty desk from IBM Building No. 25.

Mazzullo and Hatton drove the Red Line truck to Building 25 and parked it at the receiving area with the back of the truck facing the building. An IBM receiving clerk was in the area. After parking the truck, Mazzullo and Hatton took two Red Line dollies that operated on four wheels and were approximately five inches high, to haul the load from the buliding to the truck. While Mazzullo and Hatton were in the building, the IBM coordinator instructed them to take the empty metal desk and chair, load them onto the truck and haul them to the Red Line warehouse for storage. Mazzullo and Hatton loaded the chair on one dolly and placed the 30 x 60 inch desk on its side on another. Hatton and Mazzullo then proceeded to push the two loaded dollies down the aisleway, through the double doors and out of the building into the receiving area.

When they reached the door, they left the dolly with the chair and proceeded to maneuver the one with the desk through the receiving area to the truck. Mazzullo was at the front end of the desk walking backward; Hatton at the back was pushing it and looking along the side to see that the desk drawers did not open and to watch the direction of travel. After they traveled about 15 feet across the receiving area and covered about 2/3 of the distance from the doors to the truck, Mazzullo felt the desk jar and noticed that Hatton was down. Mazzullo stopped the desk, walked around and saw that Hatton was in a sitting position near the back of the desk. Hatton stated he had slipped on a pencil eraser; Mazzullo noticed one on the floor of the receiving area near Hatton. The lighting in the area was good and there was no other debris or defect on the floor of the receiving area. The eraser was similar to those used by IBM and was not the type used by Red Line or its employees.

Thereafter Mazzullo loaded the desk on the truck without assistance and hauled it to the Red Line warehouse. On August 12, 1964, Hatton filed an action against IBM for the personal injuries sustained in the accident. IBM tendered the defense of this action to Truck Exchange and demanded coverage, which Truck Exchange denied. This action ensued.

The trial court found that: 1) the accident did not arise out of and was not related to the use, loading or unloading of the truck; 2) no IBM officer or employee was using the truck with the consent and permission of Red Line at the time of the accident; 3) the accident occurred within the building premises of IBM and Hatton stepped on a pencil-shaped eraser of the type used by IBM and not used by Red Line; and 4) that Truck Exchange did not owe any coverage to IBM, and Zurich, under its policy, was obligated to provide coverage to IBM with respect to the Hatton litigation. As it was not relevant to its disposition of the matter, the trial court made no finding as to the employee exclusion clause of the Truck Exchange policy and whether the coverage afforded by the Truck Exchange policy was primary or excess to that afforded by the Zurich policy.

The first and major contention on appeal concerns the trial court's finding that the injuries did not arise out of the ‘use’ of the Red Line truck by IBM. Preliminarily, we note that at the time of its decision in the instant case (October 1967), the trial court did not have the benefit of the recent case in this state clarifying the meaning of loading and unloading and use under the ‘complete operations' doctrine.2 This question is purely one of law and we make our own independent interpretation of the policy provision in question.

