The First Circuit Relies on the Plain and Unambiguous Language of the Policy to Deny Coverage


[author: Jim S. Byun]

In Certain Interested Underwriters At Lloyd’s, London v. Perry Stolberg, ___F.3d ____, 2012 WL 1699931 (1st Cir. May 16, 2012), the First Circuit Court of Appeals affirmed the district court’s holding that the insurer was not obligated to defend or indemnify the insured based upon the plain and unambiguous meaning of the contractors exclusion. 

A worker, injured at the construction site while working for a subcontractor, sued the project developer in Massachusetts state court for injuries allegedly sustained in the course of construction work.  The developer tendered the defense of the underlying lawsuit to the insurer of a commercial general liability policy.  The insurer provisionally agreed to furnish a defense, reserving the right to disclaim coverage and withdraw should it be determined that the policy did not apply.  The insurer instituted this action seeking a declaration that it had no obligation to defend or indemnify the developer in connection with the underlying injured worker’s lawsuit.  The insurer and developer filed cross-motions for summary judgment.  The district court issued a declaratory judgment in favor of the insurer that it was not required to indemnity or defend. 

The First Circuit noted that the interpretation of an insurance policy is a matter of law.  The First Circuit also noted that ambiguity must be real to be construed against the drafter and that a policy provision is ambiguous only if it is susceptible of more than one meaning and reasonably intelligent persons would differ as to which meaning is the proper one. 

During the appeal, the insurer argued that the contractors exclusion was directly on point with the facts of the underlying lawsuit and that it unambiguously dictated that no coverage is afforded to the worker’s claims.  The contractors exclusion precluded coverage for any injuries “arising out of operations performed for [the insured] by independent contractors.”  The developer never disputed the clarity of the language of the contractors exclusion and that the worker was working for the subcontractor when he fell at the construction site and the worker’s injuries arose out of the subcontractor’s operations.  The developer, rather, argued that a separate exclusion should be read to restore coverage for the worker’s injuries.  The First Circuit found that the developer’s attempt to argue that the separate exclusion restored coverage depends on a finding that if the exclusion does not apply in a given situation, then the policy must afford coverage for that situation regardless of other provisions of the policy.  The First Circuit refused to agree with the developer’s interpretation of the policy exclusion and noted that the purpose of a policy exclusion is to narrow the scope of coverage, not to expand coverage. 

Accordingly, the First Circuit affirmed the district court’s decision, holding that the contractors exclusion provision was unambiguous and precluded coverage for any injuries arising out of operations performed for the insured by independent contractors.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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