PENNSYLVANIA GENERAL INSURANCE COMPANY, et al. v. ZURICH INSURANCE, MARYLAND CASUALTY COMPANY

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0279-04T5

DOCKET NO. A-6204-04T5

PENNSYLVANIA GENERAL INSURANCE

COMPANY, THE CAMDEN FIRE

INSURANCE ASSOCIATION and

ONEBEACON INSURANCE GROUP,

Plaintiffs-Appellants,

v.

ZURICH INSURANCE, MARYLAND

CASUALTY COMPANY,

Defendants-Respondents,

and

SAMUEL REYES-MONTANES,

JOHN R. HAGGERSTONE,

J.W. CONTRACTORS, KIMBALL BUILDERS

& DEVELOPERS, INC., and

JEFFREY WITTMANN,

Defendants.

_______________________________________________________________

SAMUEL REYES-MONTANES,

an individual,

Plaintiff,

v.

JOHN R. HAGGERSTONE, an individual;

RAYMOND HAGGERSTONE, an individual;

BARBARA HAGGERSTONE, an individual;

KIMBALL BUILDERS & DEVELOPERS, INC.,

a business entity; JEFFREY WITTMANN,

an individual; and LOMAN FORD, INC.,

a corporation,

Defendants,

and

KIMBALL BUILDERS & DEVELOPERS, INC.,

and JEFFREY WITTMANN,

Defendants/Third-Party Plaintiffs-

Respondents,

v.

LOCHIATTO PAVING AND MASONRY

COMPANY, INC.,

Third-Party Defendant,

and

PENNSYLVANIA GENERAL INSURANCE

COMPANY; and ONE BEACON INSURANCE,

Third-Party Defendants-Appellants.

 
 

Argued May 10, 2006 - Decided

Before Judges Conley, Weissbard and Sapp-Peterson.

On appeal from Superior Court of New Jersey, Law Division, Middlesex County, Docket

Nos. L-285-04 and L-6057-01.

Elliott Abrutyn argued the cause for appellants (Morgan, Melhuish, Abrutyn & Lisowski, attorneys; Mr. Abrutyn, of counsel and on the brief; Won Jai Lee,

on the brief).

Steven I. Lewbel argued the cause for respondents

(Melito & Adolfsen, attorneys; Mr. Lewbel, of counsel

and on the brief).

PER CURIAM

On June 7, 2001, a vehicle driven by John R. Haggerstone struck Samuel Reyes-Montanes, an employee of LoChiatto Paving and Masonry Company (LoChiatto), at a construction site at 421 Colonia Boulevard, Colonia. Kimball Builders and Developers, Inc. (Kimball), the general contractor for the construction project, had hired LoChiatto, a subcontractor, to pave the driveway at the property, which was owned by Jeffrey Wittmann.

According to Wittmann, on the day of the accident, he arrived at the jobsite and gave Ryan Morgan, a LoChiatto employee, and Vito LoChiatto, the owner of the paving company, instructions regarding where the LoChiatto vehicles should park. Those vehicles included a pick-up truck and three tandem dump trucks, one of which had an attached commercial trailer containing a paving machine and two rollers. Wittmann remained at the jobsite for several minutes to discuss the parking and unloading arrangements with LoChiatto, and then left. Although Wittmann maintained that he told the LoChiatto workers to park on a side street, the truck with the attached trailer was parked on Colonia Boulevard in front of the jobsite in a no stopping/no standing zone. At approximately 6:00 p.m., as Reyes-Montanes began to unload the paving machine from the trailer attached to the dump truck, he was struck by Haggerstone's vehicle and severely injured.

On July 12, 2001, Reyes-Montanes filed a complaint against Haggerstone, Kimball, and Wittmann. The complaint alleged that Kimball, as the general contractor, and Wittmann, as the property owner, were negligent in failing to provide a safe workplace, in failing to provide adequate inspection and supervision of the jobsite, in failing to secure the safe unloading of the paving equipment, and in failing to properly instruct LoChiatto on a safe place to park its vehicles. The complaint further alleged that Kimball and Wittmann created a nuisance in the form of a dangerous work site and violated various industrial and governmental safety codes, resulting in a hazardous work site and bodily injury to plaintiff.

At the time of the accident, LoChiatto was insured under two OneBeacon Insurance policies: a commercial general liability (CGL) policy, issued by Pennsylvania General Insurance Company (PGIC), with a limit of $1 million per occurrence; and a business auto policy, issued by Camden Fire Insurance Association, with a $1 million liability limit. Kimball was insured under a CGL policy issued by Maryland Casualty Company (Maryland), with a $1 million per occurrence liability limit.

