United States Court of Appeals
For the First Circuit
Nos. 03-2503, 03-2504, 03-2507, and 03-2508
NATIONAL UNION FIRE INSURANCE COMPANY OF
PITTSBURGH, PENNSYLVANIA,
Plaintiff-Appellant/Cross-Appellee,
v.
LUMBERMENS MUTUAL CASUALTY COMPANY,
Defendant-Appellee/Cross-Appellant,
K.C. ELECTRIC COMPANY; S.A. HEALY COMPANY/
MODERN CONTINENTAL, A JOINT VENTURE,
Defendants-Appellees.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Rya W. Zobel, U.S. District Judge]
Before
Boudin, Chief Judge,
and Torruella and Dyk*, Circuit Judges.
Tamara J. Smith with whom James J. Duane, III and Taylor,
Duane, Barton & Gilman, LLP were on brief for plaintiff-
appellant/cross-appellee.
Peter E. Heppner with whom Lynch & Lynch was on brief for
defendant-appellee/cross-appellant.
September 27, 2004
*
Of the Federal Circuit, sitting by designation.
DYK, Circuit Judge. This case, including an appeal and
a cross-appeal, involves a dispute between two insurance companies.
The dispute concerns their respective responsibilities to pay
defense and settlement costs relating to injuries to Richard Leahy
and Philip Sheehan, two workmen employed by K.C. Electric Company,
Inc. (“K.C. Electric”). K.C. Electric was a subcontractor
performing work for S.A. Healy/Modern Continental (“S.A. Healy”),
a prime contractor, on the Deer Island Tunnel Project (the
“Project”). Resolution of this dispute requires us to interpret
two insurance policies. The first policy was issued to the
subcontractor by Lumbermens Mutual Casualty Company (“Lumbermens”),
and the second policy was issued to the prime contractor by
National Union Fire Insurance Company of Pittsburgh, Pennsylvania
(“National Union”).
As to the first policy, the question is whether the
Lumbermens policy, though issued to the subcontractor, also
provided coverage to the prime contractor in the circumstances of
this case and, hence, to the prime contractor’s subrogee, National
Union. The second question is whether the National Union policy
provided only excess coverage. If both policies covered the prime
contractor in these circumstances, the companies would divide the
liabilities; if the Lumbermens policy applied, and if the National
Union policy provided only excess coverage, Lumbermens was solely
responsible.
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We conclude that the Lumbermens policy covered the prime
contractor, but that genuine issues of material fact exist as to
whether the National Union policy provided only excess coverage.
We thus vacate the district court’s judgment and remand for further
proceedings.
I
Leahy and Sheehan, who were employees of K.C. Electric,
were injured on the site of the Project when they slipped and fell
while they were in the tunnel. They filed separate actions against
S.A. Healy, claiming that they incurred their injuries as a result
of S.A. Healy’s negligence in failing to maintain a safe work site.
Both actions were settled before trial; Lumbermens and National
Union each contributed to the settlement payments. National Union
then instituted two actions in the district court, seeking
declarations that (1) S.A. Healy was an “additional insured” under
the Lumbermens policy, obligating Lumbermens at least to share in
the defense and settlement costs, and (2) that the National Union
policy was in excess of the Lumbermens policy pursuant to the
policies’ respective “other insurance” provisions, thus making
Lumbermens entirely liable for the defense and settlement costs.
National Union moved for summary judgment in both cases. The
parties agree that the policies are interpreted in accordance with
Massachusetts law.
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The district court denied National Union’s summary
judgment motions in two nearly identical opinions issued on the
same day. Nat’l Union Fire Ins. Co. v. Lumbermen’s Mut. Cas. Ins.
Co., No. 02-10876-RWZ (D. Mass. Oct. 1, 2003) (“Leahy”); Nat’l
Union Fire Ins. Co. v. Lumbermen’s Mut. Cas. Ins. Co., No. 02-CV-
12001-RWZ (D. Mass. Oct. 1, 2003) (“Sheehan”). First, the district
court held that S.A. Healy qualified as an additional insured under
the Lumbermens policy. Leahy, slip op. at 3; Sheehan, slip op. at
3. Second, the district court held that both National Union and
Lumbermens were primary carriers, that is, that the National Union
policy was not an excess coverage policy. Leahy, slip op. at 5;
Sheehan, slip op. at 5. In addition, in the case involving Leahy,
the district court held that, because both Lumbermens’ and National
Union’s policies provided for contribution by equal shares,
“National Union and Lumbermen’s are equally liable for the
settlement.” Leahy, slip op. at 5.
