Respondents Brief — Strachan Shipping Co. v. Bankers & Shippers Insurance

i: Office - Supreme Court, U.S

FILED

NO. 84-222 | SEP 21 994

Cet S rz in Oe EVAS.

CLERK

In the

Supreme Court of the United States

OCTOBER TERM, 1984

ARTHUR W. STURGEON

Plaintiff,

VERSUS

STRACHAN SHIPPING COMPANY,

Defendant/Third-Party Plaintifff/Appellee-Petitioner

VERSUS

BANKERS & SHIPPERS

INSURANCE COMPANY OF NEW YORK,

Third-Party Defendant/Appellant-Respondent

VERSUS

AMERICAN MUTUAL LIABILITY

INSURANCE COMPANY,

Third-Party Defendant/Appellee-Petitioner

ON PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

RESPONDENT'S BRIEF IN OPPOSITION

TO PETITION FOR WRIT OF CERTIORARI

JOHN F. TOOLEY, JR.

743 Terry Parkway

Gretna, Louisiana 70053

Telephone: (504) 394-7077

Attorney for Bankers and Shippers

Insurance Company of New York

A B Letter Service, Inc., 327 Chartres St., New Orleans, La. (504) 581-5555

BEST AVAILABLE COPY

i

TABLE OF CONTENTS

Statement in Opposition...

Conclusion .........

Certificate of Service.

Appendix ‘“‘A’’...

ii

TABLE OF AUTHORITIES FOR APPENDIX “A”

Case Page

95 ALR 2d 1122, Annotation, Risks within ‘‘Loading

and Unloading” Clauses of Motor Vehicle Liability

SOUND TU sso co ech eee ee ee A-7

7 Am.Jur.2d, Automobile Insurance, Sec. 89, pp.

BOE. oc ta veneebon ee eee _A-7, 9

7 Am. Jur.2d 1980, Automobile Insurance, Sec. 206.

Persons Covered, pp. 719-20. . A-8

7 Appleman, Insurance Law and Practice, Sec. 4322,

om. SRDOr Ghee: vcs cca ce case eee A-7

Atlantic Mutual Insurance Co. v. Gulf Insurance

Company, 596 S.W.2d 326 (Ct.Ap.Texas-1980)... A-8

Bankers and Shippers Insurance Co. of N.Y. v.

Lockamy, et al, 440 A.2d 421 (Md.

St Pe girs Tae A-1, 8

Black's Law Dictionary, 5th Ed. 1979 - ‘‘Borrower”’

Dis TAF dc 6 nen ip eee t: .A-8

7 Blashfield, Automobile Law oul Practice, Sec. 315. r Be

pp. 588-91 (3rd Ed. 1966)... sss MOSES

45 C.J.S., Insurance, Sec. 829c(2), pp. 893- 96. _A-7

Dairyland Insurance Co. v. Conercte Predicate cj

203 N.W.2d 558 (S.C.lowa-1973):..... het

The Defense Research Institute, Inc., ‘‘Loading and

Unloading”’ Provisions of the Automobile Liability

Insurance Policy (monograph 1965)... . ale hae a

29 Insurance Consel Journal 197 (1962), Brown and

Risjord, Loading and Unloading; The Conflict

between Tortious Adversaries........ sss... A-7

Liberty Mutual Insurance Co. v. American asians

Insurance Co., et al, 556 S.W.2d 242 (Sup.Ct.

Texas-1977) . vo aeeree Ay A-1, 8

McDaniels v. Great Atlantic & Pacific Tea Co. et al,

602 F.2d 78 (CA 5-1979) ............... _A-1, 8

Protective Insurance Company v. Coca-Cola

Bottling Company-Indianapolis, Inc., 423

N.E.2d 656 (Ct.Ap. Ind.-1981).. __. , .. As

iii

Robinson, et al v. Excalibur Insurance Co.,

598 S.W.2d 324 (Ct.Civ.Ap. Texas-1980)... .. A-8

United States Fidelity and Guaranty Company v.

