In the

United States Court of Appeals

For the Seventh Circuit

Nos. 12-2405, 12-2485

ATLANTIC CASUALTY INSURANCE COMPANY,

Plaintiff-Appellee,

v.

PASZKO MASONRY, INC. and ROBERT RYBALTOWSKI,

Defendants,

and

CHICAGO MASONRY CONSTRUCTION, INC.;

PRINCE CONTRACTORS, INC.; and 4929 FOREST, LLC,

Defendants-Appellants.

Appeals from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 09 C 7452—Joan B. Gottschall, Judge.

ARGUED APRIL 12, 2013—DECIDED JUNE 7, 2013

Before BAUER, POSNER, and FLAUM, Circuit Judges.

POSNER, Circuit Judge. In this diversity suit governed by

Illinois law, an insurance company seeks a declaratory
2 Nos. 12-2405, 12-2485

judgment that it has no duty to defend any of the

four defendant companies listed in the caption (Prince,

Paszko, Chicago Masonry, and Forest) against Robert

Rybaltowski’s personal injury suit against those companies. The district court granted summary judgment

in favor of Atlantic on the ground that Rybaltowski was

a contractor and that therefore the insurance policy excludes coverage of the companies’ liability to him.

Atlantic issued the insurance policy to only one of the

companies, Paszko (against which a default judgment

was entered both in the personal injury suit and in this

suit, which is why it isn’t an appellant). The three other

defendant companies, however, argued in the district

court that the policy covers them as well, as additional

insureds. See National Union Fire Ins. Co. v. American

Motorists Ins. Co., 707 F.3d 797, 800-01 (7th Cir. 2013)

(Illinois law). The district judge, agreeing with Atlantic

that Rybaltowski’s suit was within the exclusion, found

it unnecessary to decide whether the companies were

additional insureds. The parties do not mention the

issue in this court, but it may become critical if we remand.

The defendant companies worked on the construction of an apartment building at 4929 Forest Avenue in

Downers Grove, Illinois. The building was completed

in 2009; the accident giving rise to this suit occurred

during construction in 2007. Rybaltowski was an employee of a waterproofing company named Raincoat

Solutions, which had submitted a bid to Prince, the

general contractor, to perform caulking (sealing joints or

gaps). Raincoat would thus be a subcontractor of Prince
Nos. 12-2405, 12-2485 3

if Prince accepted its bid. Prince accepted it—subject,

however, to approving in advance the color of the caulking

material that Raincoat would use and satisfying itself,

also in advance, that the caulker was competent to do

the work. So Raincoat’s boss brought Rybaltowski to

the project site to demonstrate how he would do the

caulking. Raincoat did not expect to be paid for the demonstration, which involved caulking a few windows.

After the demonstration but before Rybaltowski left

the site, a beam supporting masonry equipment fell on

him, causing injuries for which he sought redress in the

tort suit. A half hour or so after the accident Raincoat

and Prince signed the subcontract.

The insurance policy that Atlantic had issued to Paszko

was a Commercial General Liability Insurance policy.

Atlantic’s version of the policy contained an exclusion,

captioned “Injury to Employees, Contractors and Employees of Contractors,” from coverage for “ ‘bodily

injury’ to any ‘contractor’ arising out of or in the course

of the rendering or performing services of any kind or

nature whatsoever by such ‘contractor’ for which any

insured may become liable in any capacity.” The exclusion stated that “ ‘contractor’ shall include but is not

limited to any independent contractor or subcontractor

of any insured, any general contractor, any developer,

any property owner, any independent contractor or

subcontractor of any general contractor, any independent

contractor or subcontractor of any developer, any independent contractor or subcontractor of any property

owner, and any and all persons working for and or providing services and or materials of any kind for these
4 Nos. 12-2405, 12-2485

persons or entities mentioned herein.” So if when

Rybaltowski was injured his employer, Raincoat, either

was a subcontractor or was providing services of any

kind to a contractor (namely Prince), within the meaning

of the exclusion, Rybaltowski was a “contractor” as

well, because he was working for Raincoat. Incidentally, Raincoat, not having been joined as a defendant in Rybaltowski’s tort suit, does not claim to be

an additional insured under Atlantic’s policy.

