|Scott D. Peterson is a partner at Healy & Healy, PC, in Wellesley, and manages its Hingham office.
General contractors, because they retain broad and non-delegable responsibility for job safety, are invariably the first targets of third-party tort claims arising from construction accidents. As a result, most risk-conscious general contractors include indemnification clauses in their subcontracts. The objective of these indemnity provisions is simple: to shift liability for injuries and property damage to the subcontractors and, consequently, reduce the general contractor’s exposure.1
Some general contractors went too far, drafting broad provisions that required indemnity even when their own negligent acts and omissions represented the exclusive cause of the injury or damage.2 Presumably in an effort to level the playing field,3 the Massachusetts legislature enacted General Laws chapter 149, section 29C (hereinafter, “section 29C”). This statute voids overreaching indemnity clauses that trigger indemnification for losses when the putative indemnitor did not cause or at least contribute to the plaintiff’s injury or damage. Since the genesis of section 29C, courts have endeavored to strike a balance between the right of parties to construction contracts to pass the cost of construction accidents to others, ideally those legally responsible for the accident, and the inequity that would result from unqualified indemnity. Toward that end, courts have routinely struck down indemnification clauses that require “unconditional indemnity,” but have enforced those that comply with the statute even when the result seems patently unfair to the indemnitor.4
Seeking a fail-safe way to shift liability back to their subcontractors, some general contractors began including in their contracts clauses that required their subcontractors to insure them.5 These so-called “additional insured” clauses obligate the subcontractor to name the general contractor as an “additional insured” on its own liability policy. Unlike indemnity clauses, however, “additional insured” clauses do not directly implicate section 29C and are typically subject only to the condition that the general contractor’s liability “arise out of” the subcontractor’s work.6
This article provides an overview of the noteworthy cases and a general framework in which to evaluate and assess indemnity and “additional insured” claims in the context of construction accident litigation.7
II. Indemnification Clauses — Form Before Facts
Although general contractors typically use boilerplate contracts drafted by the American Institute of Architects, the language of indemnity provisions nonetheless varies from contract to contract. As might be expected, divergent and sometimes competing indemnification clauses have evolved. The prototype indemnity clauses obligate subcontractors to indemnify the general contractor and often others, for example, the owner or architect, against all claims and suits “arising out of or in connection with the subcontractor’s work or operations”8 or “caused in whole or in part by any negligent act or omission of the subcontractor.”9
Certain overreaching general contractors, however, taking advantage of their superior bargaining power, soon crafted indemnity clauses that required subcontractors to provide indemnification for all losses, even those caused exclusively by the general contractor’s negligence.10 In other words, these general contractors attempted to obtain the elusive unconditional indemnity.11 Responding to this trend, in 1984, Massachusetts adopted section 29C. This statute, in its current form, states:
Any provision for or in connection with a contract for construction, reconstruction, installation, alteration, remodeling, repair, demolition, or maintenance work, including without limitation, excavation, backfilling, or grading, on any building or structure, whether underground or above ground or on any real property, including without limitation any road, bridge, tunnel, sewer, water, or other utility line, which requires a subcontractor to indemnify any party for injury to person or damage to property not caused by the subcontractor or its employees, agents, or subcontractors, shall be void.12
In its original form, the statute declared indemnity clauses that absolved indemnitees from the consequences of their own negligence void as a matter of law.13 The current version “is less sweeping and declares void indemnity provisions in construction contracts only when the injury is not caused by the subcontractor or its employees, agents, or subcontractors.”14 In other words, the statute permits general contractors to contract for indemnification for losses caused in part, or even primarily, by their own negligence, so long as the subcontractor’s conduct or work has some causal connection to the injury or damage. Although the objective of section 29C seems reasonably clear, its enforcement is nonetheless vexing.
The Appeals Court15 has developed a two-pronged approach to demystify the process of determining the validity of challenged indemnity provisions. As a threshold matter, courts look to the language of the clause itself, not the underlying facts of the accident or any subsequent finding of negligence or fault.16 Assuming that the language of the indemnity clause at issue passes muster under section 29C, the inquiry turns next to the facts of the case and, more specifically, whether there is any nexus between the subcontractor’s work and the injury- or damage-yielding accident or event.17
The first part of the inquiry presents a purely legal issue, as this exercise is tantamount to contract interpretation. The second prong, which leads to a determination of whether the indemnity provision is triggered, is typically more challenging. This latter analysis requires a review of the underlying facts, some of which may be unresolved or even disputed.
A. Does the Indemnity Language Pass Muster with Section 29C?
Any discussion of cases addressing the validity of indemnity clauses in the wake of section 29C necessarily begins with Jones v. Vappi Company.18 This is the first of many decisions wherein the Appeals Court endeavored to interpret indemnity clauses against the backdrop of the statute.