Thus, the district court held that National Union could
not recover the portions of the settlement payments that it had
paid, effectively granting summary judgment to Lumbermens on the
excess coverage issue, and effectively granting summary judgment to
National Union on the additional insured issue. See generally 10A
Charles Alan Wright et al., Federal Practice & Procedure § 2720, at
347 (3d ed. 1998) (“[S]ummary judgment may be rendered in favor of
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the opposing party even though the opponent has made no formal
cross-motion under Rule 56.”).
On joint motion of the parties, the district court
subsequently entered final judgments pursuant to Fed. R. Civ. P.
54(b) in accordance with its earlier decisions. Nat’l Union Fire
Ins. Co. v. Lumbermens Mut. Cas. Ins. Co., No. 02CV10876 RWZ (D.
Mass. Jan. 21, 2004); Nat’l Union Fire Ins. Co. v. Lumbermens Mut.
Cas. Ins. Co., No. 02-CV-12001-RWZ (D. Mass. Dec. 31, 2003). The
parties appealed and cross-appealed from those judgments.
II
A
We first consider whether the Lumbermens policy covered
S.A. Healy as an additional insured. We review the district
court’s effective grant of summary judgment in favor of National
Union without deference, drawing all reasonable inferences in favor
of the non-moving party. Beacon Mut. Ins. Co. v. OneBeacon Ins.
Group, 376 F.3d 8, 14 (1st Cir. 2004).
The subcontract between S.A. Healy and K.C. Electric
required K.C. Electric to obtain commercial general liability
insurance, among other insurance, and to name S.A. Healy as an
additional insured on its commercial general liability insurance
policy. K.C. Electric obtained its commercial general liability
policy from Lumbermens for the period between August 8, 1997, and
August 8, 1998. The policy was thus in effect when Leahy and
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Sheehan incurred their injuries on August 26, 1997, and November
18, 1997, respectively.
As was required by the subcontract, the Lumbermens policy
obtained by K.C. Electric included an additional insured provision,
which added the following paragraph to the “WHO IS AN INSURED”
section of the policy:
Any person or organization to whom or to which
you are obligated by virtue of a written
contract, agreement or permit to provide such
insurance as afforded by this policy is an
[additional] insured, but only with respect to
liability arising out of:
a. "Your work" for that insured by you
. . . .
(App. at 71.) The policy further defined “your work” as “[w]ork or
operations performed by you or on your behalf; and . . .
[m]aterials, parts or equipment furnished in connection with such
work or operations.” (App. at 75.) Thus, the policy covered only
“liability arising out of . . . work” performed by the
subcontractor for the contractor.
The district court held that S.A. Healy qualified as an
additional insured under the Lumbermens policy, even if the
employees were not actually engaged in work at the time they were
injured because “K.C. employees cannot perform their work unless,
of course, they can reach and leave their workplaces on the job
site.” Leahy, slip op. at 3; Sheehan, slip op. at 3. Thus,
because the injuries were “incurred while on the job site,” the
district court held that the “work” requirement of the additional
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insured provision was satisfied. Leahy, slip op. at 3; Sheehan,
slip op. at 3.
B
This court considered nearly identical policy language in
Merchants Insurance Co. of New Hampshire v. United States Fidelity
& Guaranty Co., 143 F.3d 5 (1st Cir. 1998). There, the court held
that “under Massachusetts law the phrase ‘arising out of’ denotes
a level of causation that lies between proximate and actual
causation.” Id. at 9. However, the court did not further
delineate this “intermediate causation” standard because, in
Merchants Insurance, “the harm occurred while [the injured
employee] was cutting and removing a section of the bridge, a task
that was assigned to [the subcontractor] in the Sherman’s Bridge
project.” Id. Because the harm occurred while the injured
employee was actually performing work for the subcontractor, the
fact that the subcontractor did not proximately cause the injury
(which was caused by the negligence of an employee of the primary
contractor) was irrelevant. The court held: “More than ‘but for’
causation existed. It was not simply because the two companies
happened to be working in the same location that [the injured
employee] was injured by [the primary contractor’s] employee;
rather, the injury was a consequence of the work that [the
subcontractor] was performing.” Id. at 9-10. This causal
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connection was sufficient to satisfy the intermediate causation
standard. Id. at 10.
