United States Court of Appeals
For the First Circuit
No. 11-2251
CERTAIN INTERESTED UNDERWRITERS AT LLOYD'S, LONDON,
Plaintiff, Appellee,
v.
PERRY STOLBERG,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Nathaniel M. Gorton, U.S. District Judge]
[Hon. Robert B. Collings, U.S. Magistrate Judge]
Before
Lynch, Chief Judge,
Selya and Thompson, Circuit Judges.
Ronald E. Harding, with whom Weston Patrick P.A. was on brief,
for appellant.
John Egan, with whom David B. Stanhill and Rubin and Rudman
LLP were on brief, for appellee.
May 16, 2012
SELYA, Circuit Judge. An injured party sued defendant-
appellant Perry Stolberg, a developer, in a Massachusetts state
court for injuries allegedly sustained in the course of
construction work. The appellant tendered the defense of the suit
to Certain Interested Underwriters at Lloyd's, London (Lloyd's),
issuer of a commercial general liability (CGL) policy. Lloyd's
provisionally accepted the defense but repaired to the federal
district court in an effort to obtain a declaration that its policy
did not obligate it either to defend the suit or to indemnify the
insured. The district court agreed and entered summary judgment
accordingly. After careful consideration, we affirm.
I. BACKGROUND
At all times relevant hereto, the appellant owned
property at 204-206 Norfolk Street in Cambridge, Massachusetts. He
planned to renovate the premises for use as condominiums. Before
starting the project, he purchased a CGL policy from Lloyd's. He
also maintained workers' compensation coverage.
The CGL policy applies to bodily injury and property
damage for which the insured (Stolberg) is found to be liable,
whenever the same results from qualifying "occurrences" or
accidents happening during the policy period. It states that:
[Lloyd's] will pay those sums that the insured
becomes legally obligated to pay as damages
because of "bodily injury" or "property
damage" to which this insurance applies.
[Lloyd's] will have the right and duty to
defend the insured against any "suit" seeking
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those damages. However, [Lloyd's] will have
no duty to defend the insured against any
"suit" seeking damages for "bodily injury" or
"property damage" to which this insurance does
not apply.
The policy contains a number of exclusions from its
broadly worded coverage. Three of these exclusions have potential
pertinence here. The first — the Independent Contractors Exclusion
(Contractors Exclusion) — provides:
This insurance does not apply to "bodily
injury", "property damage", "personal and
advertising injury" or medical payments
arising out of operations performed for you by
independent contractors or your acts or
omissions in connection with your general
supervision of such operations.
The second — the Independent Contractors' Employees or Leased
Workers Exclusion (Employees Exclusion) — provides:
This insurance does not apply to "bodily
injury" or "personal and advertising injury"
to . . . [a]ny employee or leased worker of
independent contractors arising out of
operations performed for you by said
independent contractors or your acts or
omissions in connection with the general
supervision of such operations if you have
rejected the obligations of any workers'
compensation or any similar law, or abrogated,
waived or otherwise set aside common rights or
defences generally accorded an employer under
any workers' compensation, disability benefits
or unemployment compensation law or any
similar law[.]
The third — the Workers' Compensation and Similar Laws Exclusion
(Workers' Compensation Exclusion) — states that the CGL policy does
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not apply to any obligation arising under workers' compensation or
similar laws.
The CGL policy took effect on May 20, 2005. By the fall
of that year, the condominium conversion was in full swing. The
appellant retained Allen Fox as the general contractor. Fox, in
turn, engaged Robert Gatta, doing business as Simply the Best
Construction (STBC), as a subcontractor. Jose Romero claims to
have been employed by STBC as a day laborer on the job. He alleges
that he sustained bodily injuries on or about October 6, when he
toppled from a ladder at the site.
Romero sued the appellant for negligence and breach of
duty in a Massachusetts state court. The appellant notified
Lloyd's. Lloyd's provisionally agreed to furnish a defense,
reserving the right to disclaim coverage and withdraw should it be
determined that the policy did not apply. It then instituted this
action seeking a declaration that it had no obligation to defend or
indemnify the appellant in connection with Romero's claims.1 See
28 U.S.C. § 2201(a); Fed. R. Civ. P. 57.
At the close of discovery, Lloyd's moved for summary
judgment, contending that Romero's claims fell within the
Contractors Exclusion. The appellant not only opposed the motion
1
Lloyd's named both the appellant and Romero as defendants.
