Staker&parson Companies v. Scottsdale Insurance Co

IN THE

SUPREME COURT OF THE STATE OF ARIZONA

STAKER & PARSON COMPANIES, INC.,
Plaintiff,

v.

SCOTTSDALE INSURANCE COMPANY,
Defendant.

No. CV-21-0256-CQ
July 10, 2024

Certified Questions from the
United States District Court for the District of Utah
The Honorable David Nuffer, Judge
No. 4:18-cv-00014-DN-PK
QUESTIONS ANSWERED

COUNSEL:

Timothy J. Berg (argued), Tyler D. Carlton, Fennemore Craig, P.C., Phoenix;
Rebecca L. Hill, and George W. Burbidge, II, Christensen & Jensen, P.C.,
Salt Lake City, UT, Attorneys for Staker & Parson Companies, Inc.

Timothy J. Curtis (argued), Goebel Anderson PC, Salt Lake City, UT,
Attorneys for Scottsdale Insurance Company
 STAKER & PARSON COMPANIES V. SCOTTSDALE INSURANCE CO.
Opinion of the Court

JUSTICE BEENE authored the Opinion of the Court, in which CHIEF
JUSTICE TIMMER, VICE CHIEF JUSTICE LOPEZ and JUSTICES
BRUTINEL, BOLICK, MONTGOMERY, and KING joined.

JUSTICE BEENE, Opinion of the Court:

¶1 The United States District Court for the District of Utah
certified four questions to this Court:

1. Under Arizona law, is an additionally named insured
on a commercial automobile liability insurance policy “using”
an independent contractor’s covered vehicle when that
vehicle is being operated by an employee of the independent
contractor to transport the additionally named insured’s
cargo and the additionally named insured does not have
active or actual control over the vehicle’s operation or the
independent contractor’s employee?

2. Under Arizona law, is an additionally named insured
on a commercial automobile liability insurance policy “using”
an independent contractor’s covered vehicle when that
vehicle is being operated by an employee of the independent
contractor to transport the additionally named insured’s
cargo over private roads that are owned and maintained by
the additionally named insured, regardless of whether the
additionally named insured has active or actual control over
the vehicle’s operations of the independent contractor’s
employee?

3. Under Arizona law, can the managerial functions of an
additionally named insured on a commercial automobile
liability insurance policy, such as establishing safety training
procedures for independent contractors operating vehicles on
the additionally named insured’s property, constitute a “use”
of an independent contractor’s covered vehicle?

4. If the answer to any of Questions (1) through (3) above
is “yes,” under Arizona law, is there a sufficient causal link

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Opinion of the Court

between the additionally named insured’s “use” of the
covered vehicle and theories of liability for personal injuries
sustained by the independent contractor’s employee to
trigger an insurer’s duty to defend the additionally named
insured when the employee stopped and exited the vehicle
and was injured when attempting to dislodge an obstruction
that became lodged in the vehicle’s dual tires while it was
being operated on the additionally named insured’s private
roads?

¶2 We accepted all four questions, which we now answer.

BACKGROUND

¶3 These certified questions arise from an accident that occurred
at the Ina Pit Mine in Pima, Arizona, operated at the time by Staker &
Parson Companies (“Staker”). Staker had entered into a Haul and Materials
Agreement (“Haul Agreement”) with BDR Transport (“BDR”), which was
tasked with transporting rock materials between processing areas located
within the Ina Pit Mine site. Under the Haul Agreement, BDR was required
to procure certain insurance coverages and name Staker as an additional
insured.

¶4 The accident involved William Baughn, a BDR employee.
Baughn hauled rock at the Ina Pit Mine in a BDR tractor and trailer. As
Baughn was driving on the Ina Pit Road, a rock became lodged between the
trailer’s dual set of tires. Once parked, Baughn noticed the lodged rock and
attempted to dislodge it using a hammer. The tires exploded, seriously
injuring him.

¶5 Baughn sued Staker, BDR, and certain agents of those entities.
As relevant here, Baughn alleged that Staker was negligent under three
theories: (1) improper loading of Baughn’s trailer with rock and dirt; (2)
improper maintenance of the Ina Pit Road on which Baughn traveled; and
(3) failure to devise and implement safety training and techniques. Staker
tendered its defense to Scottsdale Insurance Company (“SIC”). SIC had
issued a commercial automobile policy to BDR in accordance with the Haul
Agreement, naming Staker as an additional insured. But SIC denied
coverage, asserting Staker did not qualify as an insured under the policy
because it was not using the vehicle at the time of the accident.

