## In the



# U n ited S ta tes Co urt o f Ap p ea ls

F o rth eS e v e n th C ir cu it
N os. 12

- 2405 , 12

- 2485 A T LA NT I C C ASU ALT Y I NSURANCE C OMPAN Y, P la intif f-A pp ellee, v.
P A S Z K O M ASO NRY, I NC . an d R OBERT R Y BA LT OWS KI, D ef endants , an d
C H I CA GO M ASO NRY C ON S T RU CT I ON, I NC .; P RI NCE C O NTRA CT O RS, I NC .; an d 4929 F O REST, LLC , D efend a nts-A pp ella nts.

A pp ealsfr o m the United S t ates Di strictC our t fo r the N o rthernDi stricto f Illino is, Eas tern Div isi on. No . 09 C7452

—Jo an B. G ott schall, Judge
.
A RG UE D A PRI L 12, 2013

— D ECI DE D J UNE 7, 2013

Befo re B AUER, P OSNER, an d F LA UM, C ircu it Judges . P OSNER, Cir cu i tJudg e . In thi s di ver si ty sui t g ove rned by I ll inois la w , an insu ran ce com p an y seeks a d eclaratory2 N os. 12

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- 2485 j udg m en t th ati t ha s no duty t o de fend a ny o fthe f our defe nd ant co m panie s l i ste d i n the capti on (Pr i nce, Pa szko, Ch icago M ason ry, and F o rest) against R obert Rybal towski ’ s per sonali nj ury su it aga i nst those co m pani es . The di str i ctc o ur t g r an te d s um m ar y j udg m en t i n f avo r ofA tlanti c o n the gr ound that Ryba l towskiwas a co nt r ac to r a nd tha t th erefore the i ns ur an ce po l i cye xc l u d e s c o v e r a g e o fth e c o mp a n i e s ’ l i ab i l i t y t o h i m. Atl an ti c i ssu ed th e i ns ur an ce po l i cyt o o nl y o ne o fthe co m pan i es , Pas zk o ( ag ains t whi cha de f au l t j udg m en t w as en te re d bo th in t h e p er so n a l inju ry su it a n d in t h is sui t, wh i ch i s w h y i t i sn’ t a n appell ant)
. The thr ee othe r defe nd ant co m panie s, however, ar gued i n the dist ri ct cour t that the pol i cy covers t hem as well, as addit i onal i nsureds. S ee N at i onal U ni on Fi r eIns . Co. v. Am e r i ca n M ot or i s ts Ins . Co. , 70 7 F
. 3d 797, 80 0- 01 ( 7th Ci r. 20 13) (Illino is law ). Th e d ist r i c t ju d ge , agr ee in g w ith A tla n tic th atRyba l to wsk i ’ s suit wa s wi th i n the e xc l us i o n, f o und it u n n eces sary to d ecid e w he th er the com p an ies w ere addi ti o na l i ns ur eds

. The pa r ti es d o no t m en ti o n the i s s ue i n thi s c o ur t, b ut i t may b e c o me c r i t i c a l i fwe r e man d. The defe nd ant co m panie s work ed on the co nstr ucti on of an apart m ent bui l ding at 4929 For est A venue in Dow ners Grov e, I l l i noi s. The bui l ding w as com ple ted i n 200 9; the acci dent gi vi ng r i se to thi s s uito ccurr ed d u r i n gc o n s t r u c t i o n i n 2 0 0 7
. R yb a l t o ws k i wa s a n e mplo yee o fa w ate rpro ofi ng co m pany nam ed Rai ncoat S o l ut i o ns , whi chha d s ubmi tt ed a bi d t o Princ e, the ge ne r a l c o nt r a c t o r, t o p e r f o r m ca ul k i ng( s e a l i ngj o i nt s o r gaps)
. Rai ncoatwould thus be a subcontr acto r ofPrinceN os. 12

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- 2485 3 if Pr in c e a c c ep te d its bid . P r i n c e a c c ep te d it

