977 F.3d 69
1st Cir.2020Background
- Gomes rented an electric boom lift from United Rentals; four days later a Gomes employee operated the lift and injured attendee Guy Ayotte at a Rhode Island trade show. Ayotte sued United Rentals and Gomes alleging both vicarious liability (for Gomes' negligence) and direct negligence by United Rentals (maintenance/rental).
- Gomes was insured by Scottsdale; the rental contract required Gomes to name United Rentals as an additional insured and provide a certificate of insurance. United Rentals was insured by ACE under two policies (an ACE CGL fronting arrangement and an ACE Ultimate Net Loss policy with a $2M SIR and $3M limit).
- United Rentals demanded defense and indemnity from Scottsdale as an additional insured. The district court (Dec. 23, 2015) held Scottsdale owed a defense; after settlement the court (Mar. 30, 2018) held Scottsdale must indemnify United Rentals for both direct and vicarious liability but treated Scottsdale coverage as excess over ACE.
- Scottsdale appealed the additional-insured status and scope of coverage; United Rentals appealed the priority-of-coverage ruling.
- The First Circuit held Scottsdale waived its challenge to United Rentals' additional-insured status by the parties’ settlement agreement, construed the endorsement to provide coverage for both direct and vicarious liability, and held ACE’s SIR/fronting arrangements did not constitute "valid and collectible" insurance so Scottsdale’s policy was primary.
Issues
| Issue | United Rentals' Argument | Scottsdale's Argument | Held |
|---|---|---|---|
| Additional-insured status | Scottsdale waived appeal and United Rentals qualifies as additional insured under contract/certificate | No waiver; United Rentals not an additional insured | Scottsdale waived challenge via settlement; United Rentals is an additional insured |
| Scope of additional-insured coverage (direct v. vicarious) | Endorsement covers bodily injury "caused in whole or in part by" Gomes — covers both direct and vicarious liability | Phrase modifies "liability," so it covers only vicarious liability imputed from Gomes | Endorsement covers both direct and vicarious liability; ambiguities construed for coverage |
| Priority of coverage (primary vs. excess) | ACE policies are self-insurance/fronting and not "valid and collectible" other insurance, so Scottsdale is primary | ACE policies qualify as other collectible insurance, making Scottsdale excess | ACE SIR and fronting arrangement are not "valid and collectible" insurance here; Scottsdale is primary |
Key Cases Cited
- Brown v. Gillette Co., 723 F.2d 192 (1st Cir. 1983) (settlement terms should be enforced literally)
- Stratford Sch. Dist. v. Emps. Reinsurance Corp., 162 F.3d 718 (1st Cir. 1998) (retained self-insurance under a deductible/SIR is not "insurance" for other-insurance clauses)
- Brazas Sporting Arms, Inc. v. Am. Empire Surplus Lines Ins. Co., 220 F.3d 1 (1st Cir. 2000) (ambiguities in exclusion/coverage provisions construed against insurer)
- Liability Investigative Fund Effort, Inc. v. Mass. Med. Prof'l Ins. Ass'n, 636 N.E.2d 1317 (Mass. 1994) (insurance involves shifting risk to an insurer)
- Morrison v. Toys "R" Us, Inc., 806 N.E.2d 388 (Mass. 2004) (being "self-insured" means assuming one’s own risk rather than transferring it)
- Boston Gas Co. v. Century Indem. Co., 910 N.E.2d 290 (Mass. 2009) (discusses self-insurance as the primary layer under excess policies; not an other-insurance ruling)