Ajax Construction Company, Inc. v. Liberty Mutual Insurance Company
154 A.3d 913
| R.I. | 2017Background
- Ajax employee Mark Furia was injured in Massachusetts; he was hired in Rhode Island and worked predominantly in Massachusetts (≈70%).
- Ajax had workers’ compensation policies from Liberty (Massachusetts coverage; large premium) and Beacon (Rhode Island coverage; smaller premium).
- Beacon was ordered by a Workers’ Compensation Court judge to pay benefits in Rhode Island; the judge also ordered Liberty to indemnify Beacon for 50% because of overlapping coverage.
- On appeal the Appellate Division vacated that decree and held Beacon solely liable under R.I. Gen. Laws § 28-36-5 ("every policy shall cover the entire liability of the employer") and ruled Liberty did not owe benefits under its "Massachusetts Limited Other States Insurance Endorsement," adopting a WCRIB bulletin definition of "Massachusetts employee."
- Ajax and Beacon sought certiorari; the Rhode Island Supreme Court granted review and considered (1) the contract interpretation of "Massachusetts employee" and (2) the statutory meaning of "entire liability of the employer."
- The Supreme Court reversed the Appellate Division: it held Furia was a "Massachusetts employee" under the plain meaning of Liberty's endorsement and that § 28-36-5 does not require a single insurer to cover all employer liability, so Liberty must pay and Beacon is not solely liable; Liberty must reimburse Beacon for amounts Beacon already paid.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Meaning of "Massachusetts employee" in Liberty's endorsement | Ajax: plain meaning = employee who works primarily in Massachusetts; Furia qualifies | Appellate Division/Liberty: term limited by WCRIB bulletin to those hired in MA and primarily working in MA; Furia not covered | Term unambiguous; ordinary meaning controls; Furia (worked ~70% in MA) is a "Massachusetts employee"; WCRIB extrinsic definition improperly relied upon |
| Effect of R.I. Gen. Laws § 28-36-5 ("entire liability of the employer") | Ajax/Beacon: statute does not require one policy/insurer to cover all liability; employer may have multiple policies | Appellate Division/Liberty: statute makes issuer of RI policy (Beacon) fully liable for claims filed under RI Act | Statute ambiguous but legislative purpose is to ensure full coverage for employees, not force single-policy coverage; employers may split coverage among insurers; Beacon not solely liable |
| Whether claim location (forum) can determine insurer liability | Ajax/Beacon: insurer liability should follow policy language and premium allocation, not filing location | Liberty: liability could depend on forum and endorsement definitions | Court rejects forum-based rule; insurer liability depends on policy terms, not where employee files claim |
| Use of extrinsic materials to interpret policy terms | Ajax: extrinsic WCRIB bulletin was not part of policy and cannot define unambiguous term | Appellate Division: relied on bulletin to define "Massachusetts employee" | Court: cannot use extrinsic evidence absent ambiguity; here term unambiguous so reliance on bulletin was error |
Key Cases Cited
- Miller Bros. Const. Co. v. Maryland Casualty Co., 155 A. 709 (Conn. 1931) (statutory "entire liability" requires insurer to assume full liability it undertakes, but does not force single-policy coverage everywhere)
- American Mutual Insurance Co. v. Duvall, 372 A.2d 263 (N.H. 1977) (insurer liability should not turn on the employee’s choice of forum)
- Lenny Szarek, Inc. v. Maryland Casualty Co., 829 N.E.2d 871 (Ill. App. Ct. 2005) (declining to base coverage on forum to avoid arbitrary results)
- Geigy Chemical Corp. v. Zuckerman, 261 A.2d 844 (R.I. 1970) (stating primary purpose of workers’ compensation is to assure injured employees economic assistance and shift burden to employer)
- Medical Malpractice Joint Underwriting Ass’n v. Charlesgate Nursing Ctr., L.P., 115 A.3d 998 (R.I. 2015) (insurance-policy terms are contracts and must be interpreted by ordinary-contract rules)