An appellate court in Massachusetts, affirming a trial court's decision, has ruled that an independent contractors exclusion in a general liability insurance policy precluded coverage of a judgment against the insured in a personal injury action.
The Case
In 2002, Park Grove Realty Trust hired Atlantic Construction Services, Inc., an independent contractor, to (among other things) construct a sidewalk as part of a residential housing project.
Atlantic apparently stopped paving part of a sidewalk short of a driveway on the property and built a "cold joint" between the two.
In 2006, Claire LaPosta tripped and fell on the cold joint and injured herself.
Ms. LaPosta sued Atlantic, alleging that its negligent construction of the "cold joint" had led to her injury. She also sued Park Grove for its alleged failure to warn of the defect.
A jury returned a verdict that assigned 55 percent fault to Atlantic and 30 percent fault to Park Grove, jointly and severally.
Park Grove's insurer, Certain Underwriters at Lloyd's, London, refused to indemnify Park Grove for its portion of the judgment; as a result, Atlantic (through its insurer) satisfied the full amount.
Lloyd's, relying on the independent contractors exclusion contained in its general liability policy under which Park Grove was insured, went to court, seeking a declaration that it had no duty to indemnify Park Grove.
The trial court entered judgment in favor of Lloyd's, and Atlantic appealed. Among other things, it argued that the independent contractors exclusion was ambiguous and that the ambiguity had to be construed against Lloyd's. It also argued that, even if the independent contractors exclusion was unambiguous, the exclusion did not apply to Ms. LaPosta's tort action because Park Grove's negligence, not Atlantic's, was the basis for the action against Park Grove.
The Lloyd's Policy
The Lloyd's policy excluded from coverage:
"bodily injury" or "property damage" arising out of operations performed for the Named Insured by Independent Contractors or acts or omissions of the Named Insured in connection with his general supervision of such operations.The Appellate Court's Decision
The appellate court affirmed.
In its decision, the appellate court ruled that the independent contractors exclusion was not ambiguous. It explained that the phrase "arising out of" in the exclusion meant that bodily injury or property damage "connected to the operations" of the Park Grove's subcontractor (Atlantic) were excluded from coverage.
The appellate court was not persuaded by Atlantic's argument that, even if the independent contractors exclusion was unambiguous, the exclusion did not apply to Ms. LaPosta's tort action because Park Grove's liability arose out of Park Grove's alleged failure to warn of the defect in the sidewalk rather than Atlantic's alleged negligence in performing the work.
According to the appellate court, the phrase "arising out of" had to be read "expansively" and suggested "a causation more analogous to 'but for' causation," in which the court examining the exclusion inquired whether there would have been personal injuries, and a basis for the plaintiff's suit, in the absence of the objectionable underlying conduct.
Looking at the "source" from which Ms. Laposta's personal injury originated, not the specific theories of liability alleged in her complaint, the appellate court ruled that the source of Ms. LaPosta's injury was indisputably the cold joint created by Atlantic. Put differently, the appellate court concluded, but for Atlantic's cold joint, Ms. LaPosta would not have been injured and, therefore, her injury arose out of Atlantic's actions and the independent contractors exclusion applied.