On May 17, 2001, several weeks before the accident, LoChiatto issued a certificate of insurance to Wittmann. LoChiatto issued two additional certificates of insurance to Kimball in August and November 2001, after the accident had occurred. The certificates indicated that Kimball and Wittmann had additional insured coverage under LoChiatto's general liability policy with PGIC.

On March 25, 2002, Maryland, on behalf of Kimball and Wittmann, tendered the Reyes-Montanes action for defense to OneBeacon, as administrator of the PGIC policy. OneBeacon responded by letter dated July 16, 2002, and did not dispute that Kimball maintained "additional insured status" under the PGIC GL policy. However, OneBeacon rejected the tender, contending that Kimball's additional insured status was limited to vicarious liability due to the acts of LoChiatto and that Kimball was sued for its own acts of negligence. Maryland responded by letter dated September 23, 2002, contending that Kimball's additional insured status under the CGL policy was not limited to vicarious liability, and that Kimball was entitled to become an insured on a primary basis under the auto liability policy issued to LoChiatto by OneBeacon.

On September 13, 2002, Kimball and Wittmann filed a third-party complaint against LoChiatto, PGIC, and OneBeacon, denying liability and asserting that LoChiatto and Kimball had an indemnification agreement. OneBeacon filed an answer on November 1, 2002.

On February 20, 2003, Kimball and Wittmann filed a motion for summary judgment, alleging that they were "additional insureds" under the PGIC CGL policy issued to LoChiatto. On March 7, 2003, PGIC cross-moved for summary judgment, seeking dismissal of the third-party complaint with prejudice.

On June 20, 2003, the Law Division granted Kimball and Wittmann's motion for summary judgment and granted PGIC's cross-motion only with regard to the CGL policy. In a written opinion, the judge found that Kimball and Wittmann were named as additional insureds in LoChiatto's policy with PGIC. The judge further found that the automobile accident arose out of the use of the automobile and that the automobile exclusion of the CGL policy therefore applied. The judge then concluded that the OneBeacon auto policy provided primary coverage for Kimball and Wittmann, and that both the OneBeacon CGL policy, issued by PGIC, and the Maryland CGL policy provided excess coverage to the auto policy.

On July 31, 2003, PGIC moved for reconsideration, which was denied on September 26, 2003. On October 16, 2003, PGIC filed a motion for leave to appeal, which we denied on November 5, 2003.

In January 2004, PGIC sought leave to file a fourth-party coverage complaint against Maryland and Zurich Insurance. Simultaneously, PGIC filed a declaratory complaint against Kimball, Wittmann, Maryland, and Zurich Insurance, with the intention that, if the motion to file a fourth-party complaint were granted, the declaratory judgment action would be dismissed. Both the fourth-party complaint and the declaratory judgment complaint contended that the Maryland CGL policy is the only applicable policy due to its "Hired Auto and Non-Owned Auto" liability Endorsement. The complaints also sought clarification on the ranking of primary and excess coverage between the Maryland and OneBeacon policies. PGIC's motion for leave to file the fourth-party complaint was denied.

On March 8, 2004, Maryland moved to dismiss the declaratory complaint on res judicata grounds. On April 2, 2004, a different judge than the one that had ruled on the original action, dismissed count one of the complaint, but agreed that the first judge had not determined the priority of coverage between the CGL policies, which he had held to be excess policies to the OneBeacon auto policy.

On June 24, 2004, Maryland filed a motion for summary judgment, contending that PGIC had the duty to provide the first layer of excess coverage to Kimball and Wittmann. PGIC cross-moved, contending that Maryland's CGL policy provided the first layer of excess coverage to Kimball and Wittmann with no contribution from PGIC. On August 6, 2004, the judge ruled that the PGIC CGL policy provided the first layer of excess coverage for Kimball and Wittmann directly above the auto policy, with no contribution or coinsurance from the Maryland CGL policy; the Maryland policy provided the second layer of excess coverage. PGIC and Reyes-Montanes ultimately settled the underlying dispute for $1.2 million, and a stipulation of dismissal was entered on July 20, 2005. On July 28, 2005, PGIC filed a notice of appeal, seeking review of the first judge's rulings in this matter and thereafter moved to consolidate that appeal with the ruling in the second suit. The motion to consolidate was denied on September 28, 2005, but the appeals were calendared back-to- back for oral argument. We now dispose of both appeals in this opinion.

I

In their first three points, PGIC and OneBeacon argue that the trial court's decision to grant Kimball and Wittman's motion for summary judgment and to deny their motion for summary judgment was erroneous. The standards are well known. Summary judgment is appropriate when the moving party successfully shows that no genuine issue as to any material fact exists, and the proponent is entitled to judgment as a matter of law. R. 4:46-2. When deciding whether to grant a motion for summary judgment, the motion judge must not decide issues of fact, but must only decide whether there are any such issues. Brill v. Guardian Life Ins. Co., 142 N.J. 520, 540 (1995). In making this determination, the judge must decide whether "the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Ibid. The interpretation of an insurance policy is a question of law that can be resolved by summary judgment. Adron, Inc. v. Home Ins. Co., 292 N.J. Super. 463, 473 (App. Div. 1996).

