United States Liability Insurance Company v. Benchmark Construction Services, Inc
Filing
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Judge Nathaniel M. Gorton: ORDER entered. MEMORANDUM AND ORDER: "For the foregoing reasons, plaintiff's Motion for Summary Judgment (Docket No. 19 ) is ALLOWED and defendant's Motion for Summary Judgment (Docket No. 23 ) is DENIED. So ordered."(Moore, Kellyann)
United States District Court
District of Massachusetts
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Plaintiff,
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v.
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BENCHMARK CONSTRUCTION SERVICES, )
INC.,
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Defendant.
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UNITED STATES LIABILITY
INSURANCE COMPANY,
Civil Action No.
13-11543-NMG
MEMORANDUM & ORDER
GORTON, J.
This case arises from injuries purportedly suffered by a
painter during the renovation of a home in Newton,
Massachusetts.
The painter filed a complaint in the Middlesex
Superior Court against the general contractor for the renovation
project, defendant Benchmark Construction Services, Inc.
(“defendant” or “Benchmark”).
Benchmark tendered the claim to
plaintiff United States Liability Insurance Company (“plaintiff”
or “USLIC”).
USLIC now seeks a declaratory judgment from this
Court that it has no obligation to defend or indemnify Benchmark
in the case filed by the painter.
USLIC filed its Complaint in June, 2013.
Cross motions for
summary judgment are currently pending before the Court and a
trial is scheduled for August 4, 2014.
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I.
Background
Benchmark is a construction company that, among other
things, renovates residences.
USLIC issued Benchmark Commerical
Liability Insurance Policy No. CL1151220D (“the Policy”) for a
period beginning on June 23, 2009 and ending on June 23, 2010.
The premium of $9,122.88 was calculated to cover, among other
things, “subcontracted work” by contractors.
The Policy covers lawsuits that allege, inter alia, bodily
injury based upon an accident that occurred within the United
States.
Coverage by the policy is, however, narrowed by an
exclusion for
“Bodily injury” to ... [a]n “employee” of the insured
arising out of and in the course of
(a)
Employment by the insured; or
(b)
Performing duties related to the conduct of
the insured’s business....
Commercial General Liability Coverage Form, § 1.2(e),
Docket No. 25, Ex. 1, at 13.
That exclusion was deleted in its entirety by “Endorsement
L500”, which is subtitled “Bodily Injury Exclusion - All
Employees, Volunteer Workers, Temporary Workers, Casual
Laborers, Contractors, and Subcontractors” and is appended to
the Policy.
Endorsement L500 excludes, in relevant part,
coverage for
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1.
“Bodily injury” to any “employee”, “volunteer worker”,
“temporary worker” or “casual laborer” arising out of
or in the course of:
(a)
(b)
2.
Employment by any insured; or
Performing duties related to the conduct of any
insured’s business; [or]
“Bodily injury” to any contractor, subcontractor
or any “employee”, “volunteer worker”, “temporary
worker” or “casual laborer” of any contractor or
subcontractor arising out of or in the course of
the rendering or performing services of any kind
or nature whatsoever by such contractor,
subcontractor or “employee”, “volunteer worker”,
“temporary worker” or “casual laborer” of such
contractor or subcontractor for which any insured
may become liable in any capacity....
Endorsement L500, Docket No. 25, Ex. 1, at 37.
The Policy
does not, however, define the term “contractor”.
In July, 2009, Benchmark entered into a contract with
homeowners Tom and Sue Ghezzi-Guarino (“the Ghezzis”) to
renovate their home in Newton, Massachusetts (“the Residence”).
Plans for the renovation were designed by Thomas Huth, who was
doing business as Thomas R. Huth Architects (“Huth”).
Huth hired Sara Egan (“Egan”), who was doing business as
“Painted Design”, to apply decorative paint to Venetian plaster
on an interior wall of the Residence.
Benchmark had no
contractual relationship with Huth or Egan and Egan’s work under
her contract with Huth was outside of the scope of Benchmark’s
contract with the Ghezzis.