Both men actively litigated the case below, but Romero has not
appealed. Accordingly, we discuss the declaratory judgment action
as if the appellant were the sole defendant.
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but also cross-moved for summary judgment, positing that the
Employees Exclusion established coverage under the policy.
The district court referred the motions to a magistrate
judge. See 28 U.S.C. § 636(b)(1)(B); Fed. R. Civ. P. 72(b). The
magistrate judge, in a thoughtful rescript, recommended granting
the original motion and denying the cross-motion. See Certain
Interested Underwriters at Lloyd's London v. Stolberg, No. 09-cv-
11279, 2011 WL 4458981 (D. Mass. Sept. 2, 2011). On de novo
review, the district court adopted this recommendation in full and
entered judgment accordingly. This timely appeal followed.
II. ANALYSIS
"We review orders granting or denying summary judgment de
novo, considering the record and all reasonable inferences
therefrom in the light most favorable to the non-moving part[y]."
Estate of Hevia v. Portrio Corp., 602 F.3d 34, 40 (1st Cir. 2010).
"We will affirm only if the record reveals 'that there is no
genuine dispute as to any material fact and the movant is entitled
to judgment as a matter of law.'" Avery v. Hughes, 661 F.3d 690,
693 (1st Cir. 2011) (quoting Fed. R. Civ. P. 56(a)).
Once the moving party alleges the absence of all
meaningful factual disputes, the non-moving party must show that a
genuine issue of material fact exists. See Borges ex rel. S.M.B.W.
v. Serrano-Isern, 605 F.3d 1, 5 (1st Cir. 2010). This showing
"requires more than the frenzied brandishing of a cardboard sword."
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Calvi v. Knox Cnty., 470 F.3d 422, 426 (1st Cir. 2006). The non-
moving party must point to facts memorialized by materials of
evidentiary quality and reasonable inferences therefrom to
forestall the entry of summary judgment. See Medina-Munoz v. R.J.
Reynolds Tobacco Co., 896 F.2d 5, 8 (1st Cir. 1990).
These conventions are not altered when a court is faced
with cross-motions for summary judgment. Rather, the court must
examine the motions independently, applying the usual summary
judgment protocol to each of them. See Blackie v. Maine, 75 F.3d
716, 721 (1st Cir. 1996).
The case at hand was brought under the federal court's
diversity jurisdiction. See 28 U.S.C. § 1332(a). Such
jurisdiction inures where, as here, the parties are of diverse
citizenship and the amount in controversy exceeds $75,000.
In this instance, Massachusetts law supplies the
substantive rules of decision. See Erie R.R. v. Tompkins, 304 U.S.
64, 78 (1938). This panoply of rules includes "the rules relating
to interpretation of the insurance policy." Eaton v. Penn-Am. Ins.
Co., 626 F.3d 113, 114 (1st Cir. 2010).
The interpretation of an insurance policy is a matter of
law. See Cody v. Conn. Gen. Life Ins. Co., 439 N.E.2d 234, 237
(Mass. 1982). Ascertaining the meaning of an insurance policy "is
no different from the interpretation of any other contract, and we
must construe the words of the policy in their usual and ordinary
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sense." Hakim v. Mass. Insurers' Insolvency Fund, 675 N.E.2d 1161,
1164 (Mass. 1997). Ambiguities in the policy must be "interpreted
against the insurer . . . and in favor of the insured." Allmerica
Fin. Corp. v. Certain Underwriters at Lloyd's, London, 871 N.E.2d
418, 425 (Mass. 2007).
Even so, ambiguity — unlike beauty — does not lie wholly
in the eye of the beholder. An ambiguity must be real. A policy
provision will not be deemed ambiguous simply because the parties
quibble over its meaning. Jefferson Ins. Co. of N.Y. v. City of
Holyoke, 503 N.E.2d 474, 476 (Mass. App. Ct. 1987). Rather, a
policy provision "is ambiguous only if it is susceptible of more
than one meaning and reasonably intelligent persons would differ as
to which meaning is the proper one." Citation Ins. Co. v. Gomez,
688 N.E.2d 951, 953 (Mass. 1998).
The parties agree that, in the absence of a relevant
exclusion, the CGL policy at issue here would cover tort claims
arising in consequence of Romero's on-site injuries. They
disagree, however, about the meaning and effect of certain of the
exclusions from coverage.