— subj ect, ho wev er, to a ppr o vingi n a dva nc e th e co l o r o fthe c au l k i ng m aterial th a t R a in coat w ou ld u se an d satisfyi ng i tself, a l s o i n a dv a nc e , tha tthe c a ul k e r wa s co m pet e ntt o do the work

. S o Rai ncoat ’ s bo ss bro ught Ryba l towskito th e pr oj ec t si te t o de m o ns tr at e ho w he woul d do the c a u l k i n g . R a i n c o a tdi d n o te x p e c tt o b e p a i d f o r th e d e monst ra ti on, wh i ch i nvol ved caul ki ng a few window s. A fter the d em ons tration bu t before Ry b a lt ow ski l eft the s i te, a beam su pp or ti ng m aso nry equi pm ent fel l o n hi m , c au singi nj ur i es f o r whi chhe s o ug htr edr es s i n the tor t s uit
. A hal fhouro r so afterthe acci dent Rai ncoat and Pri nce s i gned the subcontr act. The i nsurance pol i cy that A tl anti c had iss ued to Paszk o w as a C om m er ci alGenera l Li abi l i ty I nsurance pol i cy. Atl an tic’ s ve r si o n o fthe po l i cyc o nt aine d a n e xc l us i o n, c a p t i o n e d “ I nj u r y t o E mp l o y e e s , C o n t r a c t o r s a n d E mp loy ee s o f C on tr ac to rs ,” fro m co ve ra ge for “ ‘b od ily i nj ury’ to any ‘ con tr acto r’ ar i si ng o ut o fo r i n the cour se ofthe re nd er i ng o r perf or m i ng se rv i ces of a n y k i nd o r na tur e what so ev erb y s uch‘ co nt r ac to r ’ f o r whi cha ny i ns ur ed m ayb ec o m e l i ab l e i n any ca pac i ty
. ” The e xc l usi on s tat ed t hat “ ‘ contr acto r’ shal l i ncl ud e but i s no t l i m i ted to any i nd ep endent co ntra cto r orsubco ntra cto r of any insu red , any gen eral contrac tor, a n y de velop er, any pr oper ty own er, any i nd ependent contr acto r or su bc o nt r ac to r o fa ny ge ne r alco nt r ac to r, any i nde pen den t contr acto r orsubco ntra cto r ofany devel op er, any i nd epend ent c ontr acto r orsubco ntra cto r ofany proper ty own er, and any and al l per sons w or king f orand orpro vi d in g ser vi ces and orm ate ri al s o fany ki nd f orthes e4 N os. 12

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- 2485 perso ns o r enti ti es m enti oned her ein.” So i fwh en Rybal towski w as i nj ured hi s em plo yer, Rai ncoat, ei ther was a s ubc o nt r ac to r or was pr o vi di ngs er vi ce s o fa ny k i nd t o a c o nt r ac to r ( na m ely Princ e) , wi th i n the mean i ng ofthe excl usi on, Rybal towskiw as a “contr acto r” as wel l, b ec au se he was w or k i ngf o r Ra i nc o at
. I ncid en ta l l y, Rai ncoat, nothavi ng be en j oi ned as a defendant i n Rybal towski ’ s t or t s uit, does n ot cla i m to be an addit i onali nsured under Atla nti c’ s pol i cy. T he exc lusion is poorly drafted

. Th e term “con tr a c t o r” i s ex empl i fi ed r athe r tha n c l ea r l y de fi ne d. The w ordi ng ofthe excl usi on l eave s uncer tai n w h etherRai ncoatwas a c on tr ac to r sim p ly b ec au se co m p an ies th at en ga ge in c on st ru c tio n are ca lled “c on tr ac to rs ,” or w h et h er it d id not beco m e a “co ntra cto r” unti l i t s i gned a contr act w i th Pr i nce o r unti l i t pr ovi ded m ate ri al s o r ser vi ces othe r than the dem onst ra ti on o fcaul ki ng, o r w hether the dem onst ra ti on i tse l fwas a ser vi ce pr ovi ded bya c on t ra c to r. T h e c om p lain t in R yb alt ow sk i’s t or t s u it refer s t o Rai ncoatas a “co ntra cto r, ” but thi s has no si gni fi cance for the i nter preta ti on o fA tl anti c’ s pol i cy, t o wh i c h Ryb a l t o ws k i wa s a s t r a ng e r . S e e P eki n In s . Co. v . Wi l s on , 93 0 N
. E.2 d 1011, 10 19 ( I l l