To be sure, the indemnity provision at issue in Jones was not subject to the constrictions of section 29C, as the subject construction contract predated even the original version of the statute, and the court declined to apply the statute retroactively.19 However, the court, in its dicta, clearly indicated its willingness to enforce indemnity clauses, despite gross disparity between the indemnitee’s and indemnitor’s respective negligence, provided that there is a correlation between the putative indemnitor’s work or operations and the underlying injury or damage.20
The Appeals Court upheld the validity of an indemnity clause similar to the one challenged in Jones in Kelly v. Dimeo, Inc.21 The indemnity clause scrutinized there read:
The Subcontractor shall indemnify . . . the General Contractor . . . against all claims . . . arising out of or resulting from the performance of the Subcontractor’s Work . . . , provided that any such claim . . . is caused in whole or in part by any negligent act or omission of the Subcontractor or anyone directly or indirectly employed by him or anyone for whose acts he may be liable, regardless of whether it is caused in part by a party indemnified hereunder.22
The Appeals Court held that the general contractor could enforce its indemnity claim against the subcontractor, even though the jury assessed the general contractor with a 90 percent share of the cumulative negligence.23 The significance of the decision lies in the fact that indemnity agreements are enforceable, regardless of how unfair the end result may seem. “Agreements voluntarily made . . . are not to be lightly set aside on the ground of public policy or because as events have turned it may be unfortunate for one party.”24 Although the construction contract in dispute in Kelly predated section 29C, the result would have been the same, because the indemnity provision does not run afoul of the statute: it did not elicit unconditional indemnification.25
The Appeals Court first invoked section 29C to invalidate an indemnification provision in a construction contract in Harnois v. Quannapowitt Development Corporation, certainly the most cited of the post-statute Appeals Court indemnity decisions.26 There, the plaintiff, Harnois, fell down a flight of stairs at a construction site.27 Harnois, who was employed by a subcontractor, C&R Development, subsequently filed a tort claim against the general contractor, Quannapowitt, alleging that the construction site was unsafe.28
Quannapowitt, as putative beneficiary of an indemnification provision, filed a third-party action against C&R.29 The indemnity clause, seemingly in Quannapowitt’s favor, stated:
[C & R] . . . shall indemnify the Owner, the Contractor, . . . from any and all liability . . . on account of injuries to persons . . . arising out of or in connection with the work, . . . whether such liability be the result of the alleged active or passive negligence of the owner or Contractor, their agents, servants, employees . . .30
Nevertheless, Quannapowitt’s third-party claim failed. The Appeals Court held that the clause ran afoul of section 29C and was therefore unenforceable: “A contractual obligation is void whenever it provides for indemnification by a subcontractor regardless of the fault of the indemnitee or its employees, agents or subcontractors.”31 The Appeals Court reached this result even though the jury found both Quannapowitt and the plaintiff negligent, the latter’s negligence imputed to C&R.
Had the drafter substituted the phrase “caused in whole or in part by C & R,” for, “whether such liability be the result of the alleged active or passive negligence of the Owner or Contractor, their agents, servants employees,” the provision would likely have been enforceable. The offending language required C & R to provide indemnification, without at least sharing in the liability, which is the type of “unconditional indemnity” that the statute proscribes.
The lesson to be learned from the Harnois decision, then, is that the language of the indemnity clause, not the jury’s assessment and apportionment of fault, is paramount. One rationale for this rule of law is self-evident: “If the focus is on the indemnity agreement itself rather than on the facts of any particular accident, that purpose [shifting the risk of loss for construction workers’ injuries to the general contractor where it was solely at fault] would be achieved without unduly burdening the courts and the parties with time-consuming assessments of negligence and comparative negligence.”32
There is a common misconception that the inclusion of the so-called saving language, “to the fullest extent permitted by law,” is required to validate indemnity clauses in the wake of section 29C. In fact, neither the statute nor any decisional law in its wake imposes such a requirement. While the insertion of this saving language can validate an otherwise overreaching clause,33 it is certainly not a panacea for all wayward clauses whose language contravenes the statute.
For example, in Miley v. Johnson & Johnson Orthopaedics, Inc.,34 the inclusion of the phrase “to the fullest extent permitted by law” was not enough to rescue a clause that otherwise offended the statute. In Miley, the plaintiff fell while delivering plumbing supplies to a construction site.35 He sued the owner, Johnson & Johnson, and, eventually, the general contractor, Carlson, and the plumbing subcontractor.36 Relying on an indemnity provision, Carlson impleaded a fourth defendant, the subcontractor who had previously poured the concrete floor on which Miley slipped, even though the record was devoid of any evidence, or even an allegation, that this work was performed negligently or improperly.37 Indeed, all four defendants prevailed on summary judgment, it being undisputed that the accident was caused by the natural accumulation of snow.38
Johnson & Johnson and Carlson nonetheless prosecuted their respective indemnity claims against the remaining two subcontractor defendants, no doubt to recover their litigation costs.39 Their indemnity clause read as follows:
Subcontractor shall, to the fullest extent permitted by law and to the extent that any such claims . . . are caused in whole or in part by any act or omission of Subcontractor . . . indemnify and hold harmless Contractor . . . from and against any and all claims . . . arising out of or in any manner caused by, connected with or resulting from subcontractor’s performance of this subcontract or the presence of subcontractor or subcontractor’s employees and/or agents at the project site.40
In striking down this clause, the Appeals Court held, “To make presence alone the basis for indemnity . . . steps over the limit that the Legislature set in [Mass. Gen. Laws ch.] 149 § 29C.”41 This result was based solely on the contract language, which provided for indemnity regardless of the subcontractors’ action or inaction. Deleting the underlined language would likely have saved this indemnity clause, as the subcontractors’ liability would have been tied to their “performance,” rather than mere presence.42
