Opinion ID: 3048196
Heading Depth: 3
Heading Rank: 3

Heading: Liability under the MEL Endorsement

Text: [9] Applying Washington State law to the question whether Royal is obligated to provide indemnity for the Okada settlement, we hold that Royal is not so obligated because Okada’s injuries did not result from an accident covered by the MEL endorsement. [10] The MEL endorsement extended insurance coverage by Royal for bodily injury suffered by a “master or member of the crew” of a Kelly-Ryan vessel when such person was performing work “necessary or incidental” to “Painting and/or scraping of decks of tugs or barges, and loading and unloading as applicable in Washington and Alaska.” The injured perSENTRY SELECT INS. v. ROYAL INSURANCE 3915 son in the present case, Okada, was not injured during the performance of any of these tasks. Kelly-Ryan contends, and the district court concluded, that Okada was injured while “unloading” the prefabricated house from the barge to the house mover, which included delivery of the house to the construction site. We disagree. Although the district court correctly determined that the term “loading and unloading” is ambiguous under Washington law, the court erred in failing to consider the definition of “loading and unloading” contained in the CGL policy as extrinsic evidence of the parties’ intent. The CGL policy contains a definition of “loading or unloading,” and that policy was relevant extrinsic evidence because the Big Shield policy, to which the MEL endorsement applied, was an umbrella policy of insurance in excess of both the CGL and employers’ liability policy. The nature of this umbrella policy “as an additional layer of excess coverage suggests the parties intended to provide the same coverage as the underlying [ ] policy.” Pub. Util. Dist. No. 1 v. Int’l Ins. Co., 124 Wn.2d 789, 799, 881 P.2d 1020 (1994). To determine the intent of the parties in the face of ambiguity, we look first to “evidence of the situation and relations of the parties, the subject matter of the transaction, preliminary negotiations and statements made therein, usages of trade, and the course of dealing between the parties.” Berg v. Hudesman, 115 Wn.2d 657, 668, 801 P.2d 222 (1990) (quoting Restatement (Second) of Contracts § 212 cmt. b (1981)). Accord Pub. Util. Dist. No. 1, 124 Wn.2d at 799 (applying rule of Berg to interpret a marine insurance contract). [11] We may examine the underlying CGL policy as evidence of the parties’ intent under Washington law because it is an “[a]greement[ ] . . . contemporaneous with the adoption of a writing [that is] admissible in evidence to establish . . . the meaning of the writing, whether or not integrated.” Berg, 3916 SENTRY SELECT INS. v. ROYAL INSURANCE 115 Wn.2d at 668 (first and fifth alterations in original) (quoting Restatement (Second) of Contracts § 214(c)). The CGL policy’s definition of “loading or unloading” clearly does not encompass the delivery of a house on a house mover to a construction site: 11. “Loading or unloading” means the handling of property ... c. While it is being moved from an air- craft, watercraft or “auto” to the place where it is finally delivered; but “loading or unloading” does not include the movement of property by means of mechanical device, other than a hand truck, that is not attached to the aircraft, watercraft or “auto.” In addition, under the Big Shield policy, the house mover would be a piece of “mobile equipment” because it is a “[v]ehicle[ ] that travel[s] on crawler treads” as defined by the Big Shield policy. Considering both of these definitions, we conclude that the house mover is a piece of “mobile equipment” under the Big Shield policy and under the CGL policy it is a “mechanical device . . . that is not attached to the . . . watercraft.” This strongly supports Royal’s contention that the parties never intended “unloading” to encompass the movement of a house on a house mover to a construction site. Furthermore, if any ambiguity remains after resort to the foregoing extrinsic evidence, the district court should have looked to evidence of trade usage to assess the reasonableness of the parties’ interpretations. See Pub. Util. Dist. No. 1, 124 Wn.2d at 799 (“To determine the parties’ intent, the court first will view the contract as a whole, examining its subject matter . . . and the reasonableness of [the parties’] respective interSENTRY SELECT INS. v. ROYAL INSURANCE 3917 pretations.”); Berg, 115 Wn.2d at 668 (court may look to usages of trade). Under Washington law, “the general rule is that such language [technical or terms of art] is to be given its technical meaning when used in a transaction within its technical field.” Berg, 115 Wn.2d at 666 (citing Keeton v. Dep’t of Soc. & Health Servs., 34 Wash. App. 353, 361, 661 P.2d 982 (1983); Restatement (Second) of Contracts § 202(3)(b) (1981)). Expert testimony was presented in this case on the definition of “unloading” in the maritime context. Experts from both of the P&I Underwriters answered in the affirmative when asked if “in the industry generally, unloading cargo is deemed to mean offloading it from the vessel onto another dock, wharf or another vessel.” In addition, Alaska National’s underwriter testified that he too understood the transportation of the houses on the house movers to be outside the scope of “unloading” coverage under the MEL. The district court, however, erroneously borrowed a definition of “unloading” from the automobile context, defining “unloading” under a “complete operations theory” as “the entire process involved in the movement of the article, thereby omitting any distinction between ‘loading’ and preparatory activities or ‘unloading’ and ‘delivery.’ ” Transamerica Ins. Group, 92 Wn.2d at 25. The district court should not have adopted this definition of “unloading” wholesale from the automobile insurance context. Coverage under an automobile insurance policy generally turns on whether an accident arises out of “operation, maintenance and use” of a vehicle, which clearly shapes the definition of “loading and unloading.” See 6B-184 Appleman on Insurance Law & Practice § 4322 (1st ed. 2006) (“[E]ach case must be treated according to the facts involved, taking into consideration the connection between the unloading or loading and the operation, maintenance and use of the vehicle, construing such coverage as an extension of, rather than a limitation upon, the operation, maintenance, and use clause.”). 3918 SENTRY SELECT INS. v. ROYAL INSURANCE Moreover, the Washington State cases on which the district court relied2 were decided prior to the Washington Supreme Court’s decision in Berg, 115 Wn.2d at 668-70, in which the Court adopted the Second Restatement’s context rule that ambiguities are to be construed in light of extrinsic evidence of the parties’ intent. The ambiguous use of “unloading” in this case is resolved by the applicable extrinsic evidence as to the parties’ intent. The term “unloading” does not include delivery of the prefabricated house to its construction site, a mile and a half inland from the wharf where the house was unloaded from the barge onto the house mover. Therefore, Okada was not injured during the “unloading” of the house.3 Kelly-Ryan also argues that Okada’s work atop the house mover fell within the MEL endorsement’s requirement that an accident occur during work which is “necessary or incidental” to “unloading.” We disagree. Moving a house on a house mover over a mile inland is clearly not “necessary” to complete the “unloading” of the house from the barge. KellyRyan’s contention that delivery to a remote construction site is “incidental” to “unloading” from the barge is also unpersuasive because it leads to an unreasonable and strained construction of the word “incidental.” Transcontinental Ins. Co. v. Wash. Pub. Utils. Dists. Util. Sys., 111 Wn.2d 452, 457, 2 McDonald Indus., Inc., 95 Wn.2d at 914; Transamerica Ins. Group, 92 Wn.2d at 25; Fiscus Motor Freight, Inc. v. Universal Sec. Ins. Co., 53 Wash. App. 777, 770 P.2d 679 (1989). 3 The Washington Supreme Court has acknowledged that there exists a “a split of authority as to whether ‘loading and unloading’ extends coverage to include that time when the goods are ‘at rest’ or until there is a completed operation.’ ” McDonald Indus., Inc. v. Rollins Leasing Corp., 95 Wn. 2d 909, 914, 631 P.2d 947 (1981); see also Transamerica Ins. Group, 92 Wn.2d at 25. The district court erred in adopting a definition most favorable to the insured because we do not apply the contra-insurer rule of interpretation where the insured or its broker has drafted the ambiguous language, which was what occurred in this case. See Travelers Indem. Co. v. United States, 543 F.2d 71, 74 (9th Cir. 1976) (stating that the rule of strict construction “has no applicability when the language is supplied by the insured, his agent or his broker”). SENTRY SELECT INS. v. ROYAL INSURANCE 3919 760 P.2d 337 (1988) (“[A] policy should be given a practical and reasonable interpretation rather than a strained or forced construction that leads to an absurd conclusion, or that renders the policy nonsensical or ineffective.”). Kelly-Ryan’s suggested definition of “incidental” is also inconsistent with the ordinary meaning of that term. Black’s Law Dictionary defines “incidental” as “[d]epending upon or appertaining to something else as primary, something necessary, appertaining to, or depending upon another, which is termed the principal; something incidental to the main purpose.” Black’s Law Dictionary 686 (5th ed. 1979). Webster’s similarly defines “incidental” as “[s]ubordinate, nonessential, or attendant in position or significance: as a: occurring merely by chance or without intention or calculation . . . b: being likely to ensue as a chance or minor consequence.” Webster’s Third New International Dictionary 1142 (1986). The activities subsequent to the transfer of the prefabricated house to the house mover — driving the house mover over a mile inland, dispatching a crew to accompany the mover and secure the route, coordinating the depowering of multiple power lines, and unloading the house from the house mover to the construction site — cannot possibly be considered “chance or minor consequence[s]” dependent upon or incidental to the “main purpose” of the transfer of the house from the barge to the house mover.