The issue here is whether there is a sufficient nexus
between the injuries incurred by Leahy and Sheehan and their work
for K.C. Electric to satisfy the Merchants Insurance intermediate
causation standard.1 The parties dispute whether the summary
1
National Union claims that the “majority rule” is that an
employee’s mere presence on a work site is sufficient to invoke
liability under such an additional insured provision. (Pl.-
Appellant’s/Cross-Appellee’s Rep. Br. at 22-27.) However, most of
the cases National Union cites for this proposition apply a less
stringent standard of causation than the intermediate causation
required by Merchants Insurance. See Admiral Ins. Co. v. Trident
NGL, Inc., 988 S.W.2d 451, 454 (Tex. App. 1999) (“The majority view
. . . is that for liability to ‘arise out of operations’ of a named
insured it is not necessary for the named insured’s acts to have
‘caused’ the accident; rather, it is sufficient that the named
insured’s employee was injured while present at the scene in
connection with performing the named insured’s business, even if
the cause of the injury was the negligence of the additional
insured.”); Acceptance Ins. Co. v. Syufy Enters., 81 Cal. Rptr. 2d
557, 561 (Cal. Ct. App. 1999) (“California courts have consistently
given a broad interpretation to the terms ‘arising out of’ or
‘arising from’ in various kinds of insurance provisions. It is
settled that this language does not import any particular standard
of causation or theory of liability into an insurance policy.
Rather, it broadly links a factual situation with the event
creating liability, and connotes only a minimal causal connection
or incidental relationship.”); Shell Oil Co. v. AC & S, Inc., 649
N.E.2d 946, 952 (Ill. App. Ct. 1995) (“[The injured employee’s]
injuries appear to have arisen from the operations of [the
subcontractor] and [the contractor] on plaintiff’s premises. The
injuries would not have occurred ‘but for’ [the injured employee’s]
employment by [the contractor] and [the contractor’s] presence on
plaintiff’s premises.”); Md. Cas. Co. v. Chicago & N.W. Transp.
Co., 466 N.E.2d 1091, 1094 (Ill. App. Ct. 1984) (“[T]he instant
injuries appear to have arisen from the operation and use of the
leased premises, since they would not have been sustained ‘but for’
the victim’s employment on those premises.”); see also Highland
Park Shopping Vill. v. Trinity Universal Ins. Co., 36 S.W.3d 916,
918 (Tex. App. 2001) (adopting the same causation standard as
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judgment record establishes that Leahy and Sheehan themselves were
engaged in “work” in accordance with the policy when they were
injured. Leahy testified by deposition that he was injured while
he was walking through the tunnel toward a man lift that would take
him to the surface. National Union contends that Leahy was working
at the time of his accident, but Lumbermens asserts that Leahy was
going to lunch. Leahy testified that the accident occurred
“approximately right around lunchtime,” but he also testified that
he was in the tunnel to check the mine phones and to see if two
K.C. Electric electricians were having any problems wiring pumps in
the tunnel. (App. at 214-15.) Similarly, the parties dispute
whether Sheehan was working at the time of his accident. In his
answers to interrogatories, Sheehan stated that he was “performing”
his duties “at the time [he was] injured,” but he also stated that
his “specific purpose” at the time was “going to [his] job to
perform electrical maintenance, repairs, installations, etc.”
(App. at 281, 284.) National Union thus alleges that Sheehan was
Admiral Insurance).
Other cases have adopted a site rule without addressing
the causation standard. See O’Connor v. Serge Elevator Co., 444
N.E.2d 982, 983 (N.Y. 1982) (holding that an employee’s injuries
“must be deemed as a matter of law to have arisen out of the work”
under an indemnity clause when the employee was injured “while
leaving his workplace for lunch”); Farren v. General Motors Corp.,
708 F. Supp. 436, 449 (D. Mass. 1989) (concluding that the phrase
“in connection with the work attributable to the Contractor” in an
indemnity clause “was intended by the parties to cover injuries
sustained by an employee . . . returning to his work site from a
lunch break”).
