Vermont Mutual Insurance v. Zamsky, 732 F.3d 37

On Nov. 27, 2008, Andrew Zamsky and friends used a portable fire pit stored in a shed at a house in Falmouth (owned by Zamsky's parents) and gasoline was poured on it, causing severe burns to Renata Ivnitskaya.
The Falmouth house was not an "insured location" under three homeowners policies issued by Vermont Mutual to Zamsky's parents; the policies included an exclusion for injuries "arising out of a premises" owned by an insured but not an insured location (the "UL exclusion").
Ivnitskaya sued Zamsky in Massachusetts state court for negligence; Vermont Mutual defended under a reservation of rights and filed this federal declaratory judgment action seeking a ruling that the UL exclusion excused any duty to defend or indemnify.
The district court granted summary judgment to the defendants, holding the UL exclusion did not apply and Vermont Mutual had a duty to defend Zamsky; Vermont Mutual appealed.
The First Circuit reviewed only the duty-to-defend question (Vermont Mutual had not obtained a cross-appeal to contest the limited scope), applying Massachusetts law on duty to defend and insurance-policy interpretation.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the UL exclusion bars Vermont Mutual's duty to defend because the injury "arose out of" the insured-owned, uninsured premises	UL exclusion applies because the occurrence happened at the insured-owned premises; thus no duty to defend	Exclusion requires the occurrence to arise out of a condition of the premises; the fire pit was portable personal property, not a condition of the premises, so exclusion does not apply	The UL exclusion does not apply; Vermont Mutual owes a duty to defend
Whether the federal court may resolve duty to indemnify as well as duty to defend	Vermont Mutual sought declaration of no duty to indemnify or defend	Appellees limited relief to duty to defend; no cross-appeal seeking broader relief	Court limited review to duty to defend only (no indemnity ruling on appeal)

B & T Masonry Constr. Co. v. Pub. Serv. Mut. Ins. Co., 382 F.3d 36 (1st Cir.) (insurer's duty to defend is broader than duty to indemnify)
Bos. Symph. Orch., Inc. v. Commercial Union Ins. Co., 545 N.E.2d 1156 (Mass.) (duty to defend arises when complaint allegations and known facts show a possibility of coverage)
Callahan v. Quincy Mutual Fire Ins. Co., 736 N.E.2d 857 (Mass. App. Ct.) (UL exclusion inapplicable where injury did not arise from a condition of the premises)
Commerce Ins. Co. v. Theodore, 841 N.E.2d 281 (Mass. App. Ct.) (UL exclusion applies where injury is sufficiently connected to a condition of the premises)
Bagley v. Monticello Ins. Co., 720 N.E.2d 813 (Mass.) ("arising out of" language is construed broadly)
Hakim v. Mass. Insurers' Insolvency Fund, 675 N.E.2d 1161 (Mass.) (ambiguities in insurance policies construed in favor of coverage)
Langill v. Vt. Mut. Ins. Co., 268 F.3d 46 (1st Cir.) (predictability is important in insurance interpretation)