The validity of indemnification clauses in construction contracts can turn on the inclusion (or omission) of a single word or phrase. Sciaba Construction Corporation v. Frank Bean, Inc., a 1997 Appeals Court decision, speaks to this point.43 There, Sciaba, the general contractor, contracted with the city of Boston to renovate the legendary L Street Bathhouse.44 Sciaba subcontracted the “HVAC” work to Frank Bean, Inc., which in turn subcontracted subordinate insulation work to Thermal Insulation Company.45 Lusardi, one of Thermal’s employees, was injured at the construction site when he fell into a hole that was covered, apparently in a slipshod fashion, with plywood.46 Lusardi brought a tort action against Sciaba and Bean, and, after prevailing in a jury trial, netted a $675,000 judgment against Sciaba, after an offset for his comparative negligence.47 Sciaba sought contractual indemnity from both Bean and Thermal. The indemnity clause on which Sciaba relied stated,
The [sub]contractor shall assume the defense of and hold the Owner, Architect, their officers, agents, and employees harmless from all suits and claims against them, . . . and by or from any act or omission or neglect of the Contractor, any Subcontractor, anyone directly or indirectly employed by any of them or anyone else for whose acts any of them may be liable, regardless of whether or not it is caused in part by a party indemnified hereunder.48
The Appeals Court repudiated the indemnity clause at issue because it required Bean to indemnify Sciaba for all injuries and property damage, “regardless of whether or not it is caused in part by a party indemnified hereunder.” This language, the court ruled, contravened the statutory prohibition against unconditional indemnification.49 Even absent the offending language on which the court focused, Sciaba’s contractual indemnity claim was nonetheless doomed because of the qualifying phrase “any Subcontractor.”50 To require a subcontractor to indemnity a general contractor or others for injuries or damages caused by another subcontractor for whose acts or omissions it would not be vicariously liable would surely run afoul of section 29C.51
All of the indemnification provisions discussed above involved unilateral indemnity obligations. The task of contract interpretation is complicated by the existence of a mutual indemnification clause, that is, a clause that imposes the obligation to indemnify on either general contractor or subcontractor, whatever the case may be, whose negligence caused the injury or damage and exposed the other to a claim or suit.
In Joseph Francese, Inc. v. Dos Concrete Services, Inc.,52 an employee of Dos, a subcontractor, was injured and he brought suit against Francese, the construction manager, among others.53 A jury returned a verdict in the employee’s favor, but assessed his comparative negligence at 40 percent.54 Although the jury found that Dos was not negligent, this verdict was inconsequential for the purpose of the indemnity dispute because the employee’s negligence was imputed to Dos.55
Francese sought indemnification for its liability — 60 percent of the $450,000 gross jury verdict.56 Dos’s subcontract with Francese required it to “indemnify [Francese] against any liability for injuries to persons . . . occurring at or near the construction site which shall be attributable to the negligence of [Dos], its employees, agents, subcontractors, material men, invitees or other persons over whom [Dos] has control.”57 However, the balance of the indemnity provision imposed a reciprocal obligation on Francese to indemnify Dos under the same circumstances.
Following the “basic rule of construction that we must give effect to the parties’ intentions and construe the language to give it reasonable meaning wherever possible,” the Appeals Court held that Francese’s indemnity claim was unavailing.58 Of note, the Appeals Court acknowledged that the indemnity clause was sufficient under section 29C to require Dos to indemnify Francese, despite the absence of any culpability, if the contract did not impose mutual obligations.59 This result followed because the plaintiff, Dos’s employee, was charged with some comparative negligence, which was imputed to Dos.
Another issue that has arisen concerns whether a standard indemnity clause has any temporal limitations. In Herson v. New Boston Garden Corporation,60 the Appeals Court considered whether a subcontractor could seek contractual indemnification for injuries or damages that occurred after the subcontractor/indemnitor completed its work and even vacated the job site.61
In Herson, two electricians were electrocuted, one fatally, while working at the erstwhile Boston Garden.62 Mass Electric had installed the electrical transformer implicated in the accident, but it had completed this work some three years earlier.63 The plaintiff filed suit against the owner of the venue, New Boston Garden Corporation (“NBG”), Mass Electric and others.64 All but Mass Electric settled with the plaintiffs, and a jury found Mass Electric negligent, assigning it over 80 percent of the cumulative fault.65 NBG then obtained a judgment against Mass Electric on its indemnity claim.66
Appealing only its indemnification obligation, Mass Electric argued that it was grossly unfair to enforce the indemnity provision three years after it performed the work under its subcontract. The Appeals Court, however, was not persuaded, and held that “[t]he plain language of the unambiguous indemnification provision here defeats Mass Electric’s thesis.”67
Finally, the right to indemnification in the context of construction litigation will not be implied from an ancillary requirement to purchase insurance.68 This situation can arise when, in lieu of providing contractual indemnification, a subcontractor promises to procure insurance coverage for the general contractor, or add it to its own insurance policy, and the subcontractor fails to do so. “[No] authority of which we are aware stands for the remarkable proposition that requiring a contractor to carry general liability insurance imports indemnity.”69 The same result necessarily follows even if the insurance policy purchased by the subcontractor extends to the owner, general contractor, or other party seeking implied indemnification. In the end, the right to contractual indemnification must flow from express contractual language.70
B. Do the Facts Trigger an Indemnification Obligation?
Assuming that the indemnity language does not run afoul of section 29C, the facts of the accident become the next focus. In other words, the subcontractor — more often its liability insurer — must decide, depending on the language of the applicable indemnity clause, whether its acts, conduct, or omissions caused the injury or damage, or whether the injury or damage “arose out of its work.” This question has been litigated often, yielding decisional law that affords some general guidelines, but certainly no ironclad rules.