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Opinion of the Court

¶6 Staker provided for its own defense in the lawsuit. Upon the
conclusion of the Baughn litigation, Staker sued SIC seeking a
determination of SIC’s obligation to provide and pay for Staker’s defense. 1
Staker’s complaint against SIC was filed in a Utah state court but was
subsequently removed to the United States District Court for the District of
Utah. We have jurisdiction under article 6, section 5(6) of the Arizona
Constitution and A.R.S. § 12-1861.

DISCUSSION

¶7 We review statutory terms and questions of law de novo. Cao
v. PFP Dorsey Invs., 545 P.3d 459, 463 ¶ 15 (Ariz. 2024). Though we generally
interpret contracts de novo, Powell v. Washburn, 211 Ariz. 553, 555–56 ¶ 8
(2006), we are not asked to interpret the parties’ policies. Rather, the
certified questions here refer only to Arizona law. We therefore do not
address the district court’s rulings regarding how the SIC policy applies to
the underlying facts, including its ruling that the SIC policy’s “Movement
of Property by Mechanical Device” clause excluded coverage for Baughn’s
claims that Staker negligently loaded the truck prior to the accident.

I.

¶8 We answer the first certified question in the affirmative.
Arizona law generally provides that “loading and unloading” a vehicle
constitutes “use” of that vehicle under Arizona automobile insurance
policies. See Mission Ins. v. Aid Ins. Servs., 120 Ariz. 220, 221–22 (1978).
Furthermore, “loading and unloading” is a continuous process that
necessarily encompasses transporting cargo between loading and
unloading it. See id. at 222; see also Farmers Ins. of Ariz. v. Till, 170 Ariz. 429,
431–32 (App. 1991).

¶9 Arizona’s omnibus insurance coverage statute—A.R.S.
§ 28-4009(A)(2)—requires that all motor vehicle liability policies

1 Staker’s claim seeking indemnification of the judgment from SIC became
moot after the court of appeals reversed the jury verdict against Staker. See
Baughn v. Staker & Parson Cos., No. 2 CA-CV 2017-0209, 2018 WL 5249968,
at *7 ¶ 30 (Ariz. App. Oct. 22, 2018).
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Opinion of the Court

insure the person named in the policy as the insured and any
other person, as insured, using the motor vehicle or motor
vehicles with the express or implied permission of the named
insured against loss from the liability imposed by law for
damages arising out of the ownership, maintenance or use of
the motor vehicle or motor vehicles.

(Emphasis added.) The first question here requires us to define “use of the
motor vehicle” as used in the statute.

¶10 We have previously interpreted the word “use” in this
context to include “loading and unloading.” In Mission Insurance, we found
the term “use of a motor vehicle” to include “the concept of loading and
unloading.” 120 Ariz. at 221–22. There, we noted that “‘unloading’ is
regarded as embracing all the operations which are required in any specific
situation to effect a completed delivery of the article.” Id. at 222 (quoting
Cal. Steel Bldgs., Inc. v. Transp. Indem. Co., 51 Cal. Rptr. 797, 801 (Dist. Ct.
App. 1966)). More recently, our court of appeals noted that courts “have
concluded that ‘use’ continues from the commencement of loading through
the unloading process.” Till, 170 Ariz. at 431–32.

¶11 Based on our omnibus insurance coverage statute and
consistent with our caselaw, we conclude that “use” of a motor vehicle
includes “loading and unloading.” We further conclude that “loading and
unloading” is a continuous process which includes the transportation of the
cargo being loaded and unloaded.

¶12 We also take this opportunity to clarify that the definition of
“use” is not confined to either control or the loading and unloading process.
Instead, we find that “use” of an insured vehicle is a broad concept. See
Odom v. Farmers Ins. of Ariz., 216 Ariz. 530, 536 ¶ 22 (App. 2007) (collecting
dictionary definitions to support the proposition that “[a] person ‘uses’ an
object when he or she is actually doing something with it at the time in
question” (emphasis added)); see also Westfield Ins. v. Aetna Life & Cas. Co.,
153 Ariz. 564, 568 (App. 1987) (collecting authorities to conclude that “use”
includes a broad range of activity involving the utilization of the covered
vehicle as intended or contemplated by the insured).

¶13 Consistent with existing Arizona caselaw, we define “use” as
the permissive user taking some action that involves the inherent nature of

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Opinion of the Court

the particular vehicle, like driving, loading or unloading, fueling, or
otherwise utilizing the vehicle as intended. See, e.g., Tobel v. Travelers Ins., 195 Ariz. 363, 368–69 ¶¶ 28–32 (App. 1999) (holding that “use” includes
using a parked work truck’s flashing warning lights to warn drivers that
worker was moving barricades from the roadside, where truck was insured
as barricade company’s work vehicle); Westfield Ins., 153 Ariz. at 568
(holding that tow-truck operator was “using” the covered vehicle that he
was towing); Till, 170 Ariz. at 431–32 (finding “use” of a vehicle where dog
broke through living quarters of a truck and bit a passenger sitting in the
cab, reasoning the dog was being transported by the covered truck).

