JANET BOND ARTERTON, District Judge.
Plaintiff First Mercury Insurance Company ("First Mercury") moves [Doc. # 89] for summary judgment seeking a declaratory judgment that Defendants Shawmut Woodworking & Supply, Inc. ("Shawmut") and Shepard Steel Company ("Shepard"), who are named defendants in state court lawsuits brought by employees of Shepard's subcontractor, Fast Trek Steel, are not "additional insureds" under a general liability policy that First Mercury issued to Fast Trek and thus that there is no duty to defend or indemnify them.
Intervenor-Counterclaim Plaintiff Liberty Mutual Insurance Company ("Liberty Mutual"), who issued a liability policy to Shepard and is providing a defense to Shepard and Shawmut under a reservation of rights opposes First Mercury's motion, and along with Shawmut and Shepard, has cross moved [Doc. # 90, 96-1, 87] for summary judgment seeking a declaratory judgment that First Mercury owes a duty to defend Shawmut and Shepard in the underlying actions. For the reasons that follow, Plaintiff's motion is denied and the motions of Liberty Mutual, Shawmut and Shepard are granted.
On September 13, 2010, a steel web structure collapsed during installation at Yale University's Science Area Chilled Water Plant Shell, causing the death of Robert F. Adrian and injuries to Robert Enfield, Robert Elliot, and Sheneane Ragin, all of whom were iron workers employed by Fast Trek. Shawmut was the general contractor and designer for the project and subcontracted Shepard for steel fabrication and construction. Shepard in turn subcontracted erection work to Fast Trek. As required by its contract with Shepard, Fast Trek obtained a general liability policy from First Mercury with a $1 million per occurrence coverage limitation and an excess liability policy from National Union Fire Insurance Company of Pittsburgh, PA ("National Union") with up to $10 million of coverage.
The injured parties and Mr. Adrian's estate administrators have filed negligence suits against Shawmut and Shepard, both of whom have demanded that First Mercury defend and indemnify them as "additional insureds" under its policy issued to Fast Trek. Liberty Mutual is currently providing a defense to Shepard and Shawmut under a reservation of rights and has made demand upon First Mercury to assume
At oral argument, all parties agreed that Connecticut law governs, under which "it is well established that a liability insurer has a duty to defend its insured if the pleadings" against the insured "allege a covered occurrence." Ryan v. Nat'l Union Fire Ins. Co., 692 F.3d 162, 167 (2d Cir.2012) (quoting Hartford Cas. Ins. Co. v. Litchfield Mut. Fire Ins. Co., 274 Conn. 457, 876 A.2d 1139 (2005) (alterations omitted)). "In determining whether a claim falls within the scope of an insurance policy, the Supreme Court of Connecticut `construes broad policy language in favor of imposing a duty to defend on the insurer,' and `requires a defense if an allegation of the complaint falls even possibly within the coverage.'" Id. (quoting Hartford Cas. Ins. Co., 274 Conn. at 466, 876 A.2d 1139 (2005) (alterations omitted)).
"[A]n insurer's duty to defend, being much broader in scope and application than its duty to indemnify, is determined by reference to the allegations contained in the [underlying] complaint." Coregis Ins. Co. v. American Health Found., 241 F.3d 123, 127 (2d Cir.2001) (internal citations and quotation marks omitted) (quoting Springdale Donuts, Inc. v. Aetna Cas. and Sur. Co., 247 Conn. 801, 807, 724 A.2d 1117 (1999)).