In this regard, a threshold question is whether the word “cause,” as used in the context of indemnity clauses, requires a subsidiary negligence finding against the putative indemnitor. The Appeals Court emphatically answered this question in M. DeMatteo Construction Company v. A.C. Dellovade, Inc.71
DeMatteo, the general contractor, hired Dellovade, as subcontractor, to roof and side a building in Saugus.72 One of Dellovade’s employees fell after stepping onto an “improperly set” metal beam.73 The employee, as to be expected, commenced a tort action against DeMatteo and another subcontractor.74 Faced with tort exposure, DeMatteo brought a third-party action against Dellovade for contractual indemnity. The indemnity clause on which DeMatteo relied required Dellovade to “fully indemnify and hold harmless the Contractor . . . from all claims . . . arising out of or in consequence of the performance of the Subcontractor’s work under this Contract.”75 The contract further required Dellovade to indemnify DeMatteo from all claims relating to “the performance, quality, acceptability or fitness of the work performed” by Dellovade.76 Dellovade argued that there was a legal distinction between the phrase “caused by,” the statutory parlance, and “arising out of” in the context of indemnification clause interpretation.77 The court, however, held that the clause provided the necessary “causal connection” between the subcontractor’s work and the injury, even without the words “caused by.”78 Justice Kass wrote, “The DeMatteo subcontract clause . . . ties indemnity to ‘the performance of the Subcontractor’s work under this Contract’ and ‘the performance…of the work performed,’ an equivalent of the statutory ‘caused by.’”79 In summary, these phrases are not mutually exclusive.
The Miley case, discussed earlier,80 is otherwise significant in that the Appeals Court enunciated the standard to be applied to determine a subcontractor’s indemnification obligation under a construction subcontract governed by section 29C:
In its statutory context, the word “cause” must be taken to mean some action (dropping a pipe on the deliveryman’s foot) or inaction (leaving an unnatural ice patch in the delivery path) that provokes the mishap. Otherwise, the statute is nullified, and the subcontractors, just by signing up for the subcontract and coming on the job site, are bound to indemnify “come what may.”81
At the same time, however, the language of section 29C does not require a subordinate negligence finding in order to trigger indemnity provisions.82
Even in the wake of the Appeals Court’s pronouncement of the so-called Miley standard,83 evaluating contractual indemnity claims can be an imprecise, and often perilous, exercise. For example, in Johnson v. Modern Continental Construction Company, Inc.,84 while working for an ironwork subcontractor, Mohawk, in the construction of a tunnel, the plaintiff was struck by a bundle of plywood dropped from a crane that inadvertently swung over his work area.85 Mohawk’s subcontract with the general contractor, Modern Continental, required it to indemnify Modern for any claim for injuries “arising out of or in consequence of the performance of any work” by Mohawk under its subcontract.86 Perhaps guided by the holding in DeMatteo, Mohawk stipulated that the phrase “arising out of or in consequence of” comported with the statutory language “caused by” under section 29C.87 Mohawk, instead, argued that Modern was not entitled to indemnification for its $550,000 settlement with the plaintiff because Mohawk did not “cause” the accident. A Superior Court judge agreed with Mohawk and rebuffed Modern’s indemnity claim.88 Modern appealed, arguing that the Superior Court had applied too high a standard — a negligence standard, with the attendant proximate causation requirement. Instead, relying on a First Circuit case involving the interpretation of an “additional insured” clause in an insurance policy,89 Modern urged the court to apply the “but for” causation standard.90 The Appeals Court, however, was not persuaded:
Although the judge did in fact rule that the conduct of the subcontractor’s employee was not a “substantial factor” in bringing about the harm to Johnson, a concept reflective of a proximate causation standard, he also ruled commensurate with the standard of causation enunciated in Miley that neither Johnson nor Mohawk did or failed to do anything that “caused, provoked or brought about Johnson’s accident.”91
Needless to say, subcontractors and their insurers are at a distinct disadvantage, as compared to trial and appellate judges, when assessing whether indemnity obligations are owed. Unlike courts, subcontractors and their insurers must evaluate liability without the benefit of a jury verdict or, better yet, the apportionment of fault as between the plaintiff and defendant contractors. Indeed, the Appeals Court’s dicta in Herson reinforces this point: “To the extent that Mass Electric suggests that § 29C forbids determinations to be made prior to trial as to the validity and enforceability of an indemnity clause — thereby triggering the subcontractor’s duty to indemnify — this suggestion has no merit . . . ”92
In sum, the validity of indemnification claims against subcontractors flowing from construction accidents must be evaluated on a case-by-case basis. First, the subcontractor must review the indemnification clause at issue to determine whether it requires unconditional indemnity; if so, it is void. Assuming that the clause is valid and enforceable, the subcontractor must next ascertain whether its acts or omissions “caused” the accident and the resultant injuries and damages. Of course, if the subcontractor guesses wrong and declines to defend and indemnify the general contractor, the subcontractor will be liable for the general contractor’s share of any judgment and ancillary defense costs, not to mention its own independent liability and litigation costs.
Legal challenges to the validity of indemnification clauses contained in construction contracts appear to be waning, for two likely reasons. First, armed with a cadre of decisional law, wherein the appellate and trial courts have interpreted all possible variations of competing indemnity clauses, construction contract drafters have no doubt modified the language of their indemnity clauses to make them section 29C-compliant. Just as probably, however, general contractors and owners, perhaps in pursuit of the elusive “unconditional” indemnity, have begun to rely on “additional insured” clauses to do the work that indemnity clauses once performed.