¶14 This definition is consistent with our interpretation of “use”
as a broad term, as well as the principle that “use” cannot be extended
beyond the scope of the insured purpose. See State Farm Mut. Auto. Ins. v.
Loesl, 194 Ariz. 40, 44 ¶ 20 (App. 1999) (“Insurers should not be responsible
for liability coverage that is far beyond what the parties to the policy
intended.”). Furthermore, this definition conforms with the notion that
automobile policies are not to be treated as general liability policies. See id.
(“[P]arties to an automobile liability policy do not, and should not,
contemplate that the policy is a general liability insurance contract.”); see,
e.g., id. (holding that a named insured had not “used” his vehicle
negligently by driving an inebriated passenger to a different vehicle).

¶15 In short, we conclude that “use” of a motor vehicle
encompasses any purpose for which the vehicle was intended, but the term
cannot extend beyond the scope of the insured purpose. Accordingly, we
answer the first certified question in the affirmative because “use” includes
loading and unloading an additionally named insured’s cargo, and such
loading and unloading does not require the additionally named insured’s
“active or actual control over the vehicle’s operation.”

II.

¶16 We answer the second certified question in the negative.
“Use” of a covered vehicle does not arise independently from the injured
party’s use of a vehicle over “private roads that are owned and maintained
by the additionally named insured.”

¶17 In his lawsuit, Baughn alleged that “Staker had a duty to
maintain reasonably safe mine road and dump site conditions which would

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Opinion of the Court

include routine clearance of matter to prevent or minimize the likelihood of
rocks from interfering with the safe operation of truck tires.” Baughn also
alleged that at the time of the accident, “there were inadequately
maintained conditions at the Ina Pit [R]oad which allowed trailer tires to
pick up rocks which had not been cleared by sufficient road maintenance.”
These allegations support a theory of negligence for failing to maintain
reasonably safe premises. See Dabush v. Seacret Direct LLC, 250 Ariz. 264,
267 ¶ 9 (2021). Baughn’s theory of negligence based on Staker’s
maintenance of the Ina Pit Road, however, did not arise from the
ownership, maintenance, or “use” of a covered vehicle.

¶18 As explained above, “use,” though broadly defined, still must
relate to the operation of the covered vehicle. See Loesl, 194 Ariz. at 42–43
¶ 14; Odom, 216 Ariz. at 536 ¶ 22; Part I ¶¶ 13–14. Although transporting
the cargo owned by an additionally named insured can constitute “use,”
driving on the additionally named insured’s roads, by itself, does not
constitute “use” of a covered automobile for which the insurer is required
to defend under the policy. Arizona’s definition of “use” is not so
expansive that it encompasses everything touching upon the insured
vehicle and the associated lawsuit.

¶19 Moreover, it is difficult to reconcile the word “use” with a
failure to maintain premises. A failure to maintain requires a plaintiff to
prove the defendant did not do something, i.e., the defendant did not
properly maintain its premises. “Use,” on the other hand, requires
“actually doing something” with the insured vehicle. See Odom, 216 Ariz.
at 536 ¶ 22. “Actually doing something” with a vehicle is at odds with an
allegation of not doing something with the land upon which a vehicle is
used. See id. It would be incongruous to conclude that Baughn’s theory of
negligence based on Staker’s alleged failure to maintain premises would
constitute a “use” of the insured vehicle. Accordingly, we answer the
second certified question in the negative.

III.

¶20 We also answer the third certified question in the negative.
“Managerial functions of an additionally named insured on a commercial
automobile policy” do not constitute “use” of a covered vehicle.

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Opinion of the Court

¶21 In his complaint, Baughn alleged that he received inadequate
training from both Staker and BDR with respect to how to deal with a rock
becoming lodged between the dual tires. In the duty to defend action, SIC
points out that “Staker does not explain how its alleged failure to provide
adequate safety training is in any way causally related to its alleged ‘use’ of
BDR’s vehicle.” SIC also points out that Staker “has not cited to any case
(nor has [SIC] found a case) that extends the definition of ‘using’ a vehicle
to include allegations related [to] a putative insured’s supervisory or
managerial functions regarding safety training.” Conversely, in explaining
how Baughn’s allegations gave rise to SIC’s duty to defend, Staker relates
managerial functions to “use” of a vehicle by explaining that “[t]he alleged
failure of Staker in providing safety training to Baughn concerns its
utilization of the covered vehicles as intended and contemplated by BDR
and Staker.”

