United States Court of Appeals
For the First Circuit
No. 06-2730
SCOTTSDALE INSURANCE COMPANY,
Plaintiff, Appellee,
v.
RAUL TORRES,
Defendant, Appellant,
CARRABASSETT TRADING COMPANY, LTD,
Defendant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. F. Dennis Saylor, IV, U.S. District Judge]
Before
Lipez and Howard, Circuit Judges,
and Gelpi,* District Judge
Ross Anneberg, with whom Ellis Law Offices was on brief, for
appellant.
Steven P. Perlmutter, with whom Robinson & Cole LLP was on
brief, for appellee.
April 1, 2009
*
Of the District of Puerto Rico, sitting by designation.
HOWARD, Circuit Judge. On August 23, 2004, Raul Torres
("Torres") was seriously injured while working at Carrabassett
Trading Company ("CTC") in North Oxford, Massachusetts. Torres
came to work at CTC through an agency known as Venturi Staffing
Partners, Inc. ("Venturi"). When Torres subsequently sued CTC in
state court ("the underlying suit"), CTC contacted its liability
insurance carrier, Scottsdale Insurance Co. ("Scottsdale"), for
defense and indemnity. Scottsdale subsequently filed suit in
federal court,1 seeking a declaratory judgment that it had no duty
to defend or indemnify CTC because Torres was a CTC "employee"
within the meaning of Scottsdale's policy, and was therefore
excluded from coverage.2 After conducting a hearing, the district
court granted Scottsdale's motion for summary judgment.3
Scottsdale Ins. Co. v. Carrabassett Trading Co., Inc., 460 F. Supp.
2d 251 (D. Mass. 2006) ("Scottsdale I"). Because we conclude that
material facts remain in dispute, we must reverse the district
court and remand for further proceedings.
1
Scottsdale named both CTC and Torres as defendants in the
declaratory judgment action. Although both defendants filed a
Notice of Appeal, they agreed to allow Torres to prosecute the
appeal on behalf of both.
2
The record reflects that Scottsdale is defending CTC in the
underlying suit under a reservation of rights.
3
During the hearing, CTC's counsel asked the court to treat the
objection to Scottsdale's motion for summary judgment as a cross-
motion for summary judgment.
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I. BACKGROUND
The facts recited here are undisputed unless otherwise
noted. CTC is a fiber blending and recycling company. Its
business involves baling up waste fiber from textile mills -- such
as waste from carding machines4 -- and selling the bales to, for
example, felt manufacturers. CTC fills orders on an as-needed
basis, resulting in inconsistent demand for its products. It has
five permanent employees, two of whom are salaried and three of
whom are paid hourly.
Venturi hires individuals and places them with client
companies for varying lengths of time. During times of high
product demand, CTC contacted Venturi to supplement its workforce.
Venturi paid the supplied workers, withheld taxes from their
paychecks, and took responsibility for workers' compensation
insurance. While Venturi retained the right to hire, place,
discipline and terminate its employees, CTC was responsible for
training, supervision and assigning work tasks. In cases of
unsatisfactory performance, CTC could ask the worker not to return
to the job. Venturi profited by charging the client CTC a premium
over and above the wage, tax, and workers' compensation insurance
amounts it charged back to CTC.
Torres had been employed by Venturi or its predecessor
since 2001. He was assigned to CTC in August 2003. Torres
4
A carding machine is used to prepare fibers such as wool or
cotton for use in finished textile products.
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replaced a different Venturi employee who had been at CTC for about
three weeks. Torres worked regularly at CTC until early December
2003. He was again assigned to CTC in mid-January 2004, and except
for one week in June, worked regularly until August 2004, when his
left arm was severed in an accident involving a wool-picking
machine. Torres worked a total of 1613 hours during these two
tours of duty at CTC. During roughly the same time span, five
other Venturi employees placed at CTC worked between ten and 280
hours. As a result of the accident, Torres sued CTC in
Massachusetts state court.
At the time of Torres's accident, Scottsdale was CTC's
liability insurer.5 Pursuant to the policy's "Bodily Injury and
Property Damage Liability" section, Scottsdale agreed to "pay those
sums that [CTC became] legally obligated to pay as damages because
of 'bodily injury' or 'property damage' to which this insurance
applies." The liability coverage is subject to an "Employer's
Liability" exclusion, which, in relevant part, states that the
insurance does not apply to "bodily injury to an 'employee' of the
insured arising out of and in the course of . . . performing duties
related to the conduct of the insured's business."
The policy also provides the following definitions:
5. "Employee" includes a "leased worker."
"Employee" does not include a "temporary worker."