II. Do ‘Additional Insured’ Provisions Trump Traditional Indemnity Clauses?
With the advent of section 29C, many general contractors saw their indemnity clauses declared void by courts, thus preventing them from shifting their tort liability for construction accidents to their subcontractors. In addition to re-drafting their contracts to make them compliant with section 29C, most general contractors began to supplement and even supplant conventional indemnity clauses with so-called “additional insured” clauses.
Typically, “additional insured” clauses in construction contracts require the subcontractor to purchase certain types of liability insurance, with prescribed minimum limits, and to name the general contractor as an “additional insured.”93 When a claim is filed or suit is commenced against the general contractor, it simply looks to the subcontractor’s insurer for a defense and indemnification, giving its own liability insurer a pass.94
Like indemnification provisions, the intent of “additional insured” provisions is simple: to transfer liability from the general contractor to the subcontractor, whose acts or omissions ostensibly caused or at least contributed to the injury or damage and the general contractor’s resultant tort exposure.95 There are, however, some marked differences between indemnity and “additional insured” clauses, so the similarities perhaps end with this common objective.
First, unlike indemnification clauses, the analysis of a claim for “additional insured” status always requires looking outside the four corners of the construction contract. Specifically, these clauses necessarily implicate the “additional insured” definition or endorsement, whatever the case may be, in the subcontractor’s liability insurance policy, which is not usually incorporated within the construction contract. Second, some broad “additional insured” endorsements can, under certain limited circumstances, provide general contractors with a defense and indemnification even when the general contractor’s conduct is the exclusive cause of the plaintiff’s injury.96 Finally, unlike indemnity provisions, section 29C, at least for now, does not affect the validity of “additional insured” clauses in construction contracts.
Notwithstanding the advantages afforded by “additional insured” clauses, it would be a stretch to suggest that “additional insured” status affords unconditional indemnification to the general contractor. The “additional insured” clause in the construction contract itself may indeed obligate the subcontractor to provide insurance for the general contractor, with no obvious limitations. Standard commercial insurance policies available to subcontractors, however, almost uniformly impose some restrictions on coverage availing to the putative “additional insured” — a point lost on at least some general contractors.
A. The Evolution of ‘Additional Insured’ Endorsements
Under the early prototype “additional insured” endorsements,97 the general contractor identified as an “additional insured” in a subcontractor’s liability policy is entitled to indemnification (and an antecedent defense), but only if the general contractor’s putative liability “arose out of” the subcontractor’s work.98 However, “additional insured” endorsements within insurance policies, much like indemnity clauses within construction contracts, have evolved over time, seemingly in response to decisional law.99 Some variations attempt to restrict coverage owed to the “additional insured” to tort exposure caused by the named insured’s negligence — in other words, vicarious liability.100
Despite their increasing usage, “additional insured” endorsements, and their implications on redistributing liability in construction accidents, have not received the same attention from Massachusetts appellate courts as have indemnification clauses. Nonetheless, the few decisions that there are offer some insight as to the extent to which courts will enforce “additional insured” endorsements, including those that, conceptually speaking, skirt the intent of section 29C.
In Transamerica Insurance Group v. Turner Construction Company,101 the first noteworthy decision involving “additional insured” clauses, the Appeals Court considered an “additional insured” endorsement that required the subcontractor’s liability insurer to defend and indemnify the general contractor “but only with respect to liability arising out of [the subcontractor’s] work for [the general contractor].”102 Transamerica insured Blaesing Granite Company, one of the subcontractors.103 The plaintiff, Davis, one of Blaesing’s employees, was struck by piece of granite facade, which a co-worker dropped while working several floors above Davis.104 Davis filed a tort action against the general contractor, Turner Construction Company, whose responsibility included, generally, overall job safety and, specifically, cordoning off the area below where Blaesing’s employees were performing their work.105 Turner promptly sought a defense and indemnification from Blaesing’s insurer, Transamerica, on whose policy it was listed as an “additional insured.”106 Transamerica, under protest, assumed Turner’s defense, negotiated a settlement, and then filed a declaratory judgment action against Turner and its insurer to recoup its indemnity and defense payments.107 Transamerica asserted that the “additional insured” endorsement in its policy did not afford coverage to Turner.108 Specifically, Transamerica posited that the words “arising out of,” in the context of the “additional insured” endorsement in its policy, presupposed that Blaesing was the proximate cause of the accident.109 Evidently choosing to ignore the fact that another Blaesing employee played a significant role in the accident, Transamerica argued that liability fell on Turner by virtue of its contractual and statutory obligations to ensure overall job site safety.110 The Appeals Court rejected Transamerica’s arguments, characterizing them as “breathtakingly unpersuasive.”111 The court reasoned that there was an obvious causal link between Blaesing’s work under its subcontract with Turner and the accident that injured Blaesing’s employee, enough to trigger coverage under the Transamerica policy even absent prima facie negligence on Blaesing’s part.112
The holding in Transamerica left unanswered the question of whether courts will enforce “additional insured” provisions that contain comparable language — “liability arising out of the ‘named insured’s’ work” — when it is clear from the factual record that the putative “additional insured’s” negligent acts, conduct, or omissions represented the exclusive, or even an intervening, cause of the underlying injury or damage. The Appeals Court was spared this inquiry, as it was clear from the evidentiary record that Blaesing’s negligence was certainly a contributing, if not the direct, cause of Davis’s accident.
Of course, the argument pressed by Transamerica would always be unavailing to the insurer for the presumed “additional insured” when, like in the Transamerica case, one of the named insured’s own employees is injured performing work under a subcontract for the prospective “additional insured.” Under this scenario, the “arising out of your work” causation test would necessarily be satisfied.