Our function on appeal is to determine de novo whether summary judgment was proper. Simonetti v. Selective Ins. Co., 372 N.J. Super. 421, 427 (App. Div. 2004). Like the trial court, we must view the facts in the light most favorable to the non-moving party. Coyne v. Dep't of Transp., 182 N.J. 481, 491 (2005).

LoChiatto's CGL policy, issued by PGIC, specifically provides that the insurance does not apply to:

"Bodily injury" or "property damage" arising out of the ownership, maintenance, use or entrustment to others of any . . . "auto"

. . . owned or operated by or rented or loaned to any insured. Use includes operation and "loading or unloading".

After citing multiple cases that broadly interpret the phrase "arising out of the use of an auto," the motion judge held that the alleged negligent supervision and parking instructions "arise out" of the use of LoChiatto's automobile. The judge concluded:

Therefore, it would seem logical that both Maryland Casualty Insurance Co. and Pennsylvania General Insurance Co. policies' auto exclusion would exclude coverage for Kimball and Wittmann and the Pennsylvania General Insurance Co. automobile liability policy would become the primary insurer with Pennsylvania General Insurance Co. and Maryland Casualty Insurance Co. becoming excess coverage under section IV of the Commercial General Liability Policy.

The judge's conclusion is confusing in that, if the PGIC and Maryland CGL policies exclude the incident at issue from coverage, it would not be logical for those policies to then afford excess coverage for the same matter. Indeed, Kimball and Wittmann assert that the judge "presumably concluded the auto exclusion under both GL policies [was] inapplicable because Reyes-Montanes sought to hold Kimball and Wittmann . . . liable for their negligent failure to provide a safe working environment, inadequate inspection and supervision at the site, improper construction of a curb cut out, nuisance and violations of industrial and governmental building codes." (emphasis added).

On the other hand, appellants maintain that OneBeacon did not have a duty to defend and indemnify Kimball and Wittman under the CGL policy because the "essential allegation of negligence" against Kimball is automobile-related, and the CGL policy contains an exclusion barring claims involving automobiles. We agree.

Exclusionary provisions in insurance policies are generally "strongly construed against the insurer." Westchester Fire Ins. Co. v. Cont'l Ins. Cos., 126 N.J. Super. 29, 41 (App. Div. 1973), aff'd, 65 N.J. 152 (1974). Nonetheless, our courts have interpreted exclusionary clauses barring coverage for injuries "arising out of" the use of an automobile in an expansive and comprehensive way. Am. Motorists Ins. Co. v. L-C-A Sales Co., 155 N.J. 29, 35-6 (1998); see also Allstate Ins. Co. v. Moraca, 244 N.J. Super. 5, 13 (App. Div. 1990) (citing Westchester Fire Ins. Co., supra, 126 N.J. Super. at 38). Specifically, an exclusion for injuries "arising out of" the use of an automobile is satisfied by a showing that the injury "'was connected with,' 'had its origins in,' 'grew out of,' 'flowed from,' or 'was incident to' the use of an automobile." Salem Group v. Oliver, 128 N.J. 1, 8 (1992) (quoting Moraca, supra, 244 N.J. Super. at 13 n.1 (citation omitted)). Thus, the underlying personal injury does not have to be a direct and proximate result of the use of the vehicle to satisfy the "arising out of" language. Conduit & Found. Corp. v. Hartford Cas. Ins. Co., 329 N.J. Super. 91, 101 (App. Div.), certif. denied, 165 N.J. 135 (2000). For the phrase to apply, only "a substantial nexus between the injury and the use of the vehicle" need be shown. Westchester Fire Ins. Co., supra, 126 N.J. Super. at 38.

In Conduit, supra, a case similar to the one under review, the employee of a subcontractor, Universal, was fatally injured in an automobile accident at a construction site. Id. at 93-4. At the time of the accident, construction traffic was utilizing the eastbound lane of Route 80, and Universal's vehicle, traveling eastbound, was hit by another subcontractor's vehicle traveling westbound. Id. at 98 n.5. Universal's insurance carrier, Hartford, appealed a determination that its CGL policy provided coverage, arguing that the automobile exclusion contained in the policy precluded coverage. Id. at 94-5.

We agreed, finding that, even though the liability was generally premised on workplace negligence, the specific allegations focused on traffic supervision, an "activity entirely concerned with vehicular use." Id. at 99-100. The underlying personal injury litigation, and therefore, the source of the insurer's responsibility, "all came about because of bodily injuries that arose from the use of an automobile." Id. at 100. Thus, we concluded that the automobile exclusion in the Hartford CGL policy barred recovery and that the applicable policy was Universal's business automobile policy. Ibid.

