Opinion ID: 2826717
Heading Depth: 3
Heading Rank: 2

Heading: Ambiguous Scope of Contractor

Text: We also conclude that there is a second ambiguity in the policy language: the definition of the word contractor. The L- 500 Endorsement exclusion applies only to contractors, subcontractors, and their various workers and employees. Benchmark contends that the exclusion does not apply to Bailey's claims because Bailey was not a contractor's employee within the meaning of the exclusion when she was injured. Contractor is not a defined term in the policy. If an undefined term is susceptible to multiple reasonable definitions, then the court will apply a reasonable definition that confers coverage, if one exists. See Littlefield v. Acadia Ins. Co., 392 F.3d 1, 8 (1st Cir. 2004) -14- (requiring that a policy provision susceptible to more than one reasonable interpretation be construed against the insurer); Hazen, 555 N.E.2d at 583 (same). Looking to the dictionary, the district court held – and USLIC contends on appeal – that contractor unambiguously means anyone with a contract. See U.S. Liab. Ins. Co. v. Benchmark Constr. Servs., Inc., 31 F. Supp. 3d 315, 320 (D. Mass. 2014) (citing Webster's New World College Dictionary (4th ed. 1999) for a definition of contractor as a person who contracts to supply certain materials or do certain work for a stipulated sum, esp. one who does so in any of the building trades). USLIC argues that, since Egan had a contract to apply decorative paint to the interior wall, Egan was a contractor under this broad definition. Bailey, as Egan's employee, was therefore a contractor's employee, bringing her claims under the L-500 Endorsement's purview.5 Benchmark, however, contends that contractor means someone with a contract with the insured. In other words, contractor means someone Benchmark hires but who is not 5 Benchmark argues that defining contractor as anyone with a contract is unreasonable because it renders the other classes of excluded parties listed in the L-500 Endorsement superfluous. After all, subcontractors, as well as the employees of contractors and subcontractors, are all parties with a contract, no less than contractors are. However, the interpretive canon that urges us to avoid surplusage in contracts is limited in its application to insurance policies, where redundancies abound. Ardente v. Standard Fire Ins. Co., 744 F.3d 815, 819 (1st Cir 2014) (quoting TMW Enters., Inc. v. Fed. Ins. Co., 619 F.3d 574, 577 (6th Cir. 2010)). -15- Benchmark's employee. The reasonableness of that interpretation, Benchmark argues, is evident from the structure of the exclusion. Since the first part of the exclusion is confined to Benchmark's employees and other workers that Benchmark hires, the second part of the exclusion, which speaks of contractors, subcontractors, and their workers, would logically be confined to contractors and subcontractors Benchmark retains for work on a project and their workers. We are persuaded that reasonably intelligent people may differ about the meaning of the word contractor, and hence the word is ambiguous.6 Anyone with a contract is surely a reasonable definition of the word contractor, as the district court found, but so is a more narrow definition focused on the contractual relationship of the injured party and the insured. In light of the ambiguity, we may once again look to the reasonable expectations of the insured to discern the proper meaning of the undefined term. See Trs. of Tufts Univ., 616 N.E.2d at 72. Here, the reasonable expectations of the insured support 6 Since contractor is ambiguous, USLIC's argument that Benchmark's interpretation rewrites the policy is misguided. Of course, the court will not rewrite the unambiguous terms of an insurance contract. Lexington Ins. Co. v. Gen. Accident Ins. Co. of Am., 338 F.3d 42, 50 (1st Cir. 2003); see also Hakim v. Mass. Insurers' Insolvency Fund, 675 N.E.2d 1161, 1165 (Mass. 1997) (We read the policy as written and are not free to revise it or change the order of the words. (internal quotation marks omitted)). Here, however, the ambiguity requires us to consider the full breadth of reasonable alternative definitions that the parties propose. -16- the definition Benchmark advances. As Benchmark argues, defining contractor as anyone with a contract makes a dice roll of every bodily injury claim, based on whether the injured party happened to be working under any contract no matter how attenuated to the insured's work. Although the district court felt constrained to adopt the broader definition of contractor, it nevertheless conceded the folly of such a haphazard approach to insurance: [T]he Court can discern no reason why the parties would choose ex ante to have coverage depend on whether an injured party was performing subject to a contract at the time he or she was injured regardless of whether that contract was with the insured or some other entity and regardless of whether the contract was related to the subject matter of the Policy. Benchmark, 31 F. Supp. 3d at 321. We are similarly unable to discern any reason why the parties would have contracted for coverage to depend on the coincidence of an injured party's contractual obligations in the world at large. The purpose of commercial general liability insurance also supports the narrower definition of contractor. As discussed in the previous section, this type of policy provides coverage for liability arising out of torts to third parties, as distinguishable from injuries that befall the insured's own employees. Since the word contractor is being used in a provision we have described as an employer's liability exclusion, -17- it makes sense to define contractor as someone with a contract with the insured. A reasonable insured would expect the contractual relationship between the insured and the injured party to govern the applicability of an employer's liability exclusion to a given injury.7 Contractor, then, does not mean anyone with a contract, but is more narrowly defined and means Benchmark's contractor. Therefore, the L-500 Endorsement exclusion does not apply to Bailey's claims. Bailey's boss, Egan, was not retained by Benchmark, and so Bailey is not a contractor's employee within the meaning of the exclusion.