Federal Insurance Co., 399 N.E.2d 259 (App.Ct.

eae ics Fass oo oe ww a A-8

13 Vanderbilt Law Review 903 (1960); Norman E.

Risjord, Loading and Unloading. __. _.. A-T

1

NO. &4-222

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1984

ARTHUR W. STURGEON

Plaintiff,

VERSUS

STRACHAN SHIPPING COMPANY,

Defendant/Third-Party Plaintifff/Appellee-Petitioner

VERSUS

BANKERS & SHIPPERS

INSURANCE COMPANY OF NEW YORK,

Third-Party Defendant/Appellant-Respondent

VERSUS

AMERICAN MUTUAL LIABILITY

INSURANCE COMPANY,

Third-Party Defendant/Appellee-Petitioner

ON PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

RESPONDENT'S BRIEF IN OPPOSITION

TO PETITION FOR WRIT OF CERTIORARI

STATEMENT IN OPPOSITION

Respondent’s opposition is most fully explained in

it’s Petition for En Banc Consideration for the Fifth Circuit

2

Court of Appeals (Appendix ‘‘A”’ herein). It was not

necessary for the Fifth Circuit to reverse McDaniels! in

order to distinguish and reverse the instant case. It was

necessary for the Fifth Circuit to do so in order to bring

thet Circuit in line with ail of the other Circuits and State

opinions on this vital insurancce contract change.

Respondent leaves it’s opposition to a reading of Ap-

pendix “A”.

CONCLUSION

Respondent respectfully prays that this Honorable

Court deny the Petition for a Writ of Certiorari to review

the Judgment of the United States Court of Appeals for

the Fifth Circuit.

fully submitted,

riys

F. TOOLEY, JR.

Terry Parkway

Gretna, Louisiana 70053

Telephone: (504) 394-7077

Resp

Attorney for Bankers and Shippers

Insurance Company of New York

I McDaniels v. Great Atlantic & Pacific Tea Co., et al, 602 F.2d

78 (5th Cir. 1979).

eee

3

CERTIFICATE OF SERVICE

I hereby certify that three copies each of the above

and foregoing have been served upon Jerome P. Halford,

attorney for Arthur W. Sturgeon and Lawrence E. Lar-

mann, attorney for Strachan Shipping Company and

American Mutual Liability Insurance Company, via the

United States mail, postage pre-paid, this A day of

September, 1984.

F. TOOLEY, JR.

- erry Parkway

Gretna, Louisiana 70053

Telephone: (504) 394-7077

Attorney for Bankers and Shippers

Insurance Company of New York

A-l

APPENDIX “A”

STATEMENT OF THE ISSUES

The McDaniels case! did not adequately deal with

the new loading and unloading coverage provisions of

truckmen’s liability policies, did not consider the exclu-

sionary clauses in their historical context and is entirely

out of step with developing law on that point. Liberty

Mutual Insurance Co. v. American Employers Insurance

Co., et al decided by the then Justice Sam D. Johnson of

the Supreme Court of Texas, was the most reasonable in-

terpretation of the ‘‘borrowers”’ provision in the current

policy. Bankers and Shippers Ins. Co. v. Lockamy, 440

A.2d 421 (Ct.Sp.App.Md.-1982) is the most recent.

McDaniels, was a simplistic statement by a panel on

a serious problem to the trucking industry, without careful

consideration of the overall history of the policy language

and attempted solution by the industry and its insurance

carriers. Numerous third-party claims are now being made

around the country for a coverage that was intended to be

excluded. Losses are being incurred. Premium rates must

be changed along with application for tariff rate changes

with the Interstate Commerce Commission.

McDaniels, should be reviewed, explained, modified

and/or distinguished; but more importantly, it should be

reversed, which a panel cannot do.

! McDaniels v. Great Atlantic & Pacific Tea Co., et al, 602 F.2d

78 (CA 5-1979).

PD ws . , ’

“ Liberty Mutual Insurance Co. v. American Employers Insurance

Co., et al, 556 S.W.2d 242 (Sup.Ct.Texas-1977).

A-2

STATEMENT OF THE COURSE OF PROCEEDINGS

AND DISPOSITION OF THE CASE

Plaintiff, Arthur W. Sturgeon, filed his complaint

against Strachan Shipping Company (Strachan) on March

14, 1979, for injuries received in New Orleans on March 4,

1979, when a bale of cotton fell from his tractor-trailer upon

his back, causing a compression fracture. He alleged that

defendant's forklift operators negligently caused the bale

to fall upon him.?