5
Coincidentally, Scottsdale's policy took effect the same day as
Torres's accident.
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* * * *
10. "Leased worker" means a person leased to you by
a labor leasing firm under an agreement between
you and the labor leasing firm, to perform duties
related to the conduct of your business.
"Leased worker" does not include a "temporary
worker."
* * * *
19. "Temporary worker" means a person who is furnished
to you to substitute for a permanent "employee"
on leave or to meet seasonal or short-term
workload conditions.
The ultimate question here is whether Torres was a
"leased worker," and thus excluded from coverage; or a "temporary
worker," thus obligating Scottsdale to provide a defense in
Torres's lawsuit.
II. STANDARDS OF REVIEW
A. Summary judgment
We review the district court's grant of summary judgment
de novo. Specialty Nat'l. Ins. Co. v. One Beacon Ins. Co., 486
F.3d 727, 732 (1st Cir. 2007). The presence of cross-motions
"'neither dilutes nor distorts this standard of review.'" Id.
(quoting Mandel v. Boston Phoenix, Inc., 456 F.3d 198, 205 (1st
Cir. 2006)); see also Littlefield v. Acadia Ins. Co., 392 F.3d 1,
6 (1st Cir. 2004) ("Cross motions simply require [the court] to
determine whether either of the parties deserves judgment as a
matter of law on facts that are not disputed.").
Summary judgment "should be rendered if the pleadings,
the discovery and disclosure materials on file, and any affidavits
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show that there is no genuine issue as to any material fact and
that the movant is entitled to judgment as a matter of law." AGA
Fishing Group Ltd. v. Brown & Brown, Inc., 533 F.3d 20, 23 (1st
Cir. 2008); Fed. R. Civ. P. 56(c). The party with the burden of
proof must provide evidence sufficient for the court to hold that
no reasonable fact-finder could find other than in its favor.
Torres Vargas v. Santiago Cummings, 149 F.3d 29, 35-36 (1st Cir.
1998). A dispute is "genuine" if the evidence about the fact is
such that a reasonable jury could resolve the point in favor of the
non-moving party. Rodriguez-Rivera v. Federico Trilla Reg'l Hosp.,
532 F.3d 28, 30 (1st Cir. 2008). A fact is "material" if it has
the potential of determining the outcome of the litigation. Id.
B. Insurance policy construction
The parties agree that Massachusetts law applies to this
case. Accordingly, we begin with the unexceptional proposition
that Scottsdale owes a duty to defend CTC if the allegations in the
underlying lawsuit are reasonably susceptible to an interpretation
that they state a claim covered by CTC's policy. Liquor Liab.
Joint Underwriting Ass'n. of Mass. v. Hermitage Ins. Co., 644
N.E.2d 964, 967. (Mass. 1995). Conversely, there is no duty to
defend a claim that is excluded from coverage. Metro. Prop. & Cas.
Ins. Co. v. Fitchburg Mut. Ins. Co., 793 N.E.2d 1252, 1254 (Mass.
App. Ct. 2003).
The interpretation of insurance contracts is generally a
matter of law for the court. Home Ins. Co. v. Liberty Mut. Fire
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Ins. Co., 830 N.E.2d 186, 188 (Mass. 2005). The court must
"construe the words of the policy according to the fair meaning of
the language used, as applied to the subject matter." Jacobs v.
U.S. Fid. & Guar. Ins. Co., 627 N.E.2d 463, 464 (Mass. 1994)
(citing Johnson v. Hanover Ins. Co. 508 N.E.2d 845, 849 (Mass.
1987)). Where the words in the policy are not ambiguous, "they
must be construed in their usual and ordinary sense." Id.
Ambiguity exists when the policy language is susceptible to more
than one meaning. Lumbermens Mut. Cas. Ins. Co. v. Offices
Unlimited, Inc., 645 N.E.2d 1165, 1168 (Mass. 1995). Ambiguous
policy terms are construed in favor of the insured. Hazen Paper
Co. v. U.S. Fid. & Guar. Co., 555 N.E.2d 576, 583 (Mass. 1990). At
the same time, however, ambiguity is not created simply because the
parties offer different interpretations of the policy language.
Lumbermens, 645 N.E.2d at 1168.
If a contract term is found to be ambiguous, and the
court finds it necessary to rely on extrinsic evidence to resolve
the dispute, then a question of fact appropriate for jury
consideration may arise. See Preferred Mut. Ins. Co. v. Gamache
675 N.E.2d 438, 442 (Mass. App. Ct. 1997) (summary judgment vacated
where intent to cause harm was at issue and genuine issue of
material fact remained as to intoxicated insured's mental
capacity), aff'd 686 N.E.2d 989 (Mass. 1997); see also Foisy v.