The exclusion is poorly drafted. The term “contractor”

is exemplified rather than clearly defined. The wording

of the exclusion leaves uncertain whether Raincoat was

a contractor simply because companies that engage in

construction are called “contractors,” or whether it did

not become a “contractor” until it signed a contract

with Prince or until it provided materials or services

other than the demonstration of caulking, or whether

the demonstration itself was a service provided by a

contractor. The complaint in Rybaltowski’s tort suit

refers to Raincoat as a “contractor,” but this has no significance for the interpretation of Atlantic’s policy,

to which Rybaltowski was a stranger. See Pekin Ins. Co.

v. Wilson, 930 N.E.2d 1011, 1019 (Ill. 2010). The facts

alleged in a complaint against an insured, charging a

tort or other wrong, are critical to determining the

insurer’s duty to defend, id. at 1017, but the tort plaintiff

has no authority to interpret the insurance contract.

That’s a matter for the court. Id. at 1016.

If Raincoat was “providing services . . . of any kind” to

Prince (we assume that “of any kind” modifies services
Nos. 12-2405, 12-2485 5

as well as materials, a plausible reading to which

neither party takes exception) when the accident

occurred, Rybaltowski, who “work[ed]” for and provided

services to Raincoat, was also a “contractor,” and so the

accident is not covered. Although the policy does not

define the critical term “providing services . . . of any

kind,” one possible interpretation would involve comparing Raincoat to a theatrical employment agency.

Suppose the producer of a play asks an agency to send

20 actors to him to audition for five parts. The producer

wants that many auditioners in order to increase the

likelihood of being able to hire five outstanding actors.

There is a sense in which all 20, including the rejects, are

“providing services” to the producer; they are facilitating

his picking the best by providing a range of possibilities.

Rybaltowski was auditioning by doing a free demonstration of caulking.

The intended meaning of “providing services” could be

narrower, however; and courts interpret an ambiguous

term in an insurance contract in favor of the insured.

The reason is that “insureds want insurance against the

vagaries of interpretation,” Great West Casualty Co. v.

Mayorga, 342 F.3d 816, 818 (7th Cir. 2003); see also

Stone Container Corp. v. Hartford Steam Boiler Inspection &

Ins. Co., 165 F.3d 1157, 1161-62 (7th Cir. 1999), as well as

against the risks clearly stated in the policy—especially

since an insured has no realistic possibility of negotiating

clarification of ambiguous policy language. Outboard

Marine Corp. v. Liberty Mutual Ins. Co., 607 N.E.2d 1204,

1207 (Ill. 1992); see also Payless Shoesource, Inc. v. Travelers
6 Nos. 12-2405, 12-2485

Cos., Inc., 585 F.3d 1366, 1372-73 (10th Cir. 2009); Bosecker

v. Westfield Ins. Co., 724 N.E.2d 241, 244 (Ind. 2000).

Ignoring the other defendant companies, to simplify

analysis, we ask first whether the exclusion of coverage

for injuries to “contractors” as understood by Atlantic

to exclude coverage for liability to Rybaltowski would

so limit Prince’s coverage (assuming Prince is covered as

an additional insured) as to make it implausible that

anyone would want such a policy. That would be a

reason to doubt Atlantic’s interpretation.

Not that the interpretation would make the coverage

provided by Atlantic’s policy (whether to Paszko, the

original purchaser of the policy, or to Prince or other

contractors or subcontractors who claim to be covered

by it) illusory. See American Country Ins. Co. v. Cline, 722

N.E.2d 755, 761-62 (Ill. App. 1999); American Country Ins.

Co. v. Kraemer Bros., Inc., 699 N.E.2d 1056, 1062 (Ill. App.

1998). The exclusion would still be inapplicable to a

passerby, deliveryman, building inspector, police officer,

garbage collector, or other person who might be injured

at a construction site without being involved in the construction at the site. True, the vast majority of persons

at such a site—and the persons most likely to be

injured there—are construction workers, employed by

contractors or subcontractors and thus “contractors”

themselves within the meaning of the exclusion. But

Prince did not need Atlantic’s policy in order to protect

itself against liability to those workers. It had bought

its own Commercial General Liability policy, and its

policy contains no contractor exclusion. Probably Prince
Nos. 12-2405, 12-2485 7

seeks coverage under Atlantic’s policy rather than under

its own only because its primary insurer might raise

Prince’s premiums should Prince require that insurer

to defend or indemnify it. See National Union Fire Ins. Co.

v. American Motorists Ins. Co., supra, 707 F.3d at 802.

Prince could have obtained still more coverage by

requiring each of its subcontractors to make it an additional insured under a policy that insured the subcontractor against liability to the subcontractor’s employees.