Similarly, in Scarfi v. Aetna Cas. & Sur. Co., 233 N.J. Super. 509 (App. Div. 1989), we held that the automobile exclusion in a CGL policy barred coverage when a school van was struck by a dump truck used in the insured's business. Id. at 511-12. Although the negligence claims were based on the hiring and training of the truck driver, and the repair and maintenance of the truck, the automobile exclusion applied because these underlying claims were "triggered" only when the van driver was injured as a result of the accident, which "arose out of the ownership, operation, or use of the truck." Id. at 515-16.

Here, Reyes-Montanes was struck and severely injured while unloading the paving machine from the LoChiatto trailer, which was illegally parked in a no stopping/no standing zone in front of the jobsite. The first count of the complaint alleges that Kimball and Wittmann:

were negligent . . . in failing to provide a safe working environment; in failing to provide adequate inspection and supervision of the job site; in failing to take reasonable steps to secure the safe delivery, placement, storage, loading, unloading, and moving of paving equipment and vehicles and trailers; and in failing to properly instruct its agents, servants and/or employees including its sub-contractors on a proper and safe place to park their vehicles; and in permitting its agents, servants and/or employees including its sub-contractor to park their equipment and vehicle and trailers on Colonia Boulevard in an area of the roadway that was designated as a no stopping and a no standing zone.

These allegations "arise out of" the use of an automobile because they focus on Kimball and Wittmann's alleged negligence in telling LoChiatto to park the vehicle in front of the jobsite and in failing to supervise the parking of the vehicle and the unloading process. The exclusionary clause found in the PGIC CGL policy specifically states that "use" of an automobile includes "loading or unloading." Thus, by its terms, the policy will operate to exclude coverage for injuries arising from the unloading of a vehicle, as long as the injury "'was connected with,' 'had its origins in,' 'grew out of,' 'flowed from,' or 'was incident to'" the unloading process. See Salem Group, supra, 128 N.J. at 8 (quoting Moraca, supra, 244 N.J. Super. at 13 n.1 (citation omitted)). Here, Reyes-Montanes was injured while unloading the LoChiatto trailer in an unsafe location. Thus, his injuries originated from and flowed from the unloading of an automobile.

The fact that the complaint also alleges negligence in failing to adequately inspect and supervise the job site does not take the claim out of the automobile exclusionary clause. As in Conduit, supra, 329 N.J. Super. at 100, and Scarfi, supra, 233 N.J. Super. at 515, these more general negligence claims are triggered only as a result of injuries sustained when Reyes-Montanes was unloading the vehicle. In other words, because the underlying personal injury litigation, and thus the premise for insurance coverage, came about because of bodily injuries resulting from the use, here the unloading, of a vehicle, the automobile exclusion is applicable. Conduit, supra, 329 N.J. Super. at 100-101. As noted in Conduit, "without automobile use, there is nothing to supervise, negligently or otherwise." Id. at 108; see also Bartels v. Romano, 171 N.J. Super. 23, 27 (App. Div. 1979) (holding that, where parked car rolled backwards down driveway and struck plaintiffs, auto exclusion precluded coverage even for claims of negligent supervision).

The second count of Reyes-Montanes' complaint alleges that the defendants created "a nuisance in the form of a dangerous work site, . . . result[ing] in the bodily injury of the plaintiff." The third count alleges that the defendants "did violate applicable industrial and governmental codes including but not limited to all applicable BOCA Codes, OSHA Codes, which violations did result in a dangerous and hazardous work site, which resulted in the bodily injury of the plaintiff."

Kimball and Wittmann argue that the automobile exclusion in the PGIC CGL policy does not bar coverage for plaintiff's injuries because, in addition to negligence, Reyes-Montanes sought to hold them liable for nuisance and violations of industrial and governmental building codes. Kimball and Wittmann contend that claims for these violations are "unrelated to their use of the LoChiatto vehicle during the unloading process." We find the argument unpersuasive.

In concluding that an automobile exclusion in a homeowner's policy excluded coverage for a negligent entrustment claim, we recognized that, "'coverage turns on the cause of injury, rather than on the legal theory asserted against the insured.'" Moraca, supra, 244 N.J. Super. at 17 (quoting 7A Appelman, Insurance Law and Practice 4500 (Berdal ed. Supp. 1990)); see also Conduit, supra, 329 N.J. Super. at 103. Here, even the alleged nuisance and building code violations, which ostensibly resulted in a "dangerous work site," relate back to the use of the LoChiatto vehicle. Since Reyes-Montanes was injured while unloading the trailer, the claims are still directly derived from the parking and unloading of the vehicle in a dangerous location. Stated another way, the nuisance and building code violations are essentially different ways of attempting to impose liability on Kimball and Wittmann for the same thing: injuries arising from a dangerous worksite created by the hazardous parking of the truck and trailer in a no stopping/no standing zone while it was being unloaded. Because the "underlying factual predicate," Conduit, supra, 329 N.J. Super. at 108, for all claims is the accident that occurred while Reyes-Montanes was unloading a vehicle, the nuisance and building code violation allegations are related to, and cannot be severed from, the use of the vehicle. Thus, these claims also fall within the auto exclusion.