B. The Negligence of the ‘Additional Insured’ Does Not Foil Coverage
The United States Court of Appeals for the First Circuit reached the same result in Merchants Insurance Company of New Hampshire, Inc. v. United States Fidelity and Guaranty Company,113 a landmark decision involving the interpretation of common additional insured language in an insurance policy. This case is also significant because the First Circuit held that the phrase “arising out of,” the typical lexicon in “additional insured” endorsements, denotes a level of causation somewhere between “but for” and “proximate” causation.114
In Merchants Insurance, the general contractor, D’Agostino, under contract with two municipalities, hired Great Eastern Marine Service to remove and replace a bridge.115 Woundy, one of Great Eastern’s employees, was injured when one of his coworkers pinned his arm between two pieces of demolition equipment.116 Woundy sued D’Agostino. D’Agostino, in turn, sought a defense and indemnification from Great Eastern’s insurer, under whose policy it was named as an “additional insured.”117 The “additional insured” endorsement in Great Eastern’s policy with USF&G provided D’Agostino with coverage, “but only with respect to liability arising out of” Great Eastern’s work for D’Agostino.118 The First Circuit enforced the “additional insured” endorsement, holding that the operative facts “justifie[d] the conclusion that D’Agostino’s liability for the harm to Woundy ‘arose out of’ Great Eastern’s work for D’Agostino.”119
Other jurisdictions have embraced this expansive interpretation of this particular, albeit common, “additional insured” parlance.120 The majority view is that comparable “additional insured” endorsements cover an additional insured for its own negligence.121
In National Union Fire Insurance Company of Pittsburgh v. Lumbermens Mutual Casualty Company,122 the most recent decision involving the interpretation of an “additional insured” clause, the First Circuit further delineated the “intermediate causation” standard, as first expressed by the same court in Merchants Insurance. This decision underscores the point that Massachusetts courts, following the majority view, broadly construe the term “arising out of” in the context of “additional insured” endorsements.
In National Union, the plaintiffs, Leahy and Sheehan, were injured in separate accidents while working on the construction of the Deer Island Tunnel. Both of the plaintiffs worked for K.C. Electric, a subcontractor performing work for the prime contractor, S.A. Healy. Both of the plaintiffs slipped and fell within the tunnel: Leahy, while allegedly on his way from his work area to lunch, and Sheehan, while reporting to his assigned work area.123 Both cases were settled before trial, with K.C. Electric’s and Healy’s respective insurers agreeing to fund the settlements on an equal basis.
K.C. Electric’s subcontract with Healy required it to purchase liability insurance, with minimum limits, and to name Healy as an additional insured on the policy, both of which obligations K.C. Electric fulfilled.124 Once the tort claims were settled, Healy’s insurer, National Union, filed a declaratory judgment action against K.C. Electric’s insurer, Lumbermens, seeking a determination that Healy qualified as an additional insured under the K.C. Electric’s policy.125 Simply stated, National Union was seeking to recoup its settlement contributions from Lumbermens.
The issue on appeal was “whether there [was] a sufficient nexus between the injuries incurred by Leahy and Sheehan and their work for K.C. Electric.”126 The First Circuit acknowledged that there was a factual dispute as to whether Leahy and Sheehan were indeed working at the time of their respective accidents, which generally does not bode well for affirming summary judgment.127 Nonetheless, the court held that the “additional insured” provision in K.C. Electric’s policy with Lumbermens applied to Healy, providing it coverage.128 In reaching this result, the First Circuit stated:
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.129
This result obviated the need to decide whether “coverage exists simply because the injury occurred on the prime contractor’s work site.”130 Based upon the court’s dicta, it is doubtful mere presence alone would satisfy the intermediate causation test, as there must be some correlation between the injury or damage and the named insured’s work for the additional insured.
The question that seems to beg an answer, then, is whether an “additional insured” clause in a construction contract that requires a subcontractor to provide a defense and indemnification to the general contractor, even absent some modicum of proof that the subcontractor’s action or inaction contributed to the accident, violates the spirit, if not the letter, of section 29C. If indemnity clauses that essentially require unconditional indemnification are void, then it stands to reason that “additional insured” provisions should also be unavailing to general contractors in like circumstances.
A subcontractor (or its insurer) faced with the obligation to defend and indemnify a general contractor whose negligence represented the exclusive cause of the injury or damage, where the subcontractor’s only connection is the fact that the accident tangentially involved its work, could certainly press a colorable argument that section 29C moderates overreaching “additional insured” clauses. The limitations imposed by the statute are not expressly restricted to traditional indemnity provisions. This statute begins, “Any provision for or in connection with a contract for construction. . . .” 131 Had the legislature intended to limit the scope of section 29C to traditional indemnity clauses, then it could have used language specifically restricting the statute to such clauses.132
The Appeals Court’s dicta in the Johnson decision, discussed above,133 is certainly telling, but offers no unequivocal answer. There, the Appeals Court attempted to differentiate “additional insured” provisions from traditional indemnity clauses in the context of construction contracts:
Recognizing that the Supreme Judicial Court and the Appeals Court have held that “arising out of” denotes a level of causation that is much broader than the concept of proximate causation in tort law, the First Circuit held that, where injury to the subcontractor’s employee occurred while he was working for the subcontractor in the performance of the subcontractor’s work for the general contractor under the parties’ contract, the injury ‘arose out of’ the subcontractor’s work. However, the Massachusetts law to which the First Circuit referred arises solely out of the interpretation of clauses in various insurance policies, which generally favor a construction for the insured. We do not consider coverage questions under an insurance contract analogous to coverage under an indemnity provision of a construction contract.134
Similarly, in National Union, Lumbermens posited this same argument, but its proposition met with the same fate as in Johnson.135 Relying on the Appeals Court’s edict in Johnson, the First Circuit held that “section 29C does not apply to insurance policies, and the policy considerations reflected in section 29C are not applicable to such policies.”136 Worth noting, however, the court addressed only the narrower issue of whether an “additional insured” endorsement in an insurance policy implicated section 29C. Left undecided, then, is whether a clause in a construction contract itself requiring the subcontractor to provide insurance coverage to the general contractor, presumably without limitations, is barred by section 29C.