Lloyd's asserts that the Contractors Exclusion is
directly on point and that its unambiguous meaning dictates that no
coverage is afforded for Romero's claims. At first blush, this
appears to be correct. The facts of this case fit neatly within
the encincture of the Contractors Exclusion, which precludes
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coverage for any injuries "arising out of operations performed for
[the insured] by independent contractors." Romero's complaint
alleges that he was working for STBC when he fell, that STBC was a
subcontractor on the appellant's project, and that his injuries
arose out of its operations.2 On these facts, this case is a dead
ringer for Monticello Insurance Co. v. Dion, 836 N.E.2d 1112 (Mass.
App. Ct. 2005), in which the court interpreted an identical
provision broadly to exclude coverage for injuries suffered by an
independent contractor. Id. at 1114.
The appellant does not dispute the clarity of the
language used in the Contractors Exclusion, but he nevertheless
strives mightily to contest the force of that language. Even
though the Contractors Exclusion is unambiguous in isolation, he
argues that it must be read alongside other exclusions in the
policy. He insists that, when this is done, an ambiguity looms: if
the Contractors Exclusion is read to preclude coverage for all
injuries suffered by employees of independent contractors arising
out of their operations, the Employees Exclusion would serve no
function. He adds that the Contractors Exclusion is a general
provision covering all claims arising out of an independent
2
The record evinces some uncertainty as to whether Romero
actually was employed by STBC at the time in question. Because
coverage turns in the first instance on the allegations of Romero's
complaint, see B & T Masonry Constr. Co. v. Pub. Serv. Mut. Ins.
Co., 382 F.3d 36, 39 (1st Cir. 2004), we assume the truth of those
allegations.
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contractor's operations, whereas the Employees Exclusion is a
narrower provision specially tailored to claims asserted by
independent contractors' employees. Against this background, he
urges us to conclude that the specific provision trumps the general
provision and that, therefore, the Employees Exclusion is
controlling.
The appellant then engages in a leap of logic. He
suggests that since the Employees Exclusion eliminates coverage for
employees of independent contractors if the insured has rejected
the requirements of workers' compensation or similar laws, the
converse also must be true; that is, when an insured has fully
complied with the requirements of the workers' compensation laws —
as has the appellant — the policy must afford coverage for injuries
to employees of independent contractors.
It is true, of course, that policy provisions should not
be read in isolation and that the interplay between different
policy provisions may shed light on their meaning. See Jefferson,
503 N.E.2d at 477 ("Words that are clear and unambiguous, by
themselves, may be ambiguous when read in the context of the entire
insurance contract."). It is also true that "[e]very word in an
insurance contract must be presumed to have been employed with a
purpose and must be given meaning and effect whenever practicable."
Bos. Gas Co. v. Century Indem. Co., 910 N.E.2d 290, 304 (Mass.
2009) (quoting Allmerica, 871 N.E.2d at 425) (internal quotation
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marks omitted). Moreover, in certain instances an inquiring court
admittedly should look to a specific policy provision in preference
to a more general policy provision. See Utica Mut. Ins. Co. v.
Weathermark Invs., Inc., 292 F.3d 77, 83 (1st Cir. 2002)
(construing Massachusetts law).
These canons of construction, however, do not assist the
appellant's cause. In the last analysis, his interpretation of the
CGL policy relies on mental gymnastics that we are not prepared to
undertake. We explain briefly.
To begin, the purpose of a policy exclusion is to narrow
the scope of coverage. See Donovan v. Commercial Union Ins. Co.,
692 N.E.2d 536, 540 (Mass. App. Ct. 1998) (citing Weedo v. Stone-E-
Brick, Inc., 405 A.2d 788, 795 (N.J. 1979)). The appellant's
suggestion that the Employees Exclusion should be read not to
narrow coverage but to restore coverage depends on the curious
notion that if the exclusion does not apply in a given situation,
the policy must afford coverage for that situation. Massachusetts
case law runs to the contrary. If one exclusion in an insurance
policy leaves some hope for an exception, but that glimmer of hope
is extinguished by another exclusion, there is no basis for a
finding of coverage. See Bond Bros. v. Robinson, 471 N.E.2d 1332,
1334 (Mass. 1984) ("We flatly reject the concept that, because [an
exclusion] excludes certain possible coverage and then provides for
an exception, that exception creates an ambiguity, or an
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objectively reasonable expectation of coverage, when it is
confronted with another explicit exclusion."); Donovan, 692 N.E.2d
at 539-40.