For these reasons, the auto exclusion contained in the CGL policy issued by PGIC precludes coverage, excess or otherwise, for the claims in this matter. As a result of this conclusion, we have no need to address the argument that Kimball and Wittmann were additional insureds under the PGIC CGL policy.

II

Having determined that the OneBeacon CGL policy is not applicable, we turn to the OneBeacon auto policy. As we have shown above, the issue under the OneBeacon CGL policy was whether the accident arose out of the use of an automobile, such that the auto exclusion came into play. With respect to the OneBeacon auto policy, the issue is different; it is whether Kimball, through the actions of Wittmann, was a user of the LoChiatto vehicle and therefore covered for the Reyes-Montanes claim.

In his written opinion, the judge stated that one issue that had to be resolved was whether "Kimball's and Wittmann's negligence with respect to the alleged parking instructions [was] sufficient to be deemed as use of the LoChiatto vehicles." The judge proceeded to discuss the applicability of the automobile exclusion in the CGL policy, i.e., whether the injury "arose out of" the use of an automobile, but did not specifically explain why Kimball and Wittmann could be deemed "users" of the vehicle, such that the OneBeacon auto liability policy would apply.

On appeal, PGIC and OneBeacon argue that the trial court erred in granting summary judgment to Kimball and Whitman because it incorrectly found them to be "users" under the business auto policy. Specifically, they argue that Kimball and Wittmann's only alleged involvement with the LoChiatto vehicle was to direct the vehicle in parking, and that such involvement is not an integral part of the loading and unloading of the vehicle.

N.J.S.A. 39:6A-3 and N.J.S.A. 39:6B-1 provide that every owner of an automobile must maintain a certain minimum automobile liability insurance coverage. This omnibus coverage must insure "against 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 the vehicle. N.J.S.A. 39:6A-3; N.J.S.A. 39:6B-1a (emphasis added); see also Kennedy v. Jefferson Smurfit Co., 147 N.J. 394, 403 (1997). Our courts have recognized that coverage for accidents arising out of loading and unloading operations fall within the statutorily mandated automobile liability coverage and, thus, cannot be limited by contract. Ryder/P.I.E. Nationwide, Inc. v. Harbor Bay Corp., 119 N.J. 402, 407 (1990) (citing Bellafronte v. Gen. Motors Corp., 151 N.J. Super. 377 (App. Div.), certif. denied, 75 N.J. 533 (1977)). An insurer must provide broad coverage for accidents occurring during the loading and unloading of a vehicle because "one 'who is in the process of unloading cargo from the vehicle is, for purposes of [] omnibus coverage, a user of the vehicle.'" Id. at 408 (quoting Bellafronte, supra, 151 N.J. Super. at 382-83).

Consistent with established case law, the OneBeacon business automobile policy issued to LoChiatto specifically provides that it covers "'bodily injury' sustained by an 'eligible injured person' or an 'insured person' caused by an 'accident'. . . arising out of the ownership, maintenance or use, including loading or unloading, of a 'private passenger auto' as an auto." (emphasis added).

The Court examined the scope of an insurer's obligation to provide coverage for loading and unloading activities in Kennedy, supra, 147 N.J. at 394. There, the plaintiff was injured by falling cardboard while waiting in a trailer and observing the unloading process. Id. at 396. The cardboard was on wood pallets in bundles weighing hundreds of pounds, and the cardboard fell when a pallet collapsed. Ibid. In determining whether the company that selected the pallet was an additional insured under the auto policy that covered the trailer, the Court explained that New Jersey follows the "complete operation doctrine," in which "'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 399-400 (quoting Drew Chem. Corp. v. Am. Fore Loyalty Group, 90 N.J. Super. 582, 589 (App. Div. 1966)). "The distinction between preparations for loading and the act of loading is obliterated." Id. at 400 (citing Drew, supra, 90 N.J. Super. at 587).

Accordingly, the Court explained that the inquiry courts must engage in when determining whether a particular act can be deemed part of the loading or unloading process 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?

[Id. at 400 (quoting Cenno v. W. Virginia Paper and Pulp Co., 109 N.J. Super. 41, 45 (App. Div.), certif. denied, 56 N.J. 99 (1970)).]