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On March 5, 2010, Megan Bailey (“Bailey”), an employee of
Egan, allegedly sustained bodily injury while applying
decorative paint to the interior wall of the Residence.
She
alleges that she fell from a ladder which was erected on top of
scaffolding.
Bailey.
Benchmark had no contractual relationship with
On that date, Benchmark had nearly completed the
renovation and its employees were removing tools and installing
baseboard at the Residence.
Bailey filed suit in Middlesex Superior Court on the
grounds that she was injured due to Benchmark’s negligence.
Benchmark demanded that USLIC defend and indemnify Benchmark
pursuant to the Policy.
In January, 2013, USLIC notified
Benchmark that the Policy did not cover the Bailey lawsuit
because the claims fell within the exclusion in Endorsement L500
for bodily injuries to employees of contractors.
II.
Cross Motions for Summary Judgment
A.
Legal Standard
Massachusetts law controls in actions that invoke the
diversity jurisdiction of this Court. B & T Masonry Constr. Co.
v. Pub. Serv. Mut. Ins. Co., 382 F.3d 36, 38 (1st Cir. 2004)
(citing U.S. Liab. Ins. Co. v. Selman, 70 F.3d 684, 688 (1st
Cir. 1995)).
Under Massachusetts law, the interpretation of an
insurance contract is a question of law for the Court to decide.
Id. (citing Ruggerio Ambulance Serv., Inc. v. Nat’l Grange Ins.
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Co., 724 N.E.2d 295, 298 (Mass. 2000)).
Where there are no
disputes of fact, the correct application of the policy is a
question of law that is properly resolved on summary judgment.
B & T Masonry, 382 F.3d at 38-39 (citing Liberty Mut. Ins. Co.
v. Metro Life Ins. Co., 260 F.3d 54, 61 (1st Cir. 2001)).
Ultimately, the insurer bears the burden of demonstrating that
coverage of a particular injury is excluded from the Policy. Id.
(citations omitted).
When interpreting a contract, a court should account for
what an “objectively reasonable insured, reading the policy
language, would expect to be covered.” Brazas Sporting Arms,
Inc. v. Am. Empire Surplus Lines Ins. Co., 220 F.3d 1, 4 (1st
Cir. 2000) (quoting GRE Ins. Grp. v. Metro. Bos. Hous. P’ship,
Inc., 61 F.3d 79, 81 (1st Cir. 1995)).
Because the parties are
presumed to have “tr[ied] to accomplish something rational,” any
reading must accord with common sense. Fishman v. LaSalle Nat’l
Bank, 247 F.3d 300, 302 (1st Cir. 2001) (citations omitted).
The policy should be “interpreted as a whole and construed so as
to give a reasonable meaning to each of its provisions.” JRY
Corp. v. LeRoux, 464 N.E.2d 82, 87 (Mass. App. Ct. 1984)
(citations omitted).
Moreover,
an interpretation which gives a reasonable meaning to
all of the provisions of a contract is to be preferred
to one which leaves a part useless or inexplicable.
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Jacobs v. U.S. Fid. & Guar. Co., 627 N.E.2d 463, 464 (Mass.
1994) (quoting Sherman v. Emp’rs’ Liab. Assur. Corp., 178 N.E.2d
864, 866-67 (Mass. 1961)).
Any ambiguities in the meaning of an exclusionary provision
are construed strictly against the insurer. Boazova v. Safety
Ins. Co., 968 N.E.2d 385, 390 (Mass. 2012) (citing August A.
Busch & Co. of Mass. v. Liberty Mut. Ins. Co., 158 N.E.2d 351
(Mass. 1959)).
Ambiguity exists when policy language is
“susceptible to more than one rational interpretation.” Brazas,
220 F.3d at 4-5 (citations omitted).
If two rational
interpretations exist, “the insured is entitled to the benefit
of the one that is more favorable to it.” Hazen Paper Co. v.