Massachusetts courts have thus far limited the statutory checks and balances on contractual indemnification (that is, section 29C) to traditional indemnity clauses in construction contracts. Nonetheless, in practice, even the broadest varieties of “additional insured” endorsements require some nexus between the named insured’s work, usually expressed by the “arising out of the performance of your work” vernacular, and the injury- or damage-yielding accident. Absent this qualifying language, the general contractor (and its insurer) could indiscriminately look to the insurers for any of the subcontractors on whose policies it qualifies as an “additional insured” (and there are often many) for a defense and indemnification. Ultimately, this would simply invite litigation by insurers for general contractor and subcontractors jockeying for the better position.
C. Restricting Coverage Under ‘Additional Insured’ Endorsements to Vicarious Negligence
Unlike the exposure presented by indemnity clauses, insurers of subcontractors can ostensibly limit their exposure from “additional insured” endorsements. In fact, some insurance policies, by virtue of supplemental exclusionary language, expressly restrict coverage to general contractors that otherwise qualify as “additional insureds” to exposure for injury or damage arising out of the general contractor’s vicarious liability. In fact, the First Circuit suggested this option in the Merchants Insurance case.137
Unfortunately, there are no Massachusetts appellate decisions directly on point. Two Superior Court judges have reviewed “additional insured” endorsements that attempted to restrict the general contractor’s coverage to its vicarious liability, but their decisions are at odds as to if and how this objective can be accomplished.
In Suffolk Construction Company, Inc. v. U.S. Fire Insurance Company,138 an unreported decision, a Superior Court judge, ruling on cross-motions for summary judgment, upheld the validity of exclusionary language in an “additional insured” endorsement that limited the general contractor’s coverage under the subcontractor’s policy to its exposure for vicarious liability only. 139
There, Suffolk served as the general contractor for the construction of a new facility at the University of New Hampshire.140 Suffolk subcontracted the window installation work to Cheviot Corporation, which in turn subcontracted the glazing work to Melrose Glass.141 Sewell, a Melrose Glass employee, was injured when the stepladder upon which he was working fell through the temporary plywood cover over a ventilation shaft.142 Sewell sued Suffolk, and Suffolk tendered its defense to Cheviot’s insurer, U.S. Fire, under whose policy Suffolk was named as an “additional insured.”143 The “additional insured” endorsement at the crux of this dispute provided coverage to Suffolk, but only with regard to “liability arising out of (a) [Cheviot’s] ongoing operations performed for [Suffolk] or (b) acts or omissions of [Suffolk] in connection with their general supervision of [Cheviot’s] operations.”144 Unlike the “additional insured” clauses at issue in Transamerica and Merchants Insurance, U.S. Fire’s endorsement contained further exclusionary language.145 Reducing the exclusion to its essence, U.S. Fire sought to limit Suffolk’s coverage to Suffolk’s vicarious liability for Cheviot’s conduct and Suffolk’s independent negligence in providing general supervision of Cheviot’s operations. It was reasonably clear from the evidentiary record that Suffolk was negligent in failing to reinforce the cover to the ventilation shaft. It was undisputed that an inspection by Suffolk’s own insurer only days before the accident revealed that the cover posed a safety hazard.146 U.S. Fire, invoking the exclusion, rejected Suffolk’s tender, taking the position that Suffolk’s nonfeasance represented the exclusive cause of the accident.
