Opinion
No. 15–P–910.
10-28-2016
PAN AM RAILWAYS, INC., third-party plaintiff, v. JAMES RIVER INSURANCE COMPANY, third-party defendant.
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
The third-party plaintiff, Pan Am Railways, Inc. (Pan Am), appeals the summary judgment in favor of third-party defendant, James River Insurance, Company (James River). On cross motions for summary judgment, the motion judge found that there was no genuine dispute of material fact and that James River had properly denied coverage to Pan Am based upon the "Employer's Liability—Exclusion" endorsement contained in the subject commercial general liability insurance policy. Having conducted the required de novo review of the summary judgment record, see Miller v. Cotter, 448 Mass. 671, 676, 863 N.E.2d 537 (2007), we affirm.
The original suit was brought by Robert and Sandra Fortin against Guilford Transportation (Guilford), also known as Guilford Motor Express, Pan Am, and Powell Stone and Gravel Co., Inc. (Powell). Pan Am, as a third-party plaintiff, brought suit against James River; the resulting judgment is what is before us on appeal. Prior to the entry of that judgment, all of the underlying claims and cross-claims had been dismissed by stipulations filed in January and February, 2015.
"In a case like this one where both parties have moved for summary judgment, the evidence is viewed in the light most favorable to the party against whom judgment is to enter." Albahari v. Zoning Bd. of Appeals of Brewster, 76 Mass.App.Ct. 245, 248–249 n. 4, 921 N.E.2d 121 (2010).
1. Background. On December 18, 2008, Robert Fortin slipped and fell on ice and snow while carrying out duties within the course of his employment for Intermodal Ramp Management (Intermodal) at a rail freight yard in Ayer. The freight yard was owned by Pan Am and was being operated by Intermodal pursuant to a terminal services agreement (TSA) dated July 1, 2008. On December 8, 2010, Fortin and his wife initiated the underlying civil action and, according to their amended complaint, asserted, inter alia, claims for negligence and loss of consortium against Pan Am. Specifically, Fortin and his wife claimed that Pan Am negligently maintained the freight yard and caused or permitted to exist an unreasonably dangerous condition that led to Fortin's slip and fall and resulting injuries.
Fortin and his wife also asserted claims against Guilford and Powell. Pan Am and Guilford filed cross claims against Powell, which responded with its own cross claims against Pan Am and Guilford.
Under the TSA, Intermodal agreed, among other things, to indemnify and to hold harmless Pan Am from and against all claims for personal injury to Intermodal's employees, unless the same were caused solely by Pan Am's negligence. Intermodal was further obligated under the TSA to obtain and maintain "Commercial General Liability Insurance with a combined single limit of not less than $5,000,000 per occurrence for injury to or death of persons and damage to or loss or destruction of property. Such policy shall be endorsed to provide ... contractual liability coverage for liability assumed under this [TSA]." Pan Am was to be named as an additional insured under that liability policy.
James River subsequently issued a commercial general liability policy to Intermodal, with a policy period of September 17, 2008, to September 17, 2009 (policy). Pan Am sought coverage from James River under that policy after the claims were initiated by Fortin and his wife. James River declined the claims, however, asserting that the policy did not provide Pan Am with coverage with respect to those claims.
Pan Am, therefore, filed the present third-party complaint against James River, seeking a declaratory judgment as to the availability of coverage under the policy (count I) and asserting related claims for breach of contract (count II) and unfair and deceptive trade practices under G.L. c. 93A, § 11(count III). All of those claims were subsequently dismissed when the motion judge issued his order dated September 27, 2013, denying Pan Am's motion for summary judgment and allowing James River's cross-motion for summary judgment. Judgment eventually entered on March 12, 2015. Pan Am's appeal followed.
2. Standard of review. The interpretation of an insurance contract, including the applicability of a coverage exclusion, is a question of law. See Massachusetts Bay Transp. Authy. v. Allianz Ins. Co., 413 Mass. 473, 476, 597 N.E.2d 439 (1992); Fuller v. First Financial Ins. Co., 448 Mass. 1, 5, 858 N.E.2d 288 (2006). As with any contract, an insurance policy is, whenever reasonable and practicable, to be interpreted by construing the words in their usual and ordinary sense, giving meaning and effect to every word and considering the policy as a whole, consistent with its language, background, and purpose. See Hakim v. Massachusetts Insurers' Insolvency Fund, 424 Mass. 275, 280–281, 675 N.E.2d 1161 (1997); Allmerica Financial Corp. v. Certain Underwriters at Lloyd's, London, 449 Mass. 621, 628, 871 N.E.2d 418 (2007); Boston Gas Co. v. Century Indem. Co., 454 Mass. 337, 355–356, 910 N.E.2d 290 (2009). See also Massachusetts Property Ins. Underwriting Assn. v. Wynn, 60 Mass.App.Ct. 824, 827, 806 N.E.2d 447 (2004).