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working when he was injured, while Lumbermens argues that he was
merely traveling to his actual work location at the time of the
injury.
Even if Leahy and Sheehan were not actually performing
subcontractor work at the time of their accidents, the record is
clear that the subcontractor’s work was performed at various places
throughout the tunnel, and, thus, at the time of their accidents,
the employees were within the general area where the
subcontractor’s work was performed. Leahy testified that his
“regular routine” was to travel throughout the tunnel, ensuring
that lights were working properly, and that “basically [his] time
was spent walking from the access points [for the tunnel] to the
electricians and back,” talking to the electricians, and testing
the phones. (App. at 215-16.) Similarly, Sheehan testified that
his usual duties were to “perform[] tunnel maintenance, repair[]
lights, carry[] tools and cable, etc.” (App. at 281.) We hold
that the policy’s requirements were satisfied because the employees
were injured within the general area where the subcontractor’s work
was being performed, and their presence there was directly related
to their work obligations, even if the employees were merely
traveling to or from work or to or from a lunch break.
The purpose of the “your work” clause is not to
differentiate between those employees who were actually engaged in
work on a particular task when they were injured, as opposed to
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those who were idle or moving about the job site; rather, the
provision is at least designed to cover injuries incurred in
traversing the work area for which the subcontractor was
responsible for performing work, that is, the subcontractor’s
general work area. Requiring the employee actually to have been
engaged in work would lead to artificial distinctions between
employees who are performing specific tasks versus those traversing
the subcontractor’s general work area, waiting for instructions, or
even pausing between tasks. Accordingly, we hold that the
intermediate causation standard of Merchants Insurance is satisfied
where the employee was injured within the general work area where
the subcontractor’s work was being performed, so long as his
presence was work-related. The additional insured provision in the
Lumbermens policy thus applies to S.A. Healy in this case. We need
not, therefore, decide whether coverage exists simply because the
injury occurred on the prime contractor’s work site.
The court in McCarthy Brothers Co. v. Continental Lloyds
Insurance Co., 7 S.W.3d 725 (Tex. App. 1999), was faced with a
similar situation. In McCarthy, the injured employee slipped and
fell as he was walking down an incline to get tools to perform his
work from a trailer belonging to the subcontractor for which he
worked “on the premises of” the construction site. Id. at 730.
The court relied on Merchants Insurance and held that “[t]here was
more than a mere locational relationship between the injury and
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[the injured employee’s] presence on the site” because the employee
was within the subcontractor’s general work area “for the purpose
of carrying out [the subcontractor’s] contract with [the
contractor].” Id.2
The case on which Lumbermens primarily relies is
factually distinguishable. In Pro Con Construction, Inc. v. Acadia
Insurance Co., 794 A.2d 108 (N.H. 2002), the injured employee, a
painter employed by a subcontractor, was injured when he slipped
and fell on an icy sidewalk as he was walking to a coffee truck
parked in the parking lot outside the building in which he was
painting. Id. at 109. He sued the prime contractor, alleging that
it had negligently failed to keep the sidewalk clear of snow and
ice. Id. As in Merchants Insurance, the court required more than
“but for” causation, but the court held that there was no nexus
between the painting operations and the injuries because “[t]he
injuries did not occur while the employee was engaged in any task
related to [the] painting operations or near [the] painting
operations.” Id. at 110 (citation omitted). In Pro Con, the
painter left the area in which Decorative Concepts’ work was being
performed to get coffee from the coffee truck. He was thus injured
outside the general work area in which the subcontractor was
2
Unlike the other Texas Courts of Appeals in Highland Park
Shopping Village and Admiral Insurance Co., see n.1, supra, the
court in McCarthy applied an intermediate standard of causation,
consistent with Merchants Insurance.
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performing work and was not “near” that area. In contrast, the
employees here, even if they were not actually performing work,
remained in the subcontractor’s general work area.3
III
A
The second issue in this case involves interpretation of
the National Union policy. The National Union policy included an
“Other Insurance” provision, which provided that the National Union
policy was primary (not excess) except in three situations not
pertinent here. (The Lumbermens policy also included an identical
provision providing that the Lumbermens policy was primary.)