Because coverage is determined as a matter of law by looking at the underlying complaints, see Ryan, 692 F.3d at 167, the Court examines the complaints brought by Mr. Enfield and Mr. Adrian's estate, which contain identical allegations against Shawmut and Shepard. The Enfield and Adrian complaints allege that the plaintiffs were by "employed by Fast Trek Steel, Inc." and that Charney Architects, LLC ("Charney") created the design for the chilled water plant and designed the steel web structure used to support the building and create the outer shell, including columns and beams to support flat steel trusses upon which tubular steel trusses were to be installed and connected, providing support for the roof decking. These plaintiffs further allege that "the design created by Charney failed to include critical bolt holes for the steel tubes of the web structure to be secured during construction" and as a result the steel tubes became dislodged and collapsed causing Mr. Enfield to fall from the structure and suffer serious injuries and causing Mr. Adrian's death. (See Complaints, Robert Enfield v. Charney Architects, EEC, et al. ("Enfield Complaint") & Estate of Robert Adrian v. Charney Architects, EEC, et al. ("Adrian Complaint"), Exs. B & C to Liberty
Shawmut and Shepard are alleged to have "approved this design and accepted the order for fabrication and/or installation." (Id. ¶ 18.) The specific allegations of negligence as to Shawmut and Shepard are that "through [their] agents[,] servants[,] or employees":
(Id. ¶ 19.)
Mr. Elliot's and Mr. Ragin's identical actions similarly allege that "the defendants, Shawmut and Charney, designed a steel web structure" that negligently failed to include bolt holes on the steel tubes and that Shawmut, Shepard, Charney and other defendants "negligently approved the design flaw and accepted the order for the transaction." (See Complaints, Robert Elliot, et al. v. Charney Architects, LLC, et al. ("Elliot Complaint") & Sheneane Ragin, et al. v. Charney Architects, LLC, et al. ("Ragin Complaint"), Exs. D-E to Liberty Mutual's 56(a)1 Stmt. Count Three ¶¶ 15-18, Count Two ¶¶ 15-18.) The negligent acts alleged against Shawmut, Shepard, Charney, and all other defendants
(Id., Counts One-Three ¶ 20.)
Fast Trek is not named in the four underlying complaints and the only specific reference to it is in the Enfield and Adrian complaints, which each state that the plaintiffs were employed by Fast Trek at the time of the accident. (Enfield Compl. ¶ 1; Adrian Compl. ¶ 2.)
The parties' dispute centers around the interpretation of an endorsement in the First Mercury policy issued to Fast Trek that provides for the coverage of "additional insureds" (the "Additional Insured Endorsement"). First Mercury contends (1) that Shawmut is not included in the definition of an additional insured; (2) that even if Shawmut and Shepard qualify as additional insureds, coverage extends only to vicarious liability for the negligence of the named insured, Fast Trek, and because there are no claims asserted against Fast Trek in the underlying actions, there can be no coverage for Shawmut and Shepard; and (3) a policy exclusion for "professional engineering, architectural or surveying services" applies. Although both sides advance plausible arguments in support of their respective positions, guided by the principle that to the extent that "there are two plausible interpretations of insurance policy language, the court will ordinarily select that interpretation that favors the insured over the insurer," Northrop v. Allstate Ins. Co., 247 Conn. 242, 251, 720 A.2d 879 (1998), the Court concludes that First Mercury owes Shawmut and Shepard a duty to defend.
The Additional Insured Endorsement in the First Mercury Policy issued to Fast Trek provides coverage to
(Additional Insured Endorsement, Ex. F. to Liberty Mutual's Loc. R. 56(a)1 Stmt. [Doc. # 90] at 1.)
There is no dispute that Shepard is named as an additional insured under the First Mercury Policy issued to Fast Trek based on the subcontract between Fast Trek and Shepard, which provides that Fast Trek was required to "name Shepard as additional insured."
First, they rely on Shawmut's contract with Shepard, which required Shepard to obtain insurance that provides:
(Shawmut-Shepard Contract, Ex. H to Liberty Mutual's 56(a)1 Stmt. § 9(E).)
This general contract further required that if Shepard hired additional subcontractors, it "shall require each sub-subcontractor and supplier to be bound by all Contract Documents to the same extent and with the same effect as if the subcontractor or supplier were [Shepard]." (Id. § 5(B).)