This court (Division One) was recently faced with a similar question of causation on somewhat similar facts in Shippers Dev. Co. v. General Ins. Co. of America, 274 A.C.A. 733, 743, 79 Cal.Rptr. 388, wherein one of the trucker's employees fell off the supplier's loading dock, before he opened the door of his employer's truck and trailer, to begin the icing of produce in the truck. After a learned and illuminating discussion of the recent California cases and the pertinent out-of-state decisions, the court noted at page 743, 79 Cal.Rptr. 388, that in ‘complete operations' jurisdictions, such as California, all that is required to establish coverage is that the act or omission which resulted in the injury related to an object which was necessary to carry out the loading or unloading. In rejecting the authorities denying recovery on the theory (also followed by the trial court in the instant case) that the act or omission which gives rise to the actionable negligence relates to an instrumentality that is not necessarily related to the loading or unloading process, this court said at pages 743 and 744, 79 Cal.Rptr. at page 394: ‘This analysis does not bear scrutiny. If the supplier, or consignor or consignee, maintains a loading dock it is as much an instrumentality to be used in loading and unloading as was the defective door in the Employers' Liability Assur. Corp. case ([Employers' Liability Assur. Corp. v. Indemnity Ins. Co., D.C.], 228 F.Supp. 896, supra), or the frayed rope in the Columbia Southern Chemical Corp. case ([Columbia Southern Chemical Corp. v. Manufacturers & Wholesalers Indemnity Exch.] 190 Cal.App.2d 194, 11 Cal.Rptr. 762, supra). By its presence the loading dock manifests that the entity responsible for its maintenance and existence is planning to use such vehicles as come to the dock for its commercial purposes. Those present there for loading and unloading are using the dock for such purposes, and correlatively all concerned are using the parked vehicle for a like purpose. The fact that any defect in the dock may present a hazard to others who may use it for other purposes should not defeat the connection between the dock and the loading and unloading operation when it in fact exists.’ (Emphasis added.)

We see no distinction between the instant case and Shippers Dev. Co., supra. Certainly, moving the desk across the receiving area on the dolly toward the truck was necessary to carry out the loading process. IBM'S receiving area was as much an instrumentality to be used in loading and unloading as the defective dock in Shippers Dev. Co., supra; or the frayed rope in Columbia Southern Chemical Corp. v. Manufacturers & Wholesalers Indem. Exch., 190 Cal.App.2d 194, 11 Cal.Rptr. 762; or the defective door in Employers' Liability Assur. Corp. v. Indemnity Ins. Co. (Md.1964) 228 F.Supp. 896, or the defective step in Bundschu v. Travelers Ins. Co. (1964), 22 A.D.2d 907, 255 N.Y.S.2d 529; or the unbarred cellar door in Continental Cas. Co. v. Duffy (1966), 26 A.D.2d 630, 272 N.Y.S.2d 470.3 We hold that the injury to Hatton that resulted from the failure of IBM (on whose premises the Red Line vehicle was being used, with Red Line's permission to load furniture) to maintain a safe place for loading activity, is an act of omission having a causal relationship to the use of the vehicle within the ‘complete operations' doctrine.

Accordingly, we conclude that the trial court erred in finding that the Red Line truck was not being used within the terms of the Truck Exchange policy. As we have concluded that Truck Exchange afforded coverage to IBM under its policy because of the use of the truck, we must resolve the contentions concerning the employee exclusion clause of the Truck Exchange policy and whether, as between Truck Exchange and Zurich, the coverage afforded was primary or excess.

IBM contends that the employee exclusion clause of the Truck Exchange policy (set forth, so far as pertinent in footnote 4 below)4 was not limited to employees of Red Line. Truck Exchange concedes that the statutory extension of coverage (Veh.Code, § 16451) to permissive users is considered part of its policy of liability insurance, even though the policy does not specifically so provide (Wildman v. Government Employees' Ins. Co., 48 Cal.2d 31, 39–40, 307 P.2d 359), but argues that the employee exclusion was here applicable to IBM. Truck Exchange cites Travelers Indem. Co. v. Colonial Ins. Co., 242 Cal.App.2d 227, 51 Cal.Rptr. 724, wherein the named insured contended that he had a right to recover for injuries sustained under his own liability policy which excluded coverage for injuries to the insured. This court (Division One) held the exclusion applicable in the light of the statutory provisions allowing such exclusions.