Royal Maccabees Life Ins. Co., 356 F.3d 141 (1st Cir. 2004)
(district court correctly submitted the question of parties' intent
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to the jury). Finally, the insurer has the burden of proving that
an exclusion applies. Allmerica Fin. Corp. v. Certain Underwriters
at Lloyds, London, 871 N.E.2d 418, 425 (Mass. 2007).
III. LEGAL ANALYSIS
While our ultimate resolution may differ, the district
court's analysis and focus on the issues is both accurate and
helpful. We therefore borrow liberally from that court's opinion,
noting our disagreement at the appropriate juncture.
The insurance policy at issue in this case is a
"comprehensive general liability" policy. Such policies are
designed to "protect an insured employer for losses to third
parties arising out of the operation of the insured's business."
Scottsdale I, 460 F. Supp. 2d at 255; (citing Monticello Ins. Co.
v. Dion, 836 N.E.2d 1112, 1113 (Mass. App. Ct. 2005)). Injuries to
employees are typically excluded from coverage because employers
are expected to have separate workers' compensation insurance. Id.
In that vein, the Code of Massachusetts Regulations requires
employee leasing agencies to have workers' compensation insurance
for its employees. Id. (citing Home Ins. Co., 830 N.E.2d at 190)).
Thus, the policy at issue here is typical in that it excludes
"employees" from coverage, and considers "leased workers" to be
"employees." Id.
Against this backdrop, Scottsdale is entitled to judgment
if Torres was a "leased worker." The policy definition of "leased
worker" has two parts: first, he must be "leased by a labor
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leasing firm under an agreement between [CTC] and the leasing firm
to perform duties related to [CTC's] business"; second, the
category of "leased workers" does not include "temporary workers,"
which are defined, in relevant part, as workers "furnished to [CTC]
. . . to meet seasonal or short-term workload conditions."
While there is no dispute that Torres was at CTC to
"perform duties related to CTC's business," Torres first argues
that the lack of a signed lease between CTC and Venturi forecloses
the conclusion that Venturi was a "labor leasing firm" or that the
agreement to place Torres was a "lease." The district court
quickly -- and, in our view correctly -- disposed of these twinned
arguments, concluding that "there is no requirement under the
[Scottsdale] policy that the agreement be memorialized in writing
or labeled as a 'leasing agreement.'" Scottsdale I, 466 F. Supp.
2d at 256. Nor does it matter that Venturi never used the term
"lease," as the district court correctly found that Venturi fit the
profile of a "labor leasing firm" in that it retained the rights
and obligations of an employer -- including determining rate of
pay, procuring workers' compensation insurance and processing
payroll -- while the client company directed the employee's daily
activities. Id. (citing Home Ins. Co., 830 N.E.2d. at 188-89).
"In short, Torres was "'leased by a labor leasing firm under an
agreement' between [CTC] and Venturi 'to perform duties related to
the conduct of [CTC's] business.' He is therefore a 'leased
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worker' . . . within the meaning of the first sentence of the
exclusion." Id.
We turn next to the "exception to the exclusion," in the
second part of the policy's "leased worker" definition, which
excepts "temporary workers." To be considered a "temporary worker"
-- and thus not an "employee" -- Torres had to have been "furnished
to" CTC: 1) to substitute for a permanent employee on leave; 2) to
meet seasonal workload conditions; or 3) to meet short-term
workload conditions. The parties agree that Torres was not brought
in as a substitute or to help with a seasonal workload demands.
Thus, the issue boils down to whether Torres was "furnished" to
"meet . . . short-term workload conditions."
At the outset, we eschew any reliance on the number of
hours that Torres ended up working at CTC prior to his injury, or
any comparison of Torres's hours to those of his fellow Venturi
employees placed at CTC in the same time frame. We cannot
illuminate this point any better than did the district court, so we
recount that analysis here:
A threshold question is whether the terms
"seasonal" and "short-term" are to be measured
at the time the agreement is made or at some
point thereafter. For example, a worker might
be supplied to meet an anticipated one-week
shortage (and therefore be "short-term," as
measured by the parties' expectations), but
wind up working for three years (and therefore
be "long-term," as measured by hindsight).
The answer appears to lie in the words
"furnished . . . to meet" in the "temporary
worker" definition. The phrase "furnished . .
. to meet" suggests that the reasonable
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expectations of the parties concerning
workload conditions, as measured at the time
the employee is "furnished," governs whether
the employee fits within either the "seasonal"
or "short-term" category. Thus, even if the
duration of a worker's assignment ends up
being lengthy, he or she will still be
considered a "temporary worker" if the parties
reasonably intended for him or her to fulfill
a short-term workload condition. Likewise, a
worker will not be considered "temporary" if
the parties reasonably intended for him or her
to help with a long-term or permanent workload
condition, even if the assignment is cut
short. [footnote omitted]
Scottsdale I at 257.