¶22 Unlike “use” with respect to the transportation of cargo, our
caselaw has not extended the word “use” to include exclusively managerial
functions. Because neither the statutory text itself, see § 28-4009(A)(2), nor
our caselaw enlightens us, we must look to the legislative goals, social
policies, and the transaction as a whole, including the reasonable
expectations of the insured. See State Farm Mut. Auto. Ins. v. Wilson, 162
Ariz. 251, 258 (1989). Here, an examination of those factors leads us to
conclude that “managerial functions of an additionally named insured on a
commercial automobile policy” do not constitute “use” of a covered
vehicle.

¶23 The legislative purpose of our omnibus insurance coverage
statute is “to prevent persons injured by the use of a motor vehicle, whether
in highway driving or otherwise, from being left uncompensated because
of restrictive clauses in the policy insuring the vehicle.” Mission Ins., 120
Ariz. at 222. In that light, we consider whether discounting “managerial
functions” from the term “use” would leave injured persons
uncompensated.

¶24 Here, Baughn was not left uncompensated when SIC did not
defend Staker from Baughn’s failure to supervise and train claim. Though
Staker was found not-negligent as to Baughn on appeal regarding this
claim, BDR was found 15% at fault, and it does not appear that BDR
contested its liability or refused to pay this portion of Baughn’s damages.

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Opinion of the Court

¶25 Moreover, and critically, Baughn was not precluded from
claiming that he received inadequate training from Staker and BDR. Indeed,
Baughn alleged and pursued such a claim. But he did not marshal sufficient
evidence to support this theory of liability. Baughn’s failure, therefore,
turned on the factual insufficiency of his claim—and not on the legal effect
of the SIC policy terms. In short, our interpretation of the word “use” here
would not prevent Baughn from seeking compensation under an
inadequate-training theory and, thus, is not so restrictive as to leave injured
persons uncompensated.

¶26 SIC also points out the adverse policy implications if alleged
managerial failings were to constitute “use” of a vehicle. SIC argues that if
Staker’s lack of training constitutes “use,” an insurance company’s duty to
defend would be implicated anytime a company finds a managerial
oversight that is, at most, distantly related to an automobile accident. The
implication would be that “[c]ompanies like Staker will have no incentive
to adequately maintain their premises or address worksite safety because
any financial liability would fall on their subcontractor’s insurers thus
removing any financial incentive to avoid negligence.”

¶27 We agree. There is no compelling reason to shift the burden
of employee and contractor training onto a subcontractor’s automobile
insurer when negligent training is alleged. Allowing such a shift would
mean Staker would be disincentivized to address worksite safety because
BDR’s insurer would be liable for any accidents that occur on the premises
no matter how tenuously linked to the covered vehicle. In the insurance
context, “use” of an automobile is not unlimited, and it bears repeating that
“[i]nsurers should not be responsible for liability coverage that is far
beyond what the parties to the policy intended.” Loesl, 194 Ariz. at 44 ¶ 20.

¶28 Finally, like with premises liability, it is also difficult to
reconcile the word “use” with a claim of failure to train. A failure to train
is evidenced by a failure to act, i.e., provide needed training, whereas “use”
requires “actually doing something” with the insured vehicle. See Odom,
216 Ariz. at 536 ¶ 22. It would be therefore inconsistent to conclude
Baughn’s theory of negligence based on a failure to train would constitute
a “use” of the insured vehicle.

¶29 Accordingly, we answer the third certified question in the
negative.

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Opinion of the Court

IV.

¶30 We answer the final certified question by providing the
district court with Arizona law on causation in the context of automobile
insurance policies.

¶31 “[T]here must be a causal relationship between an injury and
the ownership, maintenance or use of a motor vehicle.” Ruiz v. Farmers Ins.
of Ariz., 177 Ariz. 101, 102 (1993). State Farm Mutual Insurance Co. v.
Transport Indemnity Co., 109 Ariz. 56 (1973), establishes the causation
standard or nexus between “use” of a covered vehicle and an injury. For
there to be causation, the use of the covered vehicle does not have to be the
proximate cause of the accident. See id. at 58. Instead, the accident need
only be connected to the negligent ownership, maintenance, or use of the
covered vehicle. See id.; Ruiz, 177 Ariz. at 102; Tobel, 195 Ariz. at 370.

¶32 We do not directly answer whether there was a “sufficient
causal link” here. Causation is a question of fact. Gipson v. Kasey, 214 Ariz.
141, 147 ¶ 30 (2007). Thus, having set out the standard above, we leave the
question of a causal link to the trier of fact. See id. at 143 ¶ 9.

CONCLUSION

¶33 We answer the first certified question in the affirmative, the
second and third certified questions in the negative, and the fourth certified
question by outlining Arizona law regarding causation in the duty to
defend context.

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