Strachan answered,’ but later filed a third-party

complaint against appellant, Bankers and Shippers In-

surance Company of New York (Bankers and Shippers) on

the basis that they, Strachan, were ‘‘borrowers’’ of the

tractor-trailer during the unloading process at the time of

the accident, and were omnibus insureds entitled to a

defense and/or atorney’s fees and/or one-half (2) contribu-

tion.” Bankers and Shippers policy reads:

... Persons Insured ic) Any other person while

using an owned automobile or a hired automobile

with the permission of the named insured: provid-

ed his actual operation or (if he is not operating)

his other actual use thereof is within the scope of

such permission, but with respect to bodily injury

or property damage arising out of the loading or

unloading thereof, such other person shall be an

insured only if he is:

(1) a lessee or borrower of the automobile...®

3 Vol. 1, Doc. 1, pp. 1-4

* Vol. 1. Doe. 4. pp. 8-10

® Vol. 1, Doc. 25. pp. 75-77

6 Exhibit. Joint 2

A-3

Bankers and Shippers answered admitting they insured

plaintiff Sturgeon and his employer Pre-Fab Transit, but

denied coverage to Strachan.’ Bankers and Shippers cross-

claimed as an alternative against American Mutual,

Strachan's insurer, for contribution or for primary or ex-

cess coverage.”

All other parties were disposed of prior to trial.

Following jury selection, the plaintiff's case was settled for

$150,000.00 reserving defendant's rights inter sese.?

Thereafter, the case between Strachan, Bankers and Ship-

pers, and American Mutual was tried without jury.19 On

January 21, 1982, Judgment with reasons were rendered

holding Bankers and Shippers liable for the entire claim

against Strachan, plus attorney's fees and costs, with a

holding that the trial Judge was bound by the McDaniels

decision. !

Bankers and Shippers’ third-party demand against

Strachan’s insurers for contribution was dismissed.

American Mutual Liability Insurance Company (American

Mutual) had a Comprehensive General Liability policy cov-

ering Strachan. 12 This policy excluded coverage for *‘bodi-

ly injury—arising out of the ownership, maintenance,

operation, use, loading or unloading of (1) any automobile

" Vol. 1, Doc. 52, pp. 131-32

* Vol. 2, Doc. 112. pp. 308-09

y ; ‘ ; 7

Vol. 4, pp. 38-49; Vol. 5. pp. 1-4

10 Vol 4. pp. 40-144; Docs. 84 and 85 (stipulated depositions, Vol

4. pp. 52-54)

1) Vol. 3, 154, pp. 388-405

12 Exhibit. Joint 3

A-4

owned or operated by or rented or /oaned to any insured—

but this exclusion does not apply to the parking of an

automobile on premises owned by. rented to or controlled

by the named insured or the ways immediately adjoining,

if such automobile is not owned by or rented or loaned to

any insured.”

American Mutual also had a Business Automobile

Policy which provided that ‘for any covered automobile—

you don’t own, the insurance provided by this policy is ex-

cess over any other collectible insurance."’!4

The trial Court determined that the automobile

policy was excess and that, since “borrow is the correlative

of loan’, the exclusion in the Comprehensive General

Liability policy as to ‘“‘loaned”’ vehicles applied and

Bankers was primary carrier.14

After new trial motions, the Judgment of March 26,

1982 eliminated a $25,000.00 deductible in favor of

Bankers and Shippers, but remained the same otherwise. 15

This appeal resulted.

STATEMENT OF THE FACTS

The facts are simple and undisputed, although each

side argues the legal result.

On March, 4, 1979 Arthur W. Sturgeon was under

13 Exhibit, Joint 3

'4 Vol. 3. pp. 393-95

15 Vol. 3. Does. 155-65. pp. 406-32: Vol. 1. Bankers and Shippers

Exhibit #2. p. 199: Vol. 5. pp. 1-4

lls

A-5

contract as an owner-driver of a tractor-trailer for Pre-Fab

Transit Co.!® His rig was a standard flat bed tractor-

trailer.!7 On that date he delivered a load of valed cotton

to the Robin Street Wharf under a bill of lading to Strachan

Shipping Company.!® He had never been there before.!9

He was directed by a security guard through one of the

doors into the large covered wharf, and down a pathway

between stowed cargo to where the cotton was to be

unloaded.29

The Strachan section of the Robin Street Wharf runs

some 720 feet along the river.! It is leased by them from

the City of New Orleans Dock Board.** Strachan's

employees anc equipment perform all loading and

unloading operations, which is true for most all flat bed

loads.23 Unquestionably Strachan employees directed the

tractor-trailer driver to stop where it was convenient for

them to unload on their premises: however, Strachan

employees cannot operate, move or otherwise have any con-

nection with the truck itself.24

16 Bankers and Shippers Exhibit 5: Joint Exhibit 1. Vol. 4: pp

47-48.

17 Vol. 4. pp. 49 and 58.

18 Vol. 4. pp. 50-51.

19 Vol 5. p. 64.

20 Vol. 4, pp. 64-67 and 98-99.

21 Vol. 4. pp. 93-94 and 101-02.

22 Vol. 4. pp. 94-95 and 101.

23 Vol. 4, pp. 48-49, 85-92, 114-15 and 120.

24 Vol. 4. pp. 62. 74-75. 96 and 100; Doc. 84, pp. 5-7. 15. 17, 23-26

and 47-48; Doc. 85. pp. 4-5, 12-15 and 26.