The exclusion here in issue is entirely different, however, and refers to an exclusion for injuries to the employees of the insured. It is well settled in this state that the phrase ‘an employee * * * of the insured,’ as used in an exclusion clause, applies only where the injured party was employed by the particular insured, named or additional, who seeks the protection of the policy (Shippers Dev. Co., supra, 274 A.C.A. p. 745, 79 Cal.Rptr. 388). Contentions similar to that made by Truck Exchange in the instant case concerning similar employee exclusion clauses were expressly rejected in U. S. Fire Ins. Co. v. Transport Indem. Co., 244 Cal.App.2d 110, 116–117, 52 Cal.Rptr. 757; United States Steel Corp. v. Transport Indem. Co., 241 Cal.App.2d 461, 473, 50 Cal.Rptr. 576; Campidonica v. Transport Indem. Co., 217 Cal.App.2d 403, 407, 31 Cal.Rptr. 735; and Pleasant Valley Lima Bean Growers, etc., Assn. v. Cal-Farm Ins. Co., 142 Cal.App.2d 126, 131–134, 298 P.2d 109. Accordingly, we hold that the employee exclusion clause of the Truck Exchange policy does not apply to Truck Exchange's obligation to defend or indemnify in any action arising out of Hatton's injuries.

IBM next contends that the coverage afforded by the Truck Exchange policy is primary and must be exhausted before any coverage afforded by Zurich to IBM becomes applicable. We agree. While the Truck Exchange policy contained an ‘other insurance’ provision,5 it also contained a Public Utilities Commission endorsement defining the insurer's liability and further provided that its terms should be deemed amended to comply with California law. The policy issued by Zurich to IBM provided that, with respect to liability arising out of the use of trucks not owned by IBM, Zurich's coverage would be excess after any other applicable insurance. In both the U.S. Fire Ins. Co. case, supra, and Travelers Indem. Co. v. Colonial Ins. Co., supra, arguments identical to those here raised by Truck Exchange concerning policies with identical public utilitis endorsements were made and rejected by indicating that the provisions of the endorsement fixing the insurer's liability were unconditional and, thereby, in effect, wiped out the ‘other insurance’ clause. Furthermore, the ‘other insurance’ clause of the Truck Exchange policy refers only to coverage ‘afforded by the policy’ itself and does not extend to coverages provided by operation of law, such as that available to permissive users (Wildman v. Government Employees' Ins. Co., supra; Travelers Indem. Co. v. Colonial Ins. Co., supra), or by reason of the Public Utilities Commission endorsements.

In view of our conclusion that Truck Exchange had and still has a duty to defend IBM in the Hatton action and provide IBM with primary coverage, Truck Exchange is responsible to IBM and Zurich for the expenses of defense and attorneys' fees incurred to date (Continental Cas. Co. v. Zurich Ins. Co., 57 Cal.2d 27, 17 Cal.Rptr. 12, 366 P.2d 455).

The judgment is reversed with directions to the trial court to amend its findings of fact and conclusions of law and enter a judgment declaring the relative and respective rights and obligations of the parties to this action in accordance with the views expressed in this opinion.


1.  Sued as Farmers Insurance Group.

2.  The ‘complete operations' doctrine, besides extending to acts and events causing bodily injury occurring in point of time after loading and unloading has been completed, represents a difference in the quantum and type of causation required to render applicable insurance coverage for loss arising from the loading or unloading of a vehicle.

3.  Truck Exchange cites Pacific Indemn. Co. v. Truck Ins. Exch., 270 A.C.A. 776, 76 Cal.Rptr. 281, and Truck Ins. Exch. v. Webb, 256 Cal.App.2d 140, 63 Cal.Rptr. 791. Both are easily distinguishable as the injuries therein resulted from an independent act or intervening cause wholly disassociated from, independent of and remote from the use of the truck.

4.  ‘(f) under coverages A and G, except with respect to liability assumed by the insured under a contract as defined herein, to bodily injury to or sickness, disease or death of any employee of the insured arising out of and in the course of his employment by the insured, other than a domestic employee whose injury arises out of the ownership, maintenance or use of an automobile covered by this policy and for whose injury benefits in whole or in part are not payable or required to be provided under any workmen's compensation law;’

5.  The policy provided ‘The insurance afforded by this policy shall not apply to any loss covered by any other insurance but shall be excess insurance over such other insurance.’

TAYLOR, Associate Justice.

SHOEMAKER, P. J., and AGEE, J., concur.

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