However, National Union alleges that, in the policy it issued to
S.A. Healy, the “Other Insurance” provision was superseded by an
endorsement bearing the same date as the policy that was found in
the policy’s underwriting file. That endorsement provides:
ENDORSEMENT
This Endorsement effective 12/31/95 12:01 A.M.
FORMS A PART OF POLICY NO. GL 817-67-02 ISSUED
3
Lumbermens also argues that we should construe the policy
to bar coverage because Mass. Gen. Laws ch. 149, § 29C bars a
general contractor from securing an indemnity from its
subcontractor “for injury to persons or damage to property not
caused by the subcontractor or its employees, agents or
subcontractors.” Mass. Gen. Laws ch. 149, § 29C (2004). However,
section 29C does not apply to insurance policies, and the policy
considerations reflected in section 29C are not applicable to such
policies. See, e.g., Johnson v. Modern Cont’l Constr. Co., 731
N.E.2d 96, 99 (Mass. App. Ct. 2000) (“We do not consider coverage
questions under an insurance contract analogous to coverage under
an indemnity provision of a construction contract.”).
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TO S.A. Healy Co./Modern Continental Joint
Venture BY NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, P.A. [sic]
OTHER INSURANCE CLAUSE
In consideration of the payment of the
premium, it is hereby understood and agreed
that [the excess coverage provision in the
policy] is deleted in its entirety and
replaced by the following:
b. Excess Insurance
This insurance is excess over any other
insurance, whether primary, umbrella,
excess, contingent or on any other
basis, and whether collectible or
uncollectible.
. . . .
4. If a “claim” arises out of the
actions of a hired contractor or
subcontractor who has agreed to
either:
a. Contractually indemnify the
“insured” against whom
“claims” may be made for any
“claims” resulting form [sic]
the actions of the hired
contractor or subcontractor,
or
b. name the “insureds” against
whom “claims” may be made as
Additional Insureds on the
hired contractor’s or
subcontractor’s commercial
general liability policy.
(App. at 46 (emphases added).)
By its own terms, the endorsement purports to form a part
of the policy. However, the policy itself does not refer to the
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endorsement. The policy’s declaration page does not expressly
incorporate any endorsements; it provides: “ENDORSEMENTS ATTACHED
TO THIS POLICY: SEE ATTACHED SCHEDULE.” (App. at 9.) The attached
“FORMS SCHEDULE” includes a list of forms and endorsements, but the
endorsement at issue here is not among the endorsements on the
list. The endorsement thus is not incorporated by reference in the
policy.
Accordingly, relying on the integration clause in the
policy4 and the policy’s representation that “[t]he statements in
the Declarations are accurate and complete,” (App. at 19),
Lumbermens argued that the endorsement was parol evidence that
could not be considered in defining the scope of the National Union
policy. See, e.g., Bank v. Int’l Bus. Machs. Corp., 145 F.3d 420,
424 (1st Cir. 1998) (“In Massachusetts, ‘[t]he parol evidence rule
precludes evidence of earlier or contemporaneous discussions that
would modify the provisions of a later integrated agreement which
the proponent of the agreement seeks to enforce.’” (quoting New
England Fin. Res., Inc. v. Coulouras, 566 N.E.2d 1136, 1139 (Mass.
App. Ct. 1991)) (alteration in original)); ITT Corp. v. LTX Corp.,
926 F.2d 1258, 1261 (1st Cir. 1991) (“Under Massachusetts law,
parol evidence may not be admitted to contradict the clear terms of
4
The integration clause provides: “This policy contains
all the agreements between you and us concerning the insurance
afforded. . . . This policy’s terms can be amended or waived only
by endorsement issued by us and made a part of the policy.” (App.
at 57.)
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an agreement, or to create ambiguity where none otherwise
exists.”).
The district court agreed. It found that “the relevant
endorsement is not listed on the declaration page or the attached
schedule of included forms, and therefore, is not part of the
policy.” Leahy, slip op. at 4; Sheehan, slip op. at 4. Thus, the
district court held, because of the policy’s integration clause,
the endorsement could not be considered. Leahy, slip op. at 4;
Sheehan, slip op. at 4. In accordance with the standard “Other
Insurance” provision, the court thus held that both parties were
primary carriers. Leahy, slip op. at 5; Sheehan, slip op. at 5.