. 20 10)
. The f acts al l ege d i n a c om pla i nt a ga in st an i nsured, char gi ng a tort o r o th erwro ng, a r e cr i ti ca l t o de te r m i ni ngthe i nsurer ’ s duty t o defe n d , id

. at 1017, but th e tort plaintiff has no author i ty to i nter pret the i nsuranc e c ontract
. T h at ’s a m at te r for th e c ou rt
. Id

. at10 16. If Rai ncoatwas “pro vi ding ser vi ces . . . o fany ki nd ” t o Pri nce ( w e ass um e that “of any ki nd ” m od ifies se rv i cesN os. 12

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- 2485 5

as w el l as m ate ri al s, a pla us ible r eadi ng to wh i ch ne i th erpa r tyt ak es e xc ept i on) w he n the a cc i den t occur re d, Rybal towski, w ho “ w or k[ ed]” f orand prov i ded se r vi ce s to Ra i nc o at, was a l so a “ con tr ac to r, ” an d s o the acci dent is n ot cove re d. A l though the pol i cy does not define the c r i ti ca l t er m “ pr o vi di ngs er vi ce s . . . o fa ny k i n d , ” o n e p o s s ib l e i n t e r p r e t a t i o n w o u l d i n v o l v e c o mpari ng Rai ncoatto a theat ri cale m plo ym ent a gency . S uppo se th e pr o duce r o f a pl ay as k s an ag en cy to sen d 20 actors t o hi m to audit i on f orfi ve parts
. The pro du cer want s th atma ny a udi ti o ne r s i n o r dert o i nc r ea se the l i kel i hood o fbeing ab l e t o hi re fi ve ou tstanding acto rs . T he re is a s e n s e in w hich all20, includ ing the rej ects , are “pr o vi di ngs er vi ce s” t o the pr oduce r ; the y a r e f ac i l i ta ting hi s pi cki ng the bes t bypro vi ding a r ange of possibi l i ti es. Rybal towskiwas auditi oni ng bydoi ng a f re e dem onst ra ti on o fcaul ki ng. The i ntended m eani ng of“pro vi ding ser vi ces” co uld be na rr o wer, ho wev er ; a nd c o ur ts i nt er pr eta n a m bi g uo us t e r m in a n i ns ur a nc e c o nt r a c t i n f a v o r o fthe i ns ur e d. The r ea so n i s th at“ insur eds wanti ns ur an ce a g ains t th e vaga ri es ofi nter preta ti on, ” Gre atWe s tC a s ual ty Co. v. M ayo rga , 34 2 F
. 3d 816, 81 8 ( 7th Ci r. 20 03) ; se e a l so St oneCont ai ne rCorp. v. Har t f or d S t e am Boi l e rIns pe ct i on & Ins . Co. , 1 6 5 F
. 3 d 1 1 5 7, 1 1 6 1

- 6 2 ( 7 th Ci r . 1 9 9 9 ) , a s well as aga i nst the r i sks clear l y s tat ed i n the pol i cy

— es p ec ially sinc e ani ns ure d ha s no r ea l i st i c po ss ibi l i tyo fne g o ti at i ng c lar ifica tio n of am b igu ou s p ol i c y lan gu ag e. O utbo a rd M ar i neCorp. v. Libe r ty M ut ual Ins . Co. , 60 7 N
. E.2 d 1204, 1207( I l l