Second, when Shepard hired Fast Trek as its subcontractor (and Shawmut's sub-subcontractor), their agreement expressly incorporated the Shawmut-Shepard contract as "part of the Subcontractor Documents" (Shepard-Fast Trek Subcontract Agreement, Ex. I to Liberty Mutual's 56(a) 1 Stmt. § 2) and separately stated that Fast Trek "shall assume towards Shepard all obligations and responsibilities that Shepard assumes contractually towards [Shawmut], Construction Manager, and/or Owner, and Shepard shall have the benefit of all rights, remedies and redress against [Fast Trek] that [Shawmut] ... by contract has against Shepard" (id. § 8). Additionally and separately, in the Shepard-Fast Trek contract, Fast Trek was required to "name the Project owner and construction manager as additional insureds." (Id. § 7.)
Shawmut and Shepard thus make two arguments. First, they contend that by its own terms the Additional Insured Endorsement does not require that the "agree[ment] in writing" of Fast Trek and Shawmut to add Shawmut as an additional insured be contained in the same agreement with each other. Rather they contend that the Additional Insured Endorsement only requires that each of them
Second, they contend that because the Shepard-Fast Trek subcontract explicitly incorporated the Shawmut-Shepard subcontract with its additional insured requirement as "part of" the Shepard-Fast Trek agreement (Shepard-Fast Trek Subcontract Agreement § 2), the two agreements essentially merged and thus "Fast Trek and Shawmut did agree in the same contract to name Shawmut as additional insured." (Shawmut's Opp'n to Pl. [Doc. # 95] at 9.)
As Shawmut and Liberty Mutual note, nothing in the Additional Insured Endorsement requires that the "agree[ment] in writing" to add an additional insured be contained in a single agreement and they contend that First Mercury seeks to read this term "single agreement" into the Additional Insured Endorsement. Both parties rely on non-Connecticut case law to support their respective positions. For example, in Pro Con, Inc. v. Interstate Fire & Cas. Co., 794 F.Supp.2d 242, 252 (D.Me. 2011), the court interpreted a provision that is identical to the Additional Insured Endorsement under Fast Trek's policy with First Mercury to "not plainly restrict additional insured status only to those entities that have contracted directly with the named insured" and concluded that it was "immaterial" that the sub-subcontractor agreed with the subcontractor, rather than directly with the general contractor, to add the general contractor as an additional insured.
Likewise in Millis Dev. & Const. Inc. v. Am. First Lloyd's Ins. Co., 809 F.Supp.2d 616, 621 (S.D.Tex.2011) contractual privity was not required where, as is the case here, "the actual wording of the Additional Insured Provision does not include the words `direct' or `between' in reference to the written contract. Nor are the words `have agreed' followed by the words `with each other' or `together.' To add in those words would require the court to narrow the scope of coverage within the policy, and the court may not interpret the policy in a way that gives new meaning to the terms of the policy." Id. at 626-27.
Id. at 734, 350 Ill.Dec. 46, 948 N.E.2d 115 (emphasis in original) (internal citations omitted).
This Court finds more persuasive the reasoning in Millis Dev. & Const. and Pro Con, Inc. that Fast Trek and Shawmut could agree that Shawmut would be added as an additional insured and both parties' agreement could be memorialized in separate contracts without requiring a direct contractual relationship between the two parties.
Second, Plaintiff's interpretation would require the Court to read into the Additional Insured Endorsement terms such as "direct" or "between" in contravention of the rule that courts will not read terms into a contract. Millis Dev. & Const., Inc., 809 F.Supp.2d at 626-27 ("[T]he actual wording of the Additional Insured Provision does not include the words `direct' or `between' in reference to the written contract. Nor are the words `have agreed' followed by the words `with each other' or `together'. To add in those words would require the court to narrow the scope of coverage within the policy, and the court may not interpret the policy in a way that gives new meaning to the terms of the policy."); Galgano v. Metro. Prop. & Cas. Ins. Co., 267 Conn. 512, 519, 838 A.2d 993 (2004) ("If the terms of the policy are clear and unambiguous, then the language, from which the intention of the parties is to be deduced, must be accorded its natural and ordinary meaning.... [C]ourts cannot indulge in a forced construction ignoring provisions or so distorting them as to accord a meaning other than that evidently intended by the parties." (internal quotation marks and alterations omitted)).