U.S. Fid. & Guar. Co., 555 N.E.2d 576, 583 (Mass. 1990)
(citations omitted).
If the court determines that the policy language is
unambiguous, it must construe terms according to their “plain
and ordinary meaning,” Brazas, 220 F.3d at 4 (quoting GRE, 61
F.3d at 81), and it may not alter that meaning in any way.
Robbins v. Krock, 896 N.E.2d 633, 636-37 (Mass. App. Ct. 2008)
(quoting Rogaris v. Albert, 730 N.E.2d 869, 871 (Mass. 2000)).
It may, however, consult dictionary definitions of the term to
ascertain that meaning. See Fed. Ins. Co. v. Raytheon Co., 426
F.3d 491, 498-99 (1st Cir. 2005).
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Furthermore, the “reasonable
expectations” of an insured have no bearing upon an unambiguous
contract because
a party can have no reasonable expectation of coverage
when that expectation would run counter to the
unambiguous language of an insurance policy.
Clark Sch. for Creative Learning, Inc. v. Phila. Indem. Ins.
Co., 734 F.3d 51, 57 (1st Cir. 2013) (citing Valley Forge Ins.
Co. v. Field, 670 F.3d 93, 105 (1st Cir. 2012)).
B.
Application
1.
Ambiguity in Meaning of “Contractor”
A threshold question is whether Endorsement L500 is
ambiguous in excluding coverage for bodily injury to
any contractor, subcontractor or any “employee”,
“volunteer worker”, “temporary worker” or “casual
laborer” of any contractor or subcontractor arising
out of or in the course of the rendering or performing
services of any kind or nature whatsoever by such
contractor, subcontractor or “employee”, “volunteer
worker”, “temporary worker” or “casual laborer” of
such contractor or subcontractor for which any insured
may become liable in any capacity....
Both parties focus on whether the isolated term “contractor”,
which is not defined the policy, is susceptible to multiple
reasonable interpretations and is therefore ambiguous.
USLIC contends that the term “contractor” unambiguously
refers to anyone with a contract.
It notes that such a reading
is supported by dictionary definitions of the term.
For
instance, Webster’s New World College Dictionary (4th ed. 1999)
defines “contractor” as
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a person who contracts to supply certain materials or
do certain work for a stipulated sum, esp[ecially] one
who does so in any of the building trades.
Benchmark responds that defining contractor as “a person who
contracts” is irrational because it renders other terms of
Endorsement L500 superfluous.
In the alternative, it contends
that there are other rational interpretations of “contractor”
that include 1) a construction worker and 2) a non-employee
independent contractor of Benchmark.
The Court will address
each of the three possible interpretations, seriatim.
a.
“Anyone with a contract”
Benchmark suggests that reading “contractor” to mean
“anyone with a contract” results in redundancies because a
subcontractor is also “anyone with a contract” and yet is listed
separately. See Jacobs, 627 N.E.2d at 464 (“[A]n interpretation
which gives a reasonable meaning to all of the provisions of a
contract is to be preferred to one which leaves a part useless
or inexplicable.” (quoting Sherman, 178 N.E.2d at 866-67)).
Similarly, that broad definition would seem to render the first
paragraph of Endorsement L500 superfluous because it refers to
the employees of Benchmark, which is an entity with a contract,
and therefore is duplicative of the term excluding coverage for
“employees ... of any contractor”.
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Nevertheless, the broad definition is rational.
The First
Circuit Court of Appeals has recognized that “redundancies
abound” in insurance contracts and has therefore cautioned
against overreliance on the canon that every word must be given
an independent meaning. See Ardente v. Standard Fire Ins., 744
F.3d 815, 819 (1st Cir. 2014) (quoting TMW Enters., Inc. v. Fed.
Ins. Co., 619 F.3d 574, 577-78 (6th Cir. 2010)); see also
Certain Interested Underwriters at Lloyd’s, London v. Stolberg,
680 F.3d 61, 68 (1st Cir. 2012) (“[I]nsurance policies are
notorious for their simultaneous use of both belts and
suspenders, and some overlap is to be expected.” (internal
citations omitted)); Valley Forge, 670 F.3d at 105.