. 19 92) ; se e a l so P a yless Sh o esou rce, Inc. v. Trav elers6 N os. 12

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- 2485 C os. , Inc. , 585 F.3d 13 66 , 137 2-7 3 ( 10 th C ir. 20 09 ); B o seck er v. We s t f i e l d Ins . Co. , 724 N
. E
. 2d 241, 244 (I nd

. 2000). I gn oring the other d efend an t co m p an ies, to si m p li fy anal ysi s, we ask fi rs t whether the e xcl usi on o fco ver age for inju rie s t o “ c on tr ac to rs ” a s u n d er st oo d by A t l an tic to ex c lu d e c ov er ag e fo r l i a b ility to R yb alt ow sk i w ou ld so l i m i t Pr i nce’s c overa ge ( ass um i ng Pr i nce i s co ver ed as an addit i onali nsured) as to m ake i t i m pla usibl e that anyo ne would w ant s uch a p olic y. That w oul d be a r ea so n t o do ubtAtl an ti c’ s i nt er pr et at i o n. N ot that the i nter preta ti on w oul d m ake the cove ra ge pr o vi ded byAtl an ti c’ s po l i cy( whethe r t o Pa sz k o , the or i gi nal purchase r ofthe pol i cy, o r to Pri nce o r othe r con tr acto rs o r subcontr acto rs wh o cl ai m to be cove re d by i t) i l l u sor y. S ee Am e r i ca n Coun t ry Ins . Co. v. Cl i ne, 72 2 N .E .2d 7 55 , 761 -62 (Ill . A p p . 199 9); A m erica n C o un try In s. C o. v. K raem erBros. , Inc. , 6 9 9 N
. E. 2 d 1 0 5 6 , 1 0 6 2 ( I l l

. App
. 1 9 9 8 )
. T he e xc l us i o n wo ul d s t i l l b e i na pp l i c ab l e to a p asserb y, d eli verym an, bu il d ing insp ector, poli ce offi cer, garbag e c olle cto r, o r othe r perso n w ho m i ght b e inj ured ata c o ns tructi o n s i te wi th o utb eingi nv o l ve d in the const r uct i o n a t t he si te
. Tr ue , the v as t m aj o r i tyo fpe r so ns at such a si te

— and the per sons m ostl i kel y t o be inj ure d there

— ar e co nstr ucti on work er s, em plo yed by contract or s o r subcontr acto rs and thus “ contr acto rs ” th e ms e l v e s wi th i n th e me a n i n g o f th e e x c l u s i o n. But Pri nce di d not nee d A tl anti c’ s p olicy in or der t o prot ect i ts el fa g ains t l i ab i l i tyt o tho se wor k er s. I t had b o ug ht i ts own Com m er ci alGenera l Li abi l i ty pol i cy, and i ts pol i cy conta i ns no cont ra cto r excl usi on. Probabl y Pr i nceN os. 12

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- 2485 7

see ks cove ra ge und erA tl anti c’ s poli cy ra therthan und er i ts o wn o nl y b e c a us e i t s p r i mary i ns ur e r mi g htr ai se Pri nce’ s pre m i um s s houl d Pri nce r equi re thati nsurer to defe nd o r i nd em ni fy i t. S ee N at i onal U ni on Fi r eIns . Co. v. Am e r i ca n M ot or i s t s Ins . Co. , sup ra , 70 7 F
. 3d at 802. Pri nce c o ul d h a v e o b t a i ne d s t i l l mo r e c o v e r a g e by re q u irin g e ac h of its s u b c o n tr ac to rs to m ak e itan ad d iti o na l i nsured undera po l i cytha t i ns ur ed th e su bc o ntr acto r aga i nst l i abi l i ty to th e subcontr acto r’ s e m plo yee s. Because work er s’ co m pensati on la w pro tect s a subco ntra cto r fr o m a t o r t su it by hi s o wn empl o y ee s, tho ug h n o t th e gener alco ntra cto r f ro m a tor t s uitbytho se em plo yee s, th e g en er alc o nt r ac to r woul d b e r equi r i ngthe s ubc o ntr acto r to car rya f or m o fins u ra nce