At oral argument, First Mercury maintained that its Additional Insured Endorsement should be read to extend up only one-level from Fast Trek to Shepard or else there would be no way for First Mercury to know the extent of liability it was assuming and how to rate its policy. However, if First Mercury wanted to limit its coverage in this way to only those in direct contractual privity with Fast Trek it could have readily done so with explicit contractual language to that effect.
Next, First Mercury contends that even if Shawmut and Shepard qualify as additional insureds, the coverage only extends
(Additional Insured Endorsement at 1.)
First Mercury and National Union contend that under this limitation, coverage is not available because Fast Trek is not named as a defendant in any of the underlying lawsuits and thus the complaints do not allege injuries caused by the acts or omissions of Fast Trek, only breaches of duties by Shawmut and Shepard.
The only specific reference to Fast Trek in the underlying complaints is the allegation in the Adrian and Enfield complaints that the plaintiffs were working for Fast Trek at the time of the accident and that Shawmut and Shepard caused their injuries "through [their] agents[,] servants[,] or employees." (Enfield Compl. ¶ 1, Count Two ¶ 19, Three ¶ 19; Adrian Compl. ¶ 2, Count Two ¶ 19, Three ¶ 19.) Although Fast Trek is not a party and thus there are no claims asserted against it, Liberty Mutual and Shepard contend that certain investigative documents not incorporated in the pleadings establish that First Mercury is aware that "Fast Trek [was] a cause, if not the only or predominant cause, of the incident resulting in the death and injuries." (Liberty Mutual's Mem. Supp. at 30.) According to them, these documents establish that the accident was caused by Fast Trek's failure to properly secure the steel beams and by Mr. Enfield striking the first beam and setting off a chain reaction that caused three additional beams to fall, none of which would have happened absent the design defects alleged. (See Shepard's Mem. Supp. at 6.)
Looking beyond the four corners of a complaint to determine coverage is not precluded under Connecticut law. For example, in Hartford Cas. Ins. Co. v. Litchfield Mut. Fire Ins. Co., 274 Conn. 457, 876 A.2d 1139 (2005), the president and sole shareholder of a business had his personal dog with him at work when the dog bit and injured a business invitee. The business's insurance company refused to provide coverage under a business liability
The rationale for looking only to the four corners of the complaint is that "the obligation of the insurer to defend does not depend on whether the injured party will successfully maintain a cause of action against the insured." Middlesex Ins. Co. v. Mara, 699 F.Supp.2d 439, 448 (D.Conn. 2010). Thus, because "the duty to defend is broader than the duty to indemnify...., an insurer may be contractually bound to defend even though it may not ultimately be bound to pay, either because its insured is not factually or legally liable or because the occurrence is later proven to be outside the policy's coverage." Fitzpatrick, 78 N.Y.2d at 65, 571 N.Y.S.2d 672, 575 N.E.2d 90. "However, to say that the duty to defend is at least broad enough to apply to actions in which the complaint alleges a covered occurrence is a far cry from saying that the complaint allegations are the sole criteria for measuring the scope of that duty" and where "the insurer is attempting to shield itself from the responsibility to defend despite its actual knowledge that the lawsuit involves a covered event, wooden application of the `four corners of the complaint' rule would render the duty to defend narrower than the duty to indemnify — clearly an unacceptable result." Id. at 66, 571 N.Y.S.2d 672, 575 N.E.2d 90; see also Hartford Cas. Ins. Co., 274 Conn. at 464, 876 A.2d 1139 ("An insurer ... is not excused from its duty to defend merely because the underlying complaint does not specify the connection between the stated cause of action and the policy coverage.").