So it is here. Even if the Employees Exclusion leaves
the door ajar for coverage for certain injuries so long as the
insured has complied with the workers' compensation laws — a matter
that is far from clear — the Contractors Exclusion nevertheless
tightly shuts that door.
Here, moreover, the Contractors Exclusion neither renders
the Employees Exclusion nugatory nor conflicts with it. The two
exclusions are unambiguous and can be read harmoniously.
The Contractors Exclusion broadly excludes coverage for
any claims — including those brought by members of the general
public — arising out of the operations of independent contractors.
The Employees Exclusion addresses a variation on this theme: the
possibility that an injured person actually employed by an
independent contractor might allege that, in contemplation of
Massachusetts law, he should be treated as an employee of the
insured (here, the developer) and allowed to sue the latter for
failing to provide him with a reasonably safe place to work. See
Mass. Gen. Laws ch. 152, §§ 66-67 (authorizing private action in
tort against employer who has failed to maintain the required
workers' compensation insurance).
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This makes good sense. Massachusetts requires most
employers to carry workers' compensation insurance. Id. § 25A. A
related statute makes persons such as developers liable, in certain
circumstances, to pay benefits to employees of independent
contractors as if those employees were employees of the developer
himself. Id. § 18. If the developer has failed to obtain the
required workers' compensation insurance, the injured employee may
try to sue at common law on that theory. See id. §§ 66-67; cf.
McCracken v. Sears, Roebuck & Co., 744 N.E.2d 102, 104 (Mass. App.
Ct. 2001) (discussing, in procedural history, an independent
contractor's employee's claim against the general employer under
this private action provision).3
The Employees Exclusion affords protection against this
possibility. It ensures that the CGL policy will not apply to tort
claims of this genre mounted by an independent contractor's
employees. Read in concert with the Workers' Compensation
3
The Supreme Judicial Court of Massachusetts recently has
held that an independent contractor's employee can sue the general
employer as a liable third party even if the general employer has
obtained the required workers' compensation insurance. See
Wentworth v. Henry C. Becker Custom Bldg. Ltd., 947 N.E.2d 571, 574
(Mass. 2011); see also Mass. Gen. Laws ch. 152, § 15 (authorizing
employee to sue liable third parties). This is distinguishable
from the typical situation in which the employee of an insured
employer relinquishes any private right of action that he might
have had against the insured by accepting workers' compensation
benefits. See Mass. Gen. Laws ch. 152, § 23. In all events, this
holding post-dates the issuance of the CGL policy and, thus, could
not have had any bearing on the reason for including the exclusion
in the policy.
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Exclusion and the Contractors Exclusion, the Employees Exclusion
provides comprehensive security. If an independent contractor's
employee files a claim for workers' compensation benefits, the
Workers' Compensation Exclusion precludes coverage under the CGL
policy. If that employee files a tort action premised upon the
insured's failure to obtain the required workers' compensation
insurance, the Employees Exclusion makes certain that the CGL
policy will not be implicated. Meanwhile, the Contractors
Exclusion exempts from coverage any injuries or damages arising out
of an independent contractor's operations, broadly limiting the
insured's liability for such occurrences. There is no other
plausible reading of either this group of exclusions or the CGL
policy as a whole.
To be sure, there are situations in which the three
exclusions that we have discussed overlap. The appellant envisions
this overlapping effect as a basis for narrowing and complicating
the plain meaning of the Contractors Exclusion. But insurance
policies are notorious for their simultaneous use of both belts and
suspenders, and some overlap is to be expected. See 8 Lee R. Russ
& Thomas F. Segalla, Couch on Insurance 3d § 115:20 (2005) (noting
that overlap between workers' compensation exclusions and employees
exclusions is common in certain liability insurance policies); cf.