— i nsurance aga i nst t o r tl i ab i l i t y t o the s ub c o nt r a c t o r ’ s o wn e mpl oye e s— that the s ub c o nt r a c t o r wo ul d n o tn e e d o r wa nt
. S t i l l, s uch i nsurance often i s r equi re d by co nstr ucti on co ntra cto rs . 4 P h ilip L . B ru n er an d P at ric k J. O ’C on n or , Jr., Bru ne ran d O ’ Connoron Cons t r uc t i on Law § 1 1 :44, p. 67 (2012 Su p p . ); see , e. g. , N at i onal Fi r eIns . v. Wal s h Cons t r uc t i on Co. , 90 9 N
. E.2 d 285, 28 7- 88 ( I l l

. A pp . 20 09)
. Or Pr i nce co uld have re quir ed i nd em ni fi cati on byi ts subcontr acto rs o r prescr ibed speci fi c sa fetypre cauti ons to re du ce the l i abi l i ty r i skfr o m i nj ur i es t o i ts s ubc o nt r ac tor s’ e m pl o y ee s, a nd m i ght ha ve needed add i ti onalco ver age o nl y fori njur i es to pa ss er sb y orothe r vi si to r s no t e ng ag ed i n c o ns truct i o n. The se a ppr o ac he s woul d no t ha ve w or k ed i n the pr esent cas e, bec ause Pri nce had no contr act w i th Rai ncoati n w hi ch to i nser t an “a dd i ti onali nsured” c l ause o r a r equi r emento fi nde m ni fi cat i o n o r o th erpr o vi si o ns8 N os. 12

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- 2485 f orPrince’ s o w n prot ect ion. Pri nce m ay have been an add i ti onali nsured under Pas zko ’ s pol i cy, and Paszk o wa s r e s po ns ibl e f o r the t o pp l i ngo fthe ma s o nr y e qu i pm en t on the unfo r tu na te Ryba l to wsk i
. Buttha t’ s th e po l i cytha t co nt ains the c o nt r ac to r e xc l us i o n. W e don’ t underst and the a tt ra cti on o fan insurance po l i cys ucha s Atl an ti c’ s th at co nt ains su ch a br o ad ex cl usi on; a Googl e s ear c h sugg est s that the excl usi on i s r ar e, and ma yb e i ti s c o nfi ne d t o p o l i c i e s i s s ue d b y At l a nt i c. St i l l, br oad as i t i s, the excl usi on d oes notr ender cove ra ge i l l usor y. N orcan w e s ay that it c an’ t be as b ro ad as A tla n tic be liev es be c au se t h e n n o on e w ou ld buy the pol i cy. But w e s ti l l m ust deci de how br oad i t i s. A nd resolvi ng am biguity as w e m us t against the insu re r, w e concl ud e that i t i s not bro ad enoug h to em bra ce th e a c c id en t t o R yb alt ow sk i. The distr i ctc o ur t’ s co nt r ar y r ul i ngwas t er se : “ The langu age o fthe Exc l us i o n i s i nc r edibl y b r o ad: ‘ pr o vi di ng m at er i al s an d o r s ervi ce s o fa ny k i nd. ’ Ra i nc o atS o l uti ons’ bi d and m ockup work fel l w ith in thi s e xpansive l anguage . The c ourtm ust co ncl ud e that Rai ncoat S o l ut i o ns qua l i fi es a s a ‘ co nt r ac tor ’ a s se t o uti n the p olic y. ” W e d on ’t k n ow w h at th e jud ge m ea n t b y “ b id an d m o ckup wor k

. ” S ubmi tt i nga b i d i s l i k e appl y i ng f ora j ob, and a j ob appli cati on i s no t usual l y th ou gh t a se rv ice to th e p ro sp ec tiv e e m p loy er , th ou gh it is a p ro visi on o fi nfo rm ati on a nd h as value to the re ci pie nt, at l ea st i f th e appl i ca nt f o r th e j o b i s wor th co ns i der at i o n. Ma yb e i n d e s c r ib i n g th e b i d a s “ wo r k ” o r a s a s e r v i ce t he j ud ge w as pick i ng up a s ugges ti on byA tl anti c thatN os. 12