A-6

The truck driver gave his papers to the Strachan

foreman who came up to his truck and told him to get ready

for unloading.2° The bales of cotton are covered and

secured by tarpaulin, chains and tie-downs and are truck

equipment.7® Drivers must remove the tarpaulin, chains

and tie-downs before the unloading operation can begin.27

Strachan’s employees used a forklift-type vehicle with

‘‘squeezer’’ blades that lifted the bales from the flatbed

from the side.2® Plaintiff removed the chains and binders

holding the load, rolled up the tarpaulin for storage and

began picking up numerous tie-downs on and around his

truck, some of which had fallen to the floor.29 While he was

leaning over picking up the last few ties, after two Strachan

employees started to unload his trailer, a bale of cotton fell

upon his back causing his serious injury.29

ARGUMENT AND AUTHORITIES

There are several fallacies in McDaniel.

It hurts the assured who purchased the policies. It

hurts the insurers who tried to carefully reword the policies

to help their assureds.

25 Vol. 4. pp. 51-52 and 64-68

26 Vol. 4, pp. 49-61; Doc. 84, pp. 10 and 15; Doc. 85. pp. 8-10 and

15-17

27 Vol. 4, pp. 87, 92-93 and 117-18; Doc. 84, pp. 10, 15 and 47; Doc.

85, pp. 9-10 and 26.

28 Vol. 4, pp. 97 and 102-03; Doc. 84. pp. 30-34; Doc. 85. pp. 8.

10-11 and 15-17.

29 Vol. 4, pp. 52-58 and 68-73: Doc. 84, pp. 30-34; Doc. 85 pp. 8.

10-11 and 15-17.

39 Vol. 4, pp. 53, 57 and 73; Doc. 85. pp. 19-22

A-7

Interstate Carriers are fully regulated and their rates

set by the Interstate Commerce Commission.?! Drivers,

too, are fully regulated and must meet strict standards.?2

Neither has any economic interest under the scheduled

rates in assuming any financial loss by the daily multitude

of unknown loaders and unloaders caused by their own

negligence. Nor do they wish to pay the additional in-

surance premiums required by their insurers for such

coverage to loaders and unloaders. They previously did

cover all as “‘permissive users”’.23

Consequently, insurance carriers for the trucking in-

dustry changed their policy provisions previously covering

all loaders and unloaders as omnibus insureds eliminating

that exposure, thus reducing the insurance premiums

charged to the trucking industry, and thereby affecting the

rates charged the public as set by the Interstate Commerce

Commission and Department of Transportation. The provi-

sion now restricts coverage to loaders and unloaders who

are: “(1) a lessee or borrower of the automobile...'"24 This

31 Interstate Commeree Act, 49 USC 304.

32 Federal Motor Carrier Safety Regulations, Bankers’ Exhibit

Nos. 3 and 4; Joint Exhibit No. 1, Sec. 6 and 7.

33 95 ALR 1122, Annotation, Risks within “Loading and

Unloading’ Clauses of Motor Vehicle Liability Insurance Policy; 7

Am.Jur.2d, Automobile Insurance, Sec. 89, pp. 396-97; 7 Appleman, In-

surance Law and Practice, Sec. 4322, pp. 155-67 (1962); 7 Blashfield,

Automobile Law and Practice, Sec. 31£.7, pp. 588-91 (3rd Ed. 1966); 45

C.J.S., Insurance, Sec. 829c(2), pp. 893-96; Dairyland Insurance Co. v.

Concrete Products Co., 203 N.W.2d 558 (S.C. lowa-1973); The Defense

Research Institute, Inc. “‘Loading and Unloading’ Provisions of the

Automobile Liability Insurance Policy (monograph 1965); 29 Insurance

Counsel Journal 197 (1962) Brown and Risjord: Loading and Unloading;

The Conflict between Tortious Adversaries; 13 Vanderbilt Law Review

903, (1960) Norman E. Risjord, Loading and Unloading

34 Supra, fn. 6.

A-8

attempt to restrict omnibus coverage by truckmen and

their insurers is now being interpreted and is the main

issue in this appeal.2°

McDaniels simplistictly interpreted ‘‘borrower’’ as if

it was the prior term “‘permissive user’ and made that law

applicable without consideration of the historical develop-

ment of the policy terms. The ill-conceived McDaniels deci-

sion truly hurts the trucking industry because it is one of

the first appellate decisions under the new policy terms.

