Massachusetts Court Rules on Scope of Independent Contractor Exclusion

A Massachusetts court recently ruled in favor of insurer Lloyd’s in a dispute over a commercial property and general liability policy excluding coverage for independent contractors.

The insured, a property development firm called Cable Mills LLC, and its insurance agency argued that the exclusion shouldn’t apply in its case involving an injured subcontractor who worked at the construction site and later filed a personal injury lawsuit against Cable Mills.

Cable Mills argued that because the injured worker was retained by a contractor and not directly by Cable Mills, the independent contractor exclusion isn’t applicable and that Lloyd’s is obligated to indemnify and defend Cable Mills in the personal injury lawsuit.

However, the Appeals Court of Massachusetts in Middlesex rejected Cable Mills’ narrow definition of the independent contractor and ruled that the injured worker is subject to the coverage exclusion. The ruling, announced earlier this month, affirmed a lower court finding.

Cable Mills owned an old mill in Williamstown, Mass., and, in 2005., went about renovating it into a complex of mixed-use condominium units. The company entered into a contract with architectural services firm Feingold Alexander & Associates for the project. In turn, Feingold Alexander retained structural engineer William Barry to provide structural engineering consultation on the project.

But in March 2006, Barry is alleged to have sustained serious injuries as a result of falling through the floor at the site of the project.

Cable Mills was a customer of Coakley Pierpan Dolan and Collins Insurance Agency Inc. with regard to the insurance for the project. The agency provided the policy, running from October 2005 to April 2006, through a surplus lines broker. The policy included the following standard provision: “This insurance does not apply to ‘bodily injury,’ ‘property damage,’ ‘personal injury,’ ‘advertising injury,’ or medical payments for operations performed for you by independent contractors or your acts or omissions in connection with your general supervision of such operations” (exclusion).

Relying on this exclusion, Lloyd’s denied coverage for injuries sustained by Barry and declined to defend Cable Mills in the underlying litigation, a personal injury suit filed by Barry.

Faced with denial of coverage, Cable Mills brought a legal action against the insurance agency, alleging the agency failed to obtain the proper insurance coverage. In addition to denying liability, the agency also brought a third-party complaint against Lloyd’s, seeking a declaration that the policy issued by Lloyd’s does in fact afford coverage to Cable Mills for the claims brought by Barry, the injured worker.

On cross motions for summary judgment, a Superior Court judge denied the motions brought by Cable Mills and its insurance agency, and allowed the motion brought by Lloyd’s. That finding has now been affirmed by Appeals Court of Massachusetts.

The case is No. 11-P-1852, CABLE MILLS, LLC., vs.COAKLEY PIERPAN DOLAN AND COLLINS INSURANCE AGENCY, INC.; Certain Underwriters at Lloyd’s, London, third-party defendants, Appeals Court of Massachusetts, Middlesex, September 11, 2012.