Following the rationale of Fitzpatrick and Hartford Cas. Ins. Co., this Court concludes that it is appropriate to examine the investigative report about the accident as well as the underlying complaints to determine whether there is a duty to defend. Consideration of this material unquestionably suggests the possibility of coverage, because of the evidence that the accident was at least potentially attributable to Fast Trek's failure to properly secure the beams and Mr. Enfield striking the beams.
(OSHA Report, Ex. K to Liberty Mutual's 56(a)1 Stmt. at K35.)
The OSHA report also describes statements of Mr. Enfield,
Further, as Shawmut notes, allegations of the underlying complaints alone suggest that the injuries were caused at least in part by Fast Trek. (See Shawmut Opp'n at 10-11.) The Adrian and Enfield complaints allege the plaintiffs were working for Fast Trek at the time of the accidents and that Shawmut and Shepard caused their injuries "through [their] agents[,] servants[,] or employees," which could include Fast Trek as a subcontractor of Shepard. (Enfield Compl. ¶ 1, Count Two ¶ 19, Three ¶ 19; Adrian Compl. ¶ 2, Count Two ¶ 19, Three ¶ 19.) The Elliot and Ragin complaints likewise allege that
In Pro Con, interpreting an identical additional insured provision, the court held that where an employee of a sub-subcontractor alleged injuries arising from his work at a construction site but did not assert a claim directly against his employer in the underlying action, the general contractor was nevertheless entitled to a defense under the additional insured provision of the employer's insurance policy because the allegations of the underlying complaint "establish that the injury arose out of [the sub-subcontractor's] operations performed for [the general contractor]. From these allegations, there also is certainly the potential that facts might be developed at trial that would result in the fact finder determining that [the employee's] bodily injuries were caused, at least in part by, the acts or omissions of [his employer] (or its agents) in the performance of these operations."
Similarly, in Ramara, Inc. v. Westfield Ins. Co., 298 F.R.D. 219, 223-25 (E.D.Pa. 2014), an employee of a construction subcontractor was injured at a job site and asserted claims against the general contractor but not his employer, who he was barred from suing under the state's worker compensation scheme. Interpreting an additional insured provision identical to Fast Trek's provision with First Mercury, the court held that the general contractor was entitled to a defense under the subcontractor's additional insured provision, because the employee alleged in his underlying complaint that the general contractor was "acting by and through [its] agents, servants and/or employees" and that he was employed by a subcontractor retained by the general contractor. Id. at 226. Thus, the court concluded that "a consideration of the four corners of the complaint and the four corners of the Policy allows us to infer that it is possible that a jury could find that [the employer's] conduct was ... a cause ... of [the employee's] injury."
Accordingly, the allegations of the underlying state court complaints suggest the possibility of coverage.
Next, First Mercury and National Union contend that regardless of whether "Fast Trek was at all partially or entirely responsible for causing the underlying plaintiffs' injuries is not relevant." (Pl.'s Opp'n to Liberty Mutual [Doc. # 120] at 5, 8.) Instead they contend that the "common purpose of an additional-insured provision is to provide ... protection from vicarious liability
The "intent of the parties" is determined "as expressed in the language employed in the policy," Imperial Cas. & Indem. Co. v. State, 246 Conn. 313, 324, 714 A.2d 1230 (1998), and First Mercury's policy lacks language to connote the limitation it now urges. If "the parties had intended coverage to be limited to vicarious liability, language clearly embodying that intention was available." McIntosh v. Scottsdale Ins. Co., 992 F.2d 251, 255 (10th Cir.1993) (internal quotation marks and alterations omitted); see also, e.g., Ne. Utilities Serv. Co., 2012 WL 2872810, at *4 (holding that an additional insured that provided coverage "[t]o the extent that such additional insured is held liable for your acts or omissions arising out of and in the course of ongoing operations performed by you or your subcontractors for such additional insured" covered vicarious liability only (emphasis added)); Harbor Ins. Co. v. Lewis, 562 F.Supp. 800, 804-05 (E.D.Pa.1983) (additional insured coverage "only to the extent of liability resulting from occurrences arising out of negligence of" the policyholder "was to cover the additional insureds for vicarious liability alone."" (emphasis added)).