Applying this analysis, the Court concluded that the "question becomes whether selecting the pallet was an act in preparation of loading the vehicle or an unrelated act." Id. at 401. Finding in the affirmative, the Court held that, because selection of the pallet was "necessary and preliminary to the process of loading" the trailer, the company that selected the pallet is an additional insured under the auto policy. Id. at 403.

We more recently considered the scope of coverage for loading and unloading operations in Pisaneschi v. Turner Constr. Co., 345 N.J. Super. 336 (App. Div. 2001). There, a subcontractor's employee was injured while moving a package to a dock storage area after the truck that had delivered the packages was moved away from the dock. Id. at 339-40. Citing Kennedy, supra, 147 N.J. at 399-401, we explained that a defendant is not covered as an additional insured unless: "(1) defendant's alleged act or omission constituted an integral part of the loading or unloading of the insured's vehicle," and "(2) plaintiff's injury occurred during the process of loading or unloading that vehicle, and was causally connected with defendant's alleged act." Id. at 344. Applying this analysis, we concluded that the auto policy covering the truck did not provide coverage to the plaintiff because the unloading process was already complete when the injury occurred; the delivery had been accomplished. Id. at 347-48. In so holding, however, we recognized that:

Under New Jersey's "complete operation" doctrine, "loading and unloading" insurance "covers the entire process involved in the movement of goods, from the moment they are given into the [named] insured's possession until they are turned over at the place of destination to the party to whom delivery is to be made. . . ." Cenno, supra, 109 N.J. Super. at 46; see also [8] Couch [on Insurance] 121:10 [(3d ed. 1997)]. Any accident occurring during and arising out of the process of loading or unloading the insured vehicle is covered, and "for all practical purposes, any distinction between 'unloading' and 'delivery' and between 'loading' and 'preparatory actions' is not considered." Cenno, supra, 109 N.J. Super. at 46-47.

[Id. at 344-45.]

Here, the paving equipment was in the middle of the loading and unloading process when Wittmann allegedly gave LoChiatto instructions on where to park its truck for unloading. The paving equipment had already been loaded onto the trailer but had not yet been unloaded in order to begin the construction job. Parking the vehicle prior to unloading the equipment contained therein was a necessary and integral part of the unloading process, Kennedy, supra, 147 N.J. at 401, because the unloading could not occur unless the vehicle was positioned at or near the jobsite. Further, plaintiff's injury occurred during the process of unloading, Pisaneschi, supra, 345 N.J. Super. at 344, as the trailer was still being unloaded when plaintiff was struck by Haggerstone's vehicle. Thus, his injury is "causally connected," ibid., with Kimball and Wittmann's alleged negligence in failing to properly instruct LoChiatto on a safe location to park the vehicle for unloading purposes.

Thus, if Kimball and Wittmann did in fact fail to appropriately instruct LoChiatto and/or its employees on where to park the truck for unloading, they would be deemed "users" of the vehicle, and thus considered additional insureds under the OneBeacon auto policy. However, factual disputes regarding this issue should have precluded summary judgment. In his deposition, Wittmann stated that he told the LoChiatto workers to park on a side street, across the street from the jobsite. He recalled specifically telling Mr. LoChiatto:

We always have a lot of problems over here. Do not park in front of this house . . . This neighbor, the No Stopping or No [Standing] signs, you cannot park in front of [421 Colonia Boulevard]. The side street Longfellow, is no problem to park, across the street, but do not park in front of [421 Colonia Boulevard].

In addition, Wittmann testified that he had a similar conversation with Ryan Morgan, one of LoChiatto's employees.

In direct contrast, in a signed statement dated April 17, 2002, Mr. LoChiatto denied receiving instructions on where to park the trailer for unloading. He explained:

When we arrived, we parked our truck in front of the house along the side of the road at the curb. There were no side roads nearby and no places to park the truck on the property. . . . The builder Kimball did not direct us where to park. We parked where we had to, in front of the house, to lay down the pavement for the driveway.

Thus, the materials presented fail to "show that there is no genuine issue as to any material fact," R. 4:46-2, regarding whether Kimball and Wittmann could be deemed users of the LoChiatto vehicle. Rather, the facts on this issue are in dispute. For this reason, we remand for a factual determination as to what Kimball and Wittmann did or did not tell LoChiatto regarding the parking of its vehicles, in order to clarify the "user" issue and, thus, the applicability of the auto liability policy.

III

We next turn to the Maryland CGL policy issued to Kimball, which contained an auto exclusion clause identical to the auto exclusion contained in the PGIC CGL policy issued to LoChiatto. Thus, without more, the auto exclusion in the Maryland policy would bar coverage for the accident at issue, pursuant to the reasoning set forth in Point I, above. However, the Maryland analysis does not end there because the policy also contained a "Hired Auto and Non-Owned Auto Liability" Endorsement (the Endorsement), which alters some aspects of the policy.