James River, as the insurer, bears the initial burden of establishing the applicability of a coverage exclusion. See Hanover Ins. Co. v. Talhouni, 413 Mass. 781, 785, 604 N.E.2d 689 (1992). " 'Exclusions from coverage are to be strictly construed,' and any ambiguity in the exclusion 'must be construed against the insurer.' " Hakim, supra at 282, 675 N.E.2d 1161, quoting from Vappi & Co. v. Aetna Cas. & Sur. Co., 348 Mass. 427, 431, 204 N.E.2d 273 (1965). The language of an insurance policy is ambiguous, however, "only if it is susceptible of more than one meaning and if reasonably intelligent persons would differ over the proper meaning." McLaughlin v. Berkshire Life Ins. Co. of Am., 82 Mass.App.Ct. 351, 355, 973 N.E.2d 685 (2012), quoting from Suffolk Constr. Co. v. Illinois Union Ins. Co., 80 Mass.App.Ct. 90, 94, 951 N.E.2d 944 (2011). "[A]n ambiguity is not created simply because a controversy exists between the parties, each favoring an interpretation contrary to the other." Surabian Realty Co. v. NGM Ins. Co., 462 Mass. 715, 718, 971 N.E.2d 268 (2012), quoting from Boazova v. Safety Ins. Co., 462 Mass. 346, 351, 968 N.E.2d 385 (2012). Finally, it is appropriate to consider "what an objectively reasonable insured, reading the relevant policy language, would expect to be covered." Ruggerio Ambulance Serv., Inc. v. National Grange Mut. Ins. Co., 430 Mass. 794, 798, 724 N.E.2d 295 (2000), quoting from Hakim, supra at 282, 675 N.E.2d 1161.
3. Discussion. Here, James River claims, and the motion judge found, that coverage is not available to Pan Am with respect to the claims brought by Fortin and his wife due to the "Employer's Liability—Exclusion" endorsement in the policy, which provides, in pertinent part:
"This insurance does not apply to any claim, suit, cost or expense arising out of 'bodily injury' to:
"a. Any employee of any Insured arising out of and in the course of: (1) Employment by an insured; or
(2) Performing duties related to the conduct of any insured's business; or
"b. The spouse, child, parent, brother, sister or relative of that employee as a consequence of Paragraph a. above.
"This exclusion applies:
"a. Whether any insured may be liable as an employer or in any other capacity;
"b. To any obligation to share damages with or repay someone else who must pay damages because of the injury; or
"c. To liability assumed by the insured as a result of the insured properly or improperly rejecting the Workers Compensation Act of a state, except where liability is assumed under an 'insured contract'.
"Wherever the word 'employee' appears above, it shall mean any member, associate, 'leased worker', 'temporary worker' or any person or persons loaned to or volunteering services to you."
It is undisputed that the "claim, suit, cost or expense" for which Pan Am seeks coverage arises out of the bodily injuries that Fortin allegedly suffered when he slipped and fell in the course of performing his employment duties for the insured, Intermodal. It is also undisputed that the lone exception to the policy's employer's liability exclusion, contained in sub part (c), does not apply here. Accordingly, in our view, the motion judge properly ruled that James River sustained its burden and that the policy's employer's liability exclusion unambiguously precludes coverage for Pan Am with respect to the Fortin and his wife's claims.
The motion judge found that the exception in sub part (c) does not apply. Pan Am, which bears the burden of establishing that the exception does apply, has not challenged that finding. See Boazova, supra at 351, 968 N.E.2d 385("[W]here the insured seeks to establish coverage through an exception contained within an exclusion to coverage, the burden shifts back to the insured to prove coverage for the claimed loss").
Pan Am first asks us, in essence, to ignore the policy's employer's liability exclusion and instead conclude that coverage is available because the TSA entered into with Intermodal is an "insured contract" as defined under the policy's "Contractual Liability—Railroads" endorsement. Specifically, Pan Am suggests that, given that (1) the TSA (purportedly) qualifies as an "insured contract" under the policy's "Contractual Liability—Railroads" endorsement, and that (2) "liability for damages ... [a]ssumed in a contract or agreement that is an 'insured contract' " is one of the exceptions to the policy's "Contractual Liability" exclusion for coverage, set forth in section I.2.b(2), then (3) coverage exists for Pan Am under the policy with respect to Fortin and his wife's claims. A plain reading of the language of the policy, however, exposes fatal flaws in that logic.