United Nat'l Ins. Co. v. Waterfront N.Y. Realty Corp., 994 F.2d
105, 108-09 (2d Cir. 1993) (holding that to follow a narrower
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exclusion and disregard another applicable exclusion because of
"[t]he overlap of the clauses . . . would violate the principle
that meaning and effect should be given to all terms of a
contract"). As long as the meaning of a particular exclusion
remains clear, its language must be given effect. See Hanover Ins.
Co. v. Locke, 624 N.E.2d 615, 617 (Mass. App. Ct. 1993) (declining,
despite "some redundancy," to ignore clear exclusionary provision
that overlapped with another provision).
The appellant protests that if we interpret the
Contractors Exclusion literally, the Employees Exclusion adds
nothing to the policy, thus running afoul of the hoary principle
that all terms in a contract should be interpreted to have a
purpose. See Allmerica, 871 N.E.2d at 425. This principle,
however, is not without qualification. The case law is plain that
courts should "presume[]" that contractual terms have meaning and
effect "whenever practicable." Id. (quoting Jacobs v. U.S. Fid. &
Guar. Co., 627 N.E.2d 463, 464 (Mass. 1994)) (internal quotation
marks omitted); see King Features Syndicate, Inc. v. Cape Cod
Broad. Co., 59 N.E.2d 481, 483 (Mass. 1945) ("If possible,
reasonable effect must be given to all [of a contract's]
provisions."). Where, as here, the effect of a narrow provision is
starkly limited in light of a broader provision, this canon of
construction does not require us to invent wholly separate purposes
for overlapping provisions such that only one provision will govern
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in each case. Instead, Massachusetts law dictates that we follow
the plain language of the policy, even though some terms may be
rendered redundant or superfluous in particular instances.
See Hanover, 624 N.E.2d at 617. Although our reading may make the
Employees Exclusion supererogatory when the Contractors Exclusion
has already operated to eliminate certain events from coverage,
this reading — which leaves all of the contractual provisions
intact — is preferable to the appellant's reading, which guts the
Contractors Exclusion and which, by logical extension, would also
eviscerate the Workers' Compensation Exclusion.
The appellant's argument that the specific trumps the
general is equally unpersuasive. Before a court may supplant a
general policy provision by recourse to a more specific one, there
must be an inconsistency between the two provisions. See Capitol
Bank & Trust Co. v. 604 Columbus Ave. Realty Trust (In re 604
Columbus Ave. Realty Trust), 968 F.2d 1332, 1357-58 (1st Cir. 1992)
(applying Massachusetts law). There is no such inconsistency here;
the Contractors Exclusion and the Employees Exclusion simply do not
conflict.
In a last-ditch attempt to save the day, the appellant
seeks refuge in the doctrine of reasonable expectations. Under
Massachusetts law, this doctrine requires courts to consider "[t]he
objectively reasonable expectations" of insureds regarding policy
terms. Jefferson, 503 N.E.2d at 477 (internal quotation marks
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omitted). The appellant says that he reasonably believed that the
CGL policy would cover claims such as Romero's and that, under
Jefferson, id. at 477-78, we must honor his reasonable expectations
even though those expectations contradict unambiguous policy
language. The appellant's reliance on Jefferson is misplaced. The
Jefferson court did not need to decide — and did not decide —
whether an insured's reasonable expectations could overcome
unambiguous policy language. Instead, the court's decision rested
in relevant part on the ground that the insured's expectations were
unreasonable. Id. at 478.
Post-Jefferson, the Supreme Judicial Court of
Massachusetts has made it pellucid that the reasonable expectations
doctrine applies only when policy language is ambiguous, not when
"the plain language of [an] exclusion unambiguously precludes
coverage." Finn v. Nat'l Union Fire Ins. Co., 896 N.E.2d 1272,
1278-79 (Mass. 2008); see Bos. Gas Co., 910 N.E.2d at 305; A.W.
Chesterton Co. v. Mass. Insurers Insolvency Fund, 838 N.E.2d 1237,
1250 (Mass. 2005). Because the Contractors Exclusion in the CGL
policy is unambiguous, its terms cannot be defeated by the
appellant's professed expectations.
III. CONCLUSION
We need go no further. For the reasons elucidated above,
we uphold the entry of summary judgment in favor of Lloyd's.
Affirmed.
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