B
We conclude that there are genuine issues of material
fact as to whether the endorsement forms a part of the policy, and
that summary judgment was improper.
National Union correctly notes that the policy must be
construed as a whole. See, e.g., Fireman’s Fund Ins. Co. v.
Special Olympics Int’l, Inc., 346 F.3d 259, 261 (1st Cir. 2003)
(“An insurance policy is to be read as a whole without according
undue emphasis to any particular part over another.” (quoting
Mission Ins. Co. v. U.S. Fire Ins. Co., 517 N.E.2d 463, 466 (Mass.
1988)) (internal quotation marks omitted)). However, the question
is, what is the whole policy? We think that the mere fact that the
main body of the policy contains no reference to the endorsement
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does not, in and of itself, conclusively establish that the main
policy and the endorsement are not part of a single document.5
Further evidence is needed (apart from the endorsement
language itself) concerning whether the endorsement formed a part
of the policy. For example, if the endorsement were physically
attached to the policy when transmitted to the insured, such a
physical connection could indicate that the endorsement formed a
part of the policy:
It is the general rule that an endorsement or
rider attached to an insurance policy becomes
and forms a part of the contract; that the
policy and the endorsement or rider shall be
construed together; and that where the
provisions in the body of the policy and those
in the endorsement or rider are in
irreconcilable conflict the provisions
contained in the endorsement or rider will
prevail over those contained in the body of
the policy.
Farmers Ins. Exch. v. Ledesma, 214 F.2d 495, 498 (10th Cir. 1954);
see also, e.g., Blevio v. Aetna Cas. & Sur. Co., 39 F.3d 1, 2 (1st
Cir. 1994) (considering an endorsement attached to an insurance
policy along with the policy); Petrowski v. Hawkeye-Security Ins.
Co., 237 F.2d 609, 610 (7th Cir. 1956) (“All three documents,
5
There is no contention here that the endorsement can form
a stand-alone contract. Cf. Fairfield 274-278 Clarendon Trust v.
Dwek, 970 F.2d 990, 992 (1st Cir. 1992) (determining which of
several stand-alone contracts was the operative contract between
the parties). Nor is there any contention that the endorsement
constituted a later amendment to the policy. Therefore, the
policy’s provision that “[t]his policy’s terms can be amended or
waived only by endorsement issued by us and made a part of the
policy” is irrelevant. (App. at 57.)
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policy, declarations, and special endorsement, were stapled
together and comprised one unit when issued.”); see also Rumsfeld
v. Freedom NY, Inc., 346 F.3d 1359, 1361 (Fed. Cir. 2003);
Restatement (Second) of Contracts § 132 (1981) (stating that, for
purposes of the Statute of Frauds, a contract “may consist of
several writings if one of the writings is signed and the writings
in the circumstances clearly indicate that they relate to the same
transaction”); id. cmt. c (“It is sufficient . . . that the party
to be charged physically attaches one document to the other or
encloses them in the same envelope.”).
The summary judgment filings by the parties here only
concern the state of National Union’s underwriting files, not the
policy documents received by the insured. It is thus unclear
whether the main policy and the endorsement were stapled together
as sent by National Union and as received by the insured. In
addition, there may be other evidence, including evidence of
industry practice, that might show that the endorsement and the
policy were parts of the same document. Without a more fully-
developed record, we must vacate the district court’s effective
grant of summary judgment for Lumbermens and remand this case to
the district court for further proceedings.6
6
Lumbermens also notes that the endorsement at issue lists
the policy number as “GL 817-67-02,” (App. at 46), whereas the
endorsements listed in the forms schedule consistently use the
policy number “GL 817-67-02 RA,” (E.g., App. at 23 (emphasis
added).). We attach no significance to this minor inconsistency.
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IV
For the foregoing reasons, we conclude that S.A. Healy is
an additional insured pursuant to the Lumbermens policy. However,
we cannot determine on this record whether the National Union
policy provided only excess coverage. Accordingly, we vacate the
district court’s judgment, and we remand to the district court for
further proceedings.
It is so ordered.
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