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- 2485 9 Rybal towski ’ s ca ulk i ng was not j ust a dem ons tr ati on

— th a ti fs a t i s f a c t o r y i two u l d r e ma i n o n th e win d o ws he’ d caul ked. Fo r the dem onst ra ti on di d not invol ve caul ki ng a m ock

- up , al though th at is the w or d the j ud ge us e d; i ti nv o l v e d c a ul k i nga c t ua l wi nd o ws o fthe b ui l di n g. Bu t a s f aras appears , the caul ki ng co uld e asi l y hav e been re m ove d, and so w as tenta ti ve untilthe contr act w as si gned, wh i ch happened afterthe acci dent. The dem onst ra ti on ca ulk i ng couldbe thought the pr ovi si on o fa ser vi ce, ei therbec ause the c aul ki ng r em ai ned on the window s ( as i t pr obab l y di d, si nce Pr i nce g ave the c aul ki ng subco n tract to Rai ncoat, i m ply i ng tha t Ryba l to wsk i’ s wor kwas s at i sf ac to r y ) , o r b ec au se the demonstr at i o n l ed to the s i gni ngo fthe c o nt r ac t an d thus to the s ubsequent p ro vi si on byRai ncoato fwh at unqu esti onably were const ructi on s er vi ces. Rai ncoat ’ s inter nal cal cul ati on o fthe pri c e to i ncl ud e in i ts bi d coul d al so, th ou gh m ore du bious ly, be thou gh t t h e p rovisi on of a se r vi ce , bec au se i t t o o l ed to the b i d tha t l ed to the de m o nstr ati on caul ki ng and a fter the subcontr act w as signed to the c ontr actualcaul ki ng. A l so pla usibl e, however, i s the al ternati ve i nter preta
ti on th at se rv i ces ar e no t pr ovi ded unti l the contr acto r ( w i th o r w i thout a s i gned cont ra ct, because a provi der o f se r vi ce s i s a “c o nt r ac to r ” wi th i n the mean i ngo fthe ex cl us ion reg ar dl es s o fwhethe r he ha s a co nt r ac t) b eg i ns to d o c om p en sa te d w or k o n t h e p roj ec t. It is a s p lau sib le as the i nt er pr et at i o n a do pte d b y the di st rict j ud g e o r the on e a c tu ally p re fer re d by A tla n tic

— that a “co ntra ctor” is an y o ne i n the c o ns truct i o n b us i ne ss, w he th ero r no t he10 N os. 12

- 2405 , 12

- 2485 is r en d ering a con stru cti o n s e rvice w he n th e inj ury oc c u rs . It doe s s eem a l i ttl e o dd to tr eata const ructi on w or keras i fhe were a passerby j ust be cause he was d e mo n s t r a t i n ga c o n s t r u c t i o n s e r v i c e r a th e r th a n p e r f o r min g a co n tr ac te d -for se rv ice . B u t if th is is a lo op h ole in th e w or d y ex c lu sio n, A tla n tic co u ld h av e p lu gg ed it by ex cl ud i ng anyand al l co nstr ucti on work er s fro m cove rage, rath er than cont ractors. T he alternative interpreta ti on

— that Rybal towskiwas not a co ntra cto r w hen he wa s i nj ur ed

— t h u s ru les th e c as e. A n d so A tla n tic ha s a du ty to d efen d t h e ap p ell an ts ifthey are det erm i ned to be a dd i ti onali nsureds. The j ud gm ent i s ther ef or e re ver sed and the ca se r em an d ed for fu rt h er p r oc ee d in gs co n sis te n t w ith th is o pi ni o n. R EV ER S ED AN D R EMAND ED .

6- 7- 13