The "Contractual Liability—Railroads" endorsement provides, in pertinent part:
"With respect to operations performed for, or affecting, a Scheduled Railroad at a Designated Job Site, the definition of 'insured contract' in the Definitions section is replaced by the following:
"9. 'Insured Contract' means:
....
"f. That part of any other contract or agreement pertaining to your business (including an indemnification of a municipality in connection with work performed for a municipality) under which you assume the tort liability of another party to pay for 'bodily injury' or 'property damage' to a third person or organization. Tort liability means a liability that would be imposed by law in the absence of any contract or agreement."
The policy's "Contractual Liability" exclusion provides, in pertinent part:
"This insurance does not apply to:
....
" 'Bodily injury' or 'property damage' for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement. This exclusion does not apply to liability for damages:
"(1) That the insured would have in the absence of the contract or agreement; or
"(2)Assumed in a contract or agreement that is an 'insured contract', provided the 'bodily injury' or 'property damage' occurs subsequent to the execution of the contract or agreement. Solely for the purposes of liability assumed in an 'insured contract', reasonable attorney fees and necessary litigation expenses incurred by or for a party other than an insured are deemed to be damages because of 'bodily injury' or 'property damage', provided:
"(a) Liability to such party for, or for the cost of, that party's defense has also been assumed in the same 'insured contract'; and
"(b)Such attorney fees and litigation expenses are for defense of that party against a civil or alternative dispute resolution proceeding in which damages to which this insurance applies are alleged."
The policy's contractual liability exclusion eliminates coverage for " '[b]odily injury' or 'property damage' for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement." That has no application to Fortin and his wife's claims against Pan Am. Fortin and his wife sought to hold Pan Am liable for its own negligence, not because Pan Am had assumed any liability under the TSA. It is irrelevant for purposes of coverage with respect to Fortin and his wife's claims whether the TSA qualifies as an "insured contract" under the contractual liability—railroads endorsement or that Pan Am thereby arguably qualifies, under the right circumstances, for an exception to the policy's contractual liability exclusion. Qualifying under an exception to one exclusion to coverage (the contractual liability exclusion), which has no application to the claims for which coverage is sought, does not lead to avoidance of another exclusion to coverage (the employer's liability exclusion), which unambiguously does apply to the claims for which coverage is sought.
Pan Am next argues that the policy's employer's liability exclusion does not apply because Pan Am is not seeking coverage for a claim "arising out of" Fortin's "bodily injury," as required to call that exclusion into play. Instead, Pan Am suggests that "[t]he claim ... for which coverage is sought is a contractual indemnity claim and arises out of Intermodal's TSA with Pan Am and the indemnification obligations it contains." This argument also misses the mark.
As noted above, Fortin and his wife sought to hold Pan Am liable on claims for injuries Fortin allegedly sustained during the course of his employment with Intermodal and that were allegedly caused by Pan Am's own negligence. It is with respect to those claims that Pan Am has sought coverage from James River under the policy. Pan Am is not, as it now suggests, seeking coverage under the policy with respect to an indemnification claim against Intermodal. It is indisputably seeking coverage for a claim "arising out of" Fortin's "bodily injury." Thus, while the parties debate whether the term "arising out of" is to be read narrowly or expansively, the outcome is the same.
"The phrase 'arising out of' must be read expansively, incorporating a greater range of causation than that encompassed by proximate cause under tort law." Bagley v. Monticello Ins. Co., 430 Mass. 454, 457, 720 N.E.2d 813 (1999). See American Home Assur. Co. v. First Specialty Ins. Corp., 73 Mass.App.Ct. 1, 5, 894 N.E.2d 1167 (2008)(noting that our cases require "arising out of" to be read expansively both in coverage and exclusionary clauses).
Finally, Pan Am suggests that an objectively reasonable insured reading the policy language would expect Pan Am to be covered under the policy for the claims by Fortin and his wife. In light of the unambiguous language of the policy as discussed above, however, we disagree. Further still, as this court has previously found:
"Commercial general liability ... policies are, in general, intended to protect an insured employer against liability for losses to third parties arising out of the operation of the insured's business. 9 Couch, Insurance § 129.2 (3d ed.1997). Injuries to employees are typically excluded from coverage, id. at § 129.7, as the expectation is that the employer will have in place workers' compensation insurance (or self-insurance) in one of the forms made compulsory by G.L. c. 152, § 25A."
Monticello Ins. Co. v. Dion, 65 Mass.App.Ct. 46, 47, 836 N.E.2d 1112 (2005)(footnote omitted). In our view, therefore, an objectively reasonable insured under a commercial general liability policy, which is the type of policy at issue here, would not necessarily expect to be covered for claims arising out of bodily injuries suffered by the employee of the insured.
Pan Am's request for appellate costs is denied; James River's request for appellate fees is denied.