As the district court correctly noted, the policy does
not define "short-term." Id. at 258. The district court then
concluded that the modifier "'short-term' suggests a period of time
that is relatively brief and relatively finite." Id. Recounting
that CTC's president offered deposition testimony that Torres was
to stay at CTC for as long as he was needed, and a Venturi
manager's testimony that Torres was assigned to CTC "indefinitely,"
the court essentially concluded that "indefinite" and "short-term"
are mutually exclusive. Id. Based on this reasoning, the court
held that Torres was not a "temporary worker," and thus his claim
was not covered by the policy. Id.
Here we part company with the district court's analysis.
As noted, "short-term" is not defined in the policy, other than its
use as a modifier for "workload conditions." While undefined words
are to be construed in accordance with their plain and ordinary
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meaning, they are to be strictly construed against the insurer.
Interstate Gourmet Coffee Roasters, Inc. v. Seaco Ins. Co., 794
N.E.2d 607, 612 (Mass. App. Ct. 2003) (citing Preferred Mutual, 686
N.E.2d at 990-91). In this light, and "as applied to the subject
matter," Jacobs, 627 N.E.2d at 464, we do not view Torres's
"indefinite" placement as necessarily incompatible with the
possibility that he was addressing a "short-term workload
condition." Indeed, CTC's president testified that CTC's workload
fluctuated and that times of heavy workload required additional
help. He also agreed that Torres was brought in "just to meet what
[CTC's] workload was at the time." (emphasis added).
While our conclusion that an "indefinite" arrangement may
address "short-term conditions" necessarily forecloses summary
judgment for Scottsdale, Torres also argues that the phrase "short-
term" is ambiguous because "short-term conditions" can extend for
varying lengths of time, and thus an insured can never know whether
it is covered. This ambiguity, the argument goes, must be
construed against Scottsdale, and thus warrants reversal of the
district court and entry of summary judgment for Torres. Based on
the record before us, however, we do not believe that appellant is
entitled to summary judgment either. Our reasoning follows.
During the summary judgment hearing, the district court
posed the question of whether any further factual determination was
necessary. CTC's position was "there is a genuine issue of
material fact whether or not Mr. Torres was fulfilling a short-term
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workload need . . . . Which would bring . . . issues of fact as to
this industry, what is a normal workload . . . ." And although
counsel for Scottsdale argued that the record was sufficient for
the court to make the decision in Scottsdale's favor, he also
acknowledged that the record was bare as to CTC's intent in using
Torres. He concluded, "I don't think the record tells us anything.
I don't think a trial tells us anything about that either." We
agree that the record is insufficient. We do not agree that
further factual development would be futile.
In our view, the nature of CTC's workflow and how
Torres's placement fit within its ordinary course of business are
among the critical -- but unresolved -- factual issues necessary to
determine whether Torres was "furnished" to meet "short-term
workload conditions." Accordingly, neither side is entitled to
summary judgment, and we must remand this case for resolution of
that issue. Consistent with this approach, on other occasions we
have noted with approval a district court's use of a trial to
resolve a disputed issue of fact in an insurance policy dispute.
Foisy, 356 F.3d at 148. Other courts have done the same. See,
e.g., In re So. La. Sugars, Coop., Inc., 485 F.3d 291, 293 (5th
Cir. 2007) (case remanded where record demonstrated fact issue as
to whether injured worker was "leased worker"); Pac. Employers Ins.
Co. v. Wausau Bus. Ins. Co., 508 F. Supp. 2d 1167 (M.D. Fla. 2007)
(summary judgment denied and trial ordered to resolve dispute over
nature of work and tenure of injured worker in order to resolve
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"short-term" question).6 As Fed. R. Civ. P. 56 makes clear,
summary judgment is appropriate only when a movant is entitled to
judgment as a matter of law. On the current record, neither side
is so entitled.
The judgment of the district court is vacated. The case
is remanded for proceedings consistent with this opinion. Costs
are awarded to appellant Raul Torres.
6
At the subsequent trial in Wasau, the district court, relying
heavily on Scottsdale I, found for the insurer. Pac. Employers Ins.
Co. v.
Wausau Bus. Ins. Co., 2007 WL 2900452 (M.D. Fla. Oct. 2, 2007).
The extent of the details set forth in the trial court's findings
of fact and ruling of law is further support for our conclusion
that the instant record is lacking.
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