Before turning to the Endorsement itself, we note our agreement with OneBeacon's argument that the first judge did not consider the applicability of the Endorsement and thus, the second judge erred in concluding that the applicability of the Endorsement was res judicata insofar as the second, declaratory action was concerned. Of course, to the extent that the second judge relied on the first judge's ruling with respect to the OneBeacon CGL and auto policies, she was correct in applying res judicata. However, since we have concluded that the first judge erred with respect to those issues, the second judge's ruling is likewise undermined.

Maryland's "Hired Auto and Non-owned Auto" liability endorsement begins:

The insurance provided under SECTION I - COVERAGE A applies to "bodily injury" or "property damage" arising out of the use of any "non-owned auto" in your business by any person other than you.

This section further defines a "non-owned auto" as:

Any "auto" you do not own, lease, hire, or borrow which is used in connection with your business. However, if you are a partnership, a "non-owned auto" does not include any "auto" owned by any partner.

The provision further changes the definition of "Who is an insured," stating:

a. Each of the following is also an insured to the extent set forth below:

(1) You;

(2) Any other person using a "hired auto" with you permission;

(3) With respect to a "non-owned auto" any partner or executive officer of yours, but while such a "non-owned auto" is being used in your business;

(4) Any other person or organization, but only with respect to their liability because of acts or omissions of an insured under (1), (2) or (3) above.

"You" is defined as "the named Insured shown in the Declarations and any other person or organization qualifying as a Named Insured under this policy." Kimball is the only entity named on the Declarations page of the Maryland CGL policy.

Most importantly, the endorsement also overhauls the policy's exclusions, by providing that: "With respect to the insurance provided by this endorsement: (1) Exclusions c., e., g., h., and j. through n. are deleted." Exclusion "g" is the auto exclusion. As a result, the only auto coverage potentially available under the policy arises from the Endorsement.

OneBeacon claims that the car at issue is the LoChiatto vehicle, indisputably a "non-owned auto" within the definition of this section, since it was owned by LoChiatto, and Wittmann, the owner and sole employee of Kimball, was the only "user" of the "non-owned" automobile. However, Wittmann is clearly not "you" within the meaning of the policy, because he is not the "Named Insured." Thus, because the injury arose out of the use of a "non-owned auto" by a person other than "you," it triggers coverage under the "Hired Auto and Non-owned Auto" endorsement. As a result, according to OneBeacon, Maryland is obligated to provide coverage to Kimball under that additional provision of its CGL policy.

In support of its argument, OneBeacon cites to Ins. Co. of N. Am. v. Gov't Employees Ins. Co., 162 N.J. Super. 528 (App. Div. 1978), where we found that an auto insurance endorsement applied only to the named insured, its executive officers and other persons insured under the policy. Id. at 533. This conclusion, OneBeacon asserts, flowed from our belief that, "[n]onownership motor vehicle coverage insures an employer and its executive officers against liability imputed to them by reason of the negligence of employees and other persons using vehicles not owned by the insured on the business of the insured." Id. at 535. In other words, such endorsements are designed to "afford[] protection against liability incurred under principles of respondeat superior." Ibid. (citing Legendre v. Hill, 263 So. 2d 25 (La. 1972).

In Ins. Co. Of N. Am., supra, a church member, Stenson, used his pickup truck to transport some people to a church-related function; along the way, his vehicle was involved in an accident in which several of the passengers sustained injuries. Id. at 531. The nonownership motor vehicle coverage specifically insured only the named insured (ostensibly including its employees) and its executive officers. Id. at 532, 533. Relying on case law from other states, due to the lack of New Jersey cases addressing the interpretation of such provisions, we concluded that the endorsement did not afford Stenson coverage. Id. at 537. In announcing that holding, we focused on the policy behind the existence of such endorsements as the Louisiana Appellate Court understood it:

The court explained that the Employer's Non-Ownership Liability Endorsement was obtained to insure the employer against liability under the doctrine of respondeat superior for injury caused by tortious conduct of employees using their own vehicles for their employer's business. An employer's basic motor vehicle policy afforded coverage only for vehicles specifically listed in the policy, and not for nonowned, unlisted vehicles. [Legendre, supra,] 263 So. 2d at 27. The basic motor vehicle policy would normally afford coverage to an insured employer, as defined therein, for liability arising out of the negligence of the insured while driving owned vehicles, and for liability arising out of the use, with permission, of a vehicle owned by the insured and listed in the policy. It would not cover persons who are not insureds and who drive vehicles not owned by the employer on the employer's business. A nonownership policy seeks to close this gap in insurance coverage of the employer.

[Id. at 535-36.]

Under this analysis, the relationship between Kimball and Wittmann and the way in which Reyes-Montanes brought his claim against those parties below is the key to a determination of whether the "Hired Auto and Non-owned Auto" endorsement applies in this case.