How will jury charges be determined? What factors must

be considered? How will trucking companies determine

whether or not it wants to deliver to a particular dock to

load or unload? What are the factors determining what con-

stitutes a borrowing? How does a carrier determine

whether or not it wants to accept the risk or the respon-

sibility of a particular bill of lading? Under the McDaniels

case all of these factors are unknowns. Numerous claims

are now being litigated—very expensively.

Restrictive clauses in insurance policies are restric-

tively construed in order to protect insureds. The assureds

in this case are truckmen and carriers. Their rates are set

by United States law. Insurance premiums are a part of

their expenses included in that rate. Their interest is in

paying premiums to cover themselves, not loaders and

3° 7 Am.Jur.2d (1980) Automobile Insurance, Sec. 206, Persons

Covered, pp. 719-20; Atlantic Mutual Insurance Co. v. Gulf Insurance

Co., 596 S.W.2d 326 (Ct.Ap. Texas-1980); Bankers and Shippers In-

surance Co. of N.Y. v. Lockamy, et al, 440 A.2d 421 (Md.App.-1982);

Black's Law Dictionary, 5th Ed. 1979-Borrower” p. 167; Liberty

Mutual Insurance Co. v. American Employers Insurance Co., et al, 556

S.W.2d 242 (Sp.Ct. Texas-1977); Protective Insurance Co. v. Coca-Cola

Bottling Co.-Indianapolis, Inc., 423 N.E.2d 656 (Ct.Ap. Ind.-1981);

Robinson, et al v. Excalibur Insurance Co., 598 S.W.2d 324 (Ct.Civ.App.

Texas-1980); United States Fidelity & Guaranty Co. v. Federal In-

surance Co., 39 N.E.2d 259 (App.Ct. IIL-1979).

LS ee

A-9

unloaders. The new policy provision eliminating coverage

to loaders and unloaders is for the benefit of truckmen and

carriers. That is their intention and it should inure to their

benefit. An apt quote is:

enn. So ig

| ‘A policy may limit the application of a loading

) and unloading clause, so that it will not apply to

| every person who otherwise would be covered

| under the omnibus clause. Thus, it may extend

only to the named insured or a lessee or borrower

of the vehicle. Where such a clause is employed,

the mere fact that a consignee’s employees unload

the goods delivered does not render the consignee

a ‘‘borrower’’ of the vehicle, since such an inter-

pretation clearly would defeat the intended pur-

pose of the policy limitation. “8

McDaniels did not consider all of the policy terms,

particularly that the tractor is the insured vehicle, not just

the trailer. Never was there a consideration of a borrowing

of the ‘‘entire’’ vehicle insured under the policy. Truckmen

and their insurers’ intention, and the reasonableness of the

new insuring clause, is shown by a reading of the entire

policy.

Bankers and Shippers Insurance policy provides a

definition of hired automobile which distinguishes a semi-

trailer.2’ This Court in McDaniels decided that A&P was

the ‘‘borrower”’ of the vehicle, although they only had the

right to enter the trailer. They had no right to drive, enter

or have anything to do with the tractor, which is the in-

sured ‘‘automobile”’ under the terms of this policy.28 At no

36 7Am.Jur.2d, Automobile Insurance, Sec. 206, pp. 719-20 (1980)

37 Exhibits. Joint 1 & 2.

38 Supra, fns. 28 and 37.

A-10

time was there a finding of any control of the use of the

tractor; i.e., the controlling insured automobile that makes

up ‘‘the vehicle’, as if the driver had unshackled the tractor

and driven off during the loading process leaving the semi-

trailer in the control of the unloaders.

The McDaniels decision has caused consternation in

the trucking industry and its insurance carriers. In the ins-

tant case, as in McDaniel, there was no right of control or

even use of the entire insured ‘‘automobile’’, only the right

tc load or unload the trailer. The terms unloading and “‘bor-

rowing’ are not synonymous nor correlative for such a

purpose.??

CONCLUSION

McDaniels v. Great Atlantic & Pacific Tea Co., et al,

supra, be reversed; and the judgment of the trial Court

herein should be reversed and judgment rendered herein in

favor of Bankers and Shippers Insurance Company of New

York dismissing the demands against it; or, alternatively.

for a finding that American Mutual Liability Insurance

Company is liable over to Bankers and Shippers Insurance

Company of New York for one-half (2) of the amount of the

compromise with a credit to Bankers and Shippers for its

$25,000.00 deductible portion.

39 Supra, fn. 35.