Because workers’ compensation law protects a subcontractor from a tort suit by his own employees, though not the

general contractor from a tort suit by those employees,

the general contractor would be requiring the subcontractor to carry a form of insurance—insurance against

tort liability to the subcontractor’s own employees—that

the subcontractor would not need or want. Still, such

insurance often is required by construction contractors.

4 Philip L. Bruner and Patrick J. O’Connor, Jr., Bruner and

O’Connor on Construction Law § 11:44, p. 67 (2012 Supp.);

see, e.g., National Fire Ins. v. Walsh Construction Co., 909

N.E.2d 285, 287-88 (Ill. App. 2009). Or Prince could have

required indemnification by its subcontractors or prescribed specific safety precautions to reduce the liability

risk from injuries to its subcontractors’ employees, and

might have needed additional coverage only for injuries

to passersby or other visitors not engaged in construction.

These approaches would not have worked in the

present case, because Prince had no contract with

Raincoat in which to insert an “additional insured” clause

or a requirement of indemnification or other provisions
8 Nos. 12-2405, 12-2485

for Prince’s own protection. Prince may have been an

additional insured under Paszko’s policy, and Paszko

was responsible for the toppling of the masonry equipment on the unfortunate Rybaltowski. But that’s the

policy that contains the contractor exclusion.

We don’t understand the attraction of an insurance

policy such as Atlantic’s that contains such a broad exclusion; a Google search suggests that the exclusion is rare,

and maybe it is confined to policies issued by Atlantic.

Still, broad as it is, the exclusion does not render

coverage illusory. Nor can we say that it can’t be as

broad as Atlantic believes because then no one would

buy the policy. But we still must decide how broad it is.

And resolving ambiguity as we must against the insurer,

we conclude that it is not broad enough to embrace

the accident to Rybaltowski.

The district court’s contrary ruling was terse: “The

language of the Exclusion is incredibly broad: ‘providing

materials and or services of any kind.’ Raincoat Solutions’ bid and mockup work fell within this expansive

language. The court must conclude that Raincoat

Solutions qualifies as a ‘contractor’ as set out in the

policy.” We don’t know what the judge meant by “bid

and mockup work.” Submitting a bid is like applying

for a job, and a job application is not usually thought a

service to the prospective employer, though it is a provision of information and has value to the recipient, at

least if the applicant for the job is worth consideration.

Maybe in describing the bid as “work” or as a service the

judge was picking up a suggestion by Atlantic that
Nos. 12-2405, 12-2485 9

Rybaltowski’s caulking was not just a demonstration—that if satisfactory it would remain on the windows

he’d caulked. For the demonstration did not involve

caulking a mock-up, although that is the word the judge

used; it involved caulking actual windows of the building. But as far as appears, the caulking could easily have

been removed, and so was tentative until the contract was

signed, which happened after the accident.

The demonstration caulking could be thought the provision of a service, either because the caulking remained

on the windows (as it probably did, since Prince gave

the caulking subcontract to Raincoat, implying that

Rybaltowski’s work was satisfactory), or because the

demonstration led to the signing of the contract and thus

to the subsequent provision by Raincoat of what unquestionably were construction services. Raincoat’s internal

calculation of the price to include in its bid could also,

though more dubiously, be thought the provision of a

service, because it too led to the bid that led to the demonstration caulking and after the subcontract was signed

to the contractual caulking.

Also plausible, however, is the alternative interpretation that services are not provided until the contractor

(with or without a signed contract, because a provider of

services is a “contractor” within the meaning of the

exclusion regardless of whether he has a contract) begins

to do compensated work on the project. It is as plausible

as the interpretation adopted by the district judge or the

one actually preferred by Atlantic—that a “contractor” is

anyone in the construction business, whether or not he
10 Nos. 12-2405, 12-2485

is rendering a construction service when the injury

occurs. It does seem a little odd to treat a construction

worker as if he were a passerby just because he was

demonstrating a construction service rather than performing a contracted-for service. But if this is a loophole in

the wordy exclusion, Atlantic could have plugged it

by excluding any and all construction workers from

coverage, rather than contractors. The alternative interpretation—that Rybaltowski was not a contractor when

he was injured—thus rules the case. And so Atlantic

has a duty to defend the appellants if they are determined to be additional insureds.

The judgment is therefore reversed and the case remanded for further proceedings consistent with this

opinion.

REVERSED AND REMANDED.

6-7-13