Plaintiff asserts that the amended complaint in the underlying dispute presents a negligence cause of action against Wittmann and unnamed employees of Kimball for failing to provide a safe work environment with respect to the movement of vehicles and in failing to provide proper instructions on where to safely park the LoChiatto dump truck and attached trailer. The complaint alleged that Kimball's employees and/or Wittmann were negligent, and Wittmann testified that at the time of the accident he was Kimball's only employee. Based on the proceeding analysis, plaintiff argues that the Non-owned Auto endorsement provides coverage to Kimball for accidents arising out of the use of an automobile by Wittmann, Kimball's employee, who is someone other than "you" within the meaning of the Endorsement.

Maryland responds that OneBeacon misconstrues the purpose and scope of the Auto Endorsement and the effect that the Auto Exclusion "g" has on coverage as it relates to the Reyes-Montanes action. First, Maryland argues that the Endorsement's plain language precludes coverage here because neither of the two vehicles involved in the accident fits within the ambit of the definition of "non-owned auto" in the Maryland CGL policy. The Endorsement defines the term "non-owned auto" as "any 'auto' you do not own, lease, hire or borrow which is used in connection with your business." Clearly, the vehicle Haggerstone drove is not at issue. Maryland points out that LoChiatto owned the vehicle which Reyes-Montanes was unloading and that it was being unloaded in connection with LoChiatto's business, not the business of Kimball. We disagree.

The scope of the phrase "used in connection with your business," is broader than what Maryland suggests in this argument. Here, Kimball, as the general contractor, hired LoChiatto to pave the driveway "in connection with" Kimball's business of developing the property. Absent Kimball's involvement, LoChiatto would not have been at the site preparing to pave the property. In other words, LoChiatto used the dump truck to lay the paving for Kimball's business. Thus, the unloading was done in connection with Kimball's business.

Second, Maryland claims that there is no coverage here because the Endorsement excludes coverage for the named insured, Kimball. Essentially, Maryland is contending that if Kimball - who is "you" or "the named insured" - is a "user" of the "non-owned" automobile, then the Endorsement does not apply because it is restricted to injuries "arising out of the use of any 'non-owned auto' in your business by any person other than you." This comports with our reasoning in Ins. Co. of N. Am., supra, regarding vicarious liability, in that the Endorsement affords coverage to Kimball only where one of its employees uses a non-owned auto resulting in an accident from which some litigation transpires.

Thus, Maryland is correct that Kimball, as the named insured, is not entitled to coverage under the "Non-owned auto" clause of the Endorsement for its own actions but only for vicarious liability. While the portions of the complaint that Maryland enumerates in its brief do not assert claims against Kimball for vicarious liability due to Wittmann's actions as the principal's sole employee, Maryland's argument ignores other parts of the complaint that do make such allegations. Put simply, the Endorsement imputes Wittmann's actions as the sole employee of Kimball, as alleged in the amended complaint, to the named insured, Kimball, and renders the Endorsement potentially applicable in this case.

Notwithstanding, the final assessment of whether the Endorsement applies rests upon whether Wittman was a "user" of the non-owned LoChiatto vehicle. This is the same determination that required a remand under Point II above, concerning the applicability of the OneBeacon auto policy. The results of that remand and the factual determination it requires, will govern here, as well. If the court finds that Wittmann was not a user, then neither the OneBeacon auto nor the Maryland CGL policies will apply. If Wittmann was a user, then both will apply. And, if both policies apply, then the "Other Insurance" Clause of the Maryland CGL policy makes that policy excess to the OneBeacon auto policy.

Reversed and remanded for further proceedings consistent with this opinion.

 

PGIC and the Camden Fire Insurance Association are subsidiaries of OneBeacon Insurance Group. We generally refer herein to the appellant as OneBeacon rather than to Camden or PGIC.

Maryland Casualty Company appears to be part of the Zurich Insurance Company, as both names are listed on the policy.

According to the contract, "You" or "Your" refer to the "Named Insured" in the Declarations, in this case, "Kimball Construction."

The Other Insurance clause reads in pertinent part:

4. Other Insurance

a. Primary Insurance

This insurance is primary except when b. below applies. If this insurance is primary, our obligations are not affected unless any of the other insurance is also primary. Then, we will share with all other insurance by the method described in c. below.

b. Excess Insurance

This insurance is excess over any of the other insurance, whether primary, excess, contingent or on any other basis:

. . . .

(3) If the loss arises out of the maintenance or use of aircraft, "autos" or watercraft to the extent not subject to Exclusion g. of Coverage A (SECTION I);

(4) That is available to the insured as an additional insured under that other insurance.

(continued)

(continued)

34

A-0279-04T5

July 14, 2006