797 F.3d 116
1st Cir.2015Background
- Benchmark, a general contractor, was insured by USLIC under a Commercial General Liability policy with an L-500 endorsement that replaced the standard Employer's Liability exclusion.
- Decorative painter Meghan Bailey, employed by Sara Egan (Painted Design), fell from scaffold while painting at homeowners' renovation site and sued Benchmark for negligence.
- USLIC refused to defend or indemnify Benchmark, invoking the L-500 Endorsement exclusion for "bodily injury" to any "contractor, subcontractor or any employee ... of any contractor or subcontractor arising out of ... rendering services ... for which any insured may become liable."
- District court ruled for USLIC, reading "contractor" to mean "anyone with a contract" and reading the clause "for which any insured may become liable" as modifying "bodily injury," thus excluding Bailey's claim.
- First Circuit reversed, holding the endorsement ambiguous on two points (the antecedent of "for which any insured may become liable" and the meaning of "contractor"), and construed ambiguities against the insurer, finding USLIC had a duty to defend and indemnify Benchmark.
Issues
| Issue | Plaintiff's Argument (USLIC) | Defendant's Argument (Benchmark) | Held |
|---|---|---|---|
| Antecedent ambiguity: Does "for which any insured may become liable" modify "services" or "bodily injury"? | Modifies "bodily injury": exclusion intended broadly to bar coverage whenever insured may be liable for the injury, regardless of contractual relation. | Modifies "services": exclusion applies only when insured may be liable for the contractor's/services themselves (i.e., where insured retained control or responsibility). | The phrase is ambiguous; construed for the insured to modify "services," so exclusion does not apply because Benchmark was not liable for Bailey's services. |
| Definition of "contractor": Does it mean "anyone with a contract" or only contractors hired by the insured? | Broad definition: "contractor" means anyone with a contract (so Egan and her employee fall within exclusion). | Narrow definition: "contractor" means a contractor of the insured (so it excludes only those in the insured's employment/subcontractor chain). | Term is ambiguous; construed for the insured to mean the insured's contractors, so Egan/Bailey were not within the exclusion. |
| Duty to defend/indemnify given the endorsement clauses | No duty: endorsement plainly excludes Bailey's claims. | Duty exists: endorsement ambiguities must be resolved for insured, bringing claim within coverage. | Court holds USLIC has a duty to defend and indemnify Benchmark and reverses district court. |
Key Cases Cited
- Boazova v. Safety Ins. Co., 968 N.E.2d 385 (Mass. 2012) (ambiguous policy terms construed against insurer; exclusions strictly construed)
- Boston Gas Co. v. Century Indem. Co., 910 N.E.2d 290 (Mass. 2009) (policy words given their usual and ordinary sense)
- Citation Ins. Co. v. Gomez, 688 N.E.2d 951 (Mass. 1998) (term is ambiguous if reasonably intelligent people could differ)
- Trustees of Tufts Univ. v. Commercial Union Ins. Co., 616 N.E.2d 68 (Mass. 1993) (reasonable insured's expectations inform ambiguous-policy interpretation)
- Hazen Paper Co. v. U.S. Fid. & Guar. Co., 555 N.E.2d 576 (Mass. 1990) (same; consider insured expectations)
- Kostrzewa v. Suffolk Constr. Co., 897 N.E.2d 1272 (Mass. App. Ct. 2008) (general contractor liability tied to retention of control over work/safety)
- Corsetti v. Stone Co., 483 N.E.2d 793 (Mass. 1985) (control test for general contractor's duty to subcontractor's employees)
- Littlefield v. Acadia Ins. Co., 392 F.3d 1 (1st Cir. 2004) (ambiguous policy terms construed in favor of insured)
- Ardente v. Standard Fire Ins. Co., 744 F.3d 815 (1st Cir. 2014) (avoid overreliance on anti-surplusage canon in insurance contexts)
- Lexington Ins. Co. v. Gen. Accident Ins. Co. of Am., 338 F.3d 42 (1st Cir. 2003) (court will not rewrite unambiguous contract terms)
- Hakim v. Massachusetts Insurers' Insolvency Fund, 675 N.E.2d 1161 (Mass. 1997) (exclusionary provisions treated with particular strictness against insurer)