Here, interpreting “contractor” broadly is not irrational
merely because it results in redundancies when applied to an
insured who happens to be both a contractor and employer.
Moreover, the interpretations preferred by Benchmark do not
necessarily avoid such redundancies.
For instance, construction
workers who perform under a subcontract are a subset of
construction workers who perform under a contract.
b.
“A construction worker”
Next, it is irrational to read “contractor” to mean
“construction worker” merely because the term is frequently used
to refer to those who work in the “building trades”.
The term
“building trades” sweeps broadly enough to include decorative
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painting completed during a renovation and is not limited to
those who perform carpentry or electrical work, for instance.
c.
“An independent contractor”
Finally, even if the Court were to accept that one
plausible meaning of “contractor” includes an “independent
contractor,” Benchmark cannot prevail.
There is no dispute that
Egan was an “independent contractor” according to that
definition and that Bailey was therefore an employee of an
independent contractor.
Benchmark suggests that, in light of
the first paragraph of Endorsement L500, which refers to
employees and other individuals who are employed by or perform
services for the insured, “contractor” can reasonably be
understood to mean “an independent contractor of the insured.”
Limiting the term “contractor” to those in contractual
privity with the insured contradicts the clear and unambiguous
language of Endorsement L500, which excludes coverage for bodily
injury to
any “employee” ... of any contractor ... arising out
of or in the course of the rendering or performing
services of any kind or nature whatsoever by such
contractor ....
(Emphasis added).
Endorsement L500 cannot plausibly be read to
limit the exclusion to only “independent contractors” of
Benchmark.
The term “any” is plain and unambiguous and the
Court is not permitted to alter that meaning. Robbins, 896
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N.E.2d at 636-37; see also James River Ins. Co. v. Keyes2Safety,
Inc., No. 11-901, 2012 WL 30233334, at *4 (N.D. Ill. July 24,
2012) (finding unpersuasive the argument that exclusion “must
have meant” to be limited to independent contractors and
subcontractors of the insured when exclusion stated plainly that
it applied to “any” contractor or subcontractor).
2.
Application of Plain Meaning
Because “contractor” is unambiguous, the Court must apply
the plain meaning of Endorsement L500.
Bailey falls within that
exclusion as an employee of any contractor who was injured while
performing services and therefore USLIC is not required to
indemnify or defend Benchmark against her claims.
That said, the Court can discern no reason why the parties
would choose ex ante to have coverage depend on whether an
injured party was performing subject to a contract at the time
he or she was injured regardless of whether that contract was
with the insured or some other entity and regardless of whether
the contract was related to the subject matter of the Policy.
See Fishman, 247 F.3d at 302 (explaining that parties to a
contract are presumed to intend rational results).
Nevertheless, the doctrine of “reasonable expectations” has no
application here because it would be unreasonable for Benchmark
to expect coverage that is precluded by the unambiguous language
of an insurance policy. See Clark, 734 F.3d at 57 (citing Valley
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Forge, 670 F.3d at 105).
If Benchmark wanted Endorsement L500
to sweep less broadly, it could have amended it to apply only to
its contractors or subcontractors. See James River, 2012 WL
30233334, at *4.
Having failed to do so, it may not now argue
that the contract means other than what it says.
3.
Duty to Defend
Because the language of Endorsement L500 is unambiguous,
the issue of whether USLIC has a duty to defend is moot. See
Sterilite Corp. v. Cont’l Cas. Co., 458 N.E.2d 338, 340 (Mass.
App. Ct. 1983).
ORDER
For the foregoing reasons, plaintiff’s Motion for Summary
Judgment (Docket No. 19) is ALLOWED and defendant’s Motion for
Summary Judgment (Docket No. 23) is DENIED.
So ordered.
/s/ Nathaniel M. Gorton
Nathaniel M. Gorton
United States District Judge
Dated July 8, 2014
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