Another flaw in the argument of First Mercury and National Union is that they fail to give effect to the full phrase "liability... caused, in whole or in part" by the named insured (Additional Insured Endorsement at 1), specifically the "in whole or in part" language. See Finkel v. St. Paul Fire & Marine Ins. Co., No. 3:00CV1194 (AHN), 2002 WL 1359672, at *3 (D.Conn. June 6, 2002) ("Since it must be assumed that each word contained in an insurance policy is intended to serve a purpose, every term will be given effect if that can be done by any reasonable construction." (internal quotation marks omitted)).
Finally, the history of the standardized contractual language developed by the Insurance Services Office ("ISO") and used in the First Mercury Additional Insured Endorsement confirms that the word "liability" relates to proximate causation and not vicarious liability.
For example, in Royal Indent. Co. v. Terra Firma, Inc., 50 Conn.Sup. 563, 573-74, 948 A.2d 1101 (Super.Ct.2006), the Superior Court held that an additional insured provision in a policy with the "arising out of" language provided coverage for the independent negligence of the general contractor, a breach of the non-delegable duty to maintain a safe worksite, resulting in injuries to the subcontractor's employees,
In the 2004 version of the ISO's additional insured endorsement, used by First Mercury here, the ISO amended this language to require that liability be "caused in whole or in part" by the named insured rather than simply "arising out of" the named insured's acts or omissions, as stated
Thus, that Shawmut's and Shepard's "liability" must be "caused, in whole or in part" by Fast Trek's acts or omissions means that coverage under the Additional Insured Endorsement is not limited to Shawmut's and Shepard's vicarious liability for Fast Trek's acts or omissions but instead refers more broadly to liability that is caused, at least in part, by Fast Trek, but excludes situations involving only the independent acts of negligence of the additional insureds.
Finally, First Mercury contends that even if Shawmut and Shepard are covered as additional insureds, coverage is precluded by a policy exclusion in the Additional Insured Endorsement, providing that additional insureds are not covered for:
(Additional Insured Endorsement at 1.)
First Mercury contends that this policy exclusion applies to Shepard because "the crux" of the underlying claims is "negligence in approving designs, specifications and orders relating to the design for the web structure."
Shawmut, identified in the underlying complaints as "the general contractor," and Shepard as the "subcontractor for steel fabrication," are not designated as professional architects, engineers, or surveyors. While the underlying complaints, which also name Charney Architects, do allege negligent design and approval of the design of the steel tubes, they also contain general allegations of failure to warn, failure to ensure a safe work area, and failure to properly install the steel beams. Thus, the professional liability policy exclusion does not apply to all of the allegations of the underlying complaints and does not absolve Plaintiff of its duty to defend Shawmut and Shepard. See Zurich Am. Ins. v. Liberty Mut. Ins., X07CV030084312S, 2004 WL 1789015, at *5 (Conn.Super.Ct. July 16, 2004) ("The underlying complaints contain allegations that Alstom negligently supervised the planning, work, efforts, and performance of BVCI so as to provide a safe workplace. On their face, these allegations are not limited to supervisory functions with respect to architectural or engineering compliance. They are broad enough to embrace claims of general project supervision and safety in the workplace.").
For the reasons set forth above, First Mercury's Motion [Doc. # 89] for Summary Judgment is DENIED. The Motions of Liberty Mutual, Shawmut and Shepard [Doc. # 90, 96-1, 87] for Summary Judgment are GRANTED as to First Mercury's duty to defend.
IT IS SO ORDERED.