Suffolk filed a separate declaratory judgment action against U.S. Fire, seeking a determination that it was covered under U.S. Fire’s policy, regardless of the degree of Suffolk’s negligence.147 Suffolk argued that the “additional insured” provision and exclusionary language were mutually repugnant, rendering the entire endorsement ambiguous; therefore, the provision should be construed in Suffolk’s favor.148 The motion judge rebuffed this argument, holding, “U.S. Fire has carefully crafted language in its exclusionary provision to protect itself against indemnification in exactly incidents such as this.”149 Once satisfied that the U.S. Fire’s exclusionary language was valid and enforceable, the motion judge ruled that U.S. Fire was not required to indemnify Suffolk where Suffolk’s liability arose out of its own negligence and was unrelated to supervision of Cheviot’s work.150
Another Superior Court judge, considering an “additional insured” endorsement with similar but not identical exclusionary language, reached the opposite result in Suffolk Construction Company, Inc. v. Royal & Sunalliance Insurance Company.151 In that case, Suffolk was the general contractor in the construction of the former Lafayette Place Mall.152 As was its practice, Suffolk required all of its subcontractors, including Component Assembly Systems and S&F Contractors, to include Suffolk as an “additional insured” on their respective liability policies.153 One of Component’s employees was injured on the job and filed a tort action against Suffolk and S&F.154 Suffolk, as might be expected, promptly tendered its defense to Component’s and S&F’s respective insurers, Royal and Liberty Mutual.155 Royal refused to indemnify or even defend Suffolk, citing exclusionary language applicable to its “additional insured” endorsement that attempted to restrict Suffolk’s coverage as an “additional insured” to its vicarious liability as a result of Component’s negligence.156 Liberty Mutual offered a conditional defense, but refused to reimburse Suffolk for its defense costs.157 Royal’s and Liberty Mutual’s actions prompted Suffolk to file a declaratory judgment action. Royal moved for summary judgment, positing that the employee had alleged only direct negligence by Suffolk, which its “additional insured” endorsement expressly barred.158 Suffolk cross-moved for summary judgment, arguing that Royal’s policy language was ambiguous.159 The Superior Court awarded summary judgment to Suffolk. The motion judge reasoned that the vicarious liability exclusionary language, unless read in a vacuum, was irreconcilable with the “arising out of your work” provision and, therefore, created ambiguity in the policy.160 The motion judge even suggested that the policy would be virtually meaningless if construed to limit Suffolk’s coverage to vicarious liability.161
It seems clear at this juncture that Massachusetts’ courts will enforce “additional insured” endorsements conditioned on “liability arising out of the named insured’s work,” even when the general contractor, or other beneficiary, was negligent. The next wave of appellate decisions involving construction contracts, no doubt, will focus on “additional insured” clauses, and, specifically, whether insurers can indeed restrict the coverage of “additional insureds” to their vicarious liability. Based upon the limited decisional law to date, it would not be too bold a prediction that more restrictive “additional insured” endorsements will be validated by the courts, provided, of course, their intent is clear and their language otherwise unambiguous.
In the final analysis, “additional insured” endorsements complement, but certainly do not trump, traditional indemnity clauses as a means by which general contractors can pass their tort liability for construction accidents down to their subcontractors. Although the legal standards applicable to “additional insured” endorsements are more lax than those governing traditional indemnity clauses under section 29C, “unconditional indemnity” for construction accident liability is nonetheless a myth. Even the broadest “additional insured” endorsements require that the presumptive “additional insured’s” liability “arise out of” the named insured’s work for the additional insured.
In certain limited circumstances, general contractors may be able to compel indemnification under a subcontractor’s liability policy as an “additional insured,” even where the subcontractor was blameless, a rub on section 29C. This scenario unfolds when a subcontractor’s employee is injured in the course of his or her work, through no fault of the employee or subcontractor, and the general contractor seeks a defense and indemnification from that subcontractor’s liability insurer.
Can general contractors circumvent the well-intentioned constrictions imposed by section 29C, by relying instead on “additional insured” clauses? No Massachusetts court has yet applied section 29C to void indemnity obligations owing under an “additional insured” clause, as opposed to under a traditional indemnity clause. If the decisions in Johnson v. Modern Continental Construction Company162 and National Union Fire Insurance Company of Pittsburgh v. Lumbermens Mutual Casualty Company163 are any indication, however, then Massachusetts courts will continue to treat indemnity clauses in construction contracts and “additional insured” endorsements in insurance policies independently — the former against the backdrop of section 29C, and the latter in conformity with well-developed decisional law relating to the interpretation of insurance policy language.
1. The general contractor’s exposure includes its liability, direct or vicarious, for any judgments or settlements for injuries or property damage, its costs (including attorneys’ fees) in defending claims and suits, and, finally, the expense for liability insurance. The cost of insurance is invariably tied to the insured’s loss and claim history, so the fewer the claims submitted to the general contractor’s insurer, the lower the insurance premiums.[back]
2. See, e.g., Harnois v. Quannapowitt Dev., Inc., 35 Mass. App. Ct. 286, 286-87 n.1 (1993); Speers v. H.P. Hood, Inc., 22 Mass. App. Ct. 598, 600 n.4 (1986).[back]
3. See Joseph P. Musacchio, Statutory Limitations on Indemnity Agreements in Construction Contracts, 80 Mass. L. Rev. 54, 55 n.10 (1995).[back]
4. See, e.g., Sciaba Const. Corp. v. Frank Bean, Inc., 43 Mass. App. Ct. 66 (1997) (“It is the unconditional indemnity demanded by the [challenged] language that offends Mass. Gen Laws ch. 149, § 29C.”). [back]
5. See, e.g., Transamerica Ins. Group v. Turner Constr. Co., 33 Mass. App. Ct. 446 (1992). The practice of general contractors requiring subcontractors to include them as additional insureds predates section 29C. See, e.g., Massachusetts Turnpike Auth. v. Perini Corp., 349 Mass. 448, 457-58 (1965). But the practice became far more prevalent after the enactment of the statute. “Additional insured” clauses, and their attendant obligations in the context of construction accident claims, received no attention from the appellate courts until the Transamerica decision. [back]
6. See, e.g., Merchants Ins. Co. of N.H. v. United States Fidelity & Guar. Co., 143 F.3d 5, 9 (1st Cir. 1998) (“additional insured” provision at issue identified the additional insured as “the person or organization shown in the Schedule. . . but only with respect to liability arising out of ‘ your work.’”).[back]
7. This article supplements Joseph Musacchio’s comprehensive 1995 article on the same subject matter, see supra note 3, particularly as to the developing law on “additional insured” clauses. [back]
8. See, e.g., Jones v. Vappi Co., 28 Mass. App. Ct. 77, 79-81 (1989). [back]
9. See, e.g., Herson v. New Boston Garden Corp., 40 Mass. App. Ct. 779, 782 (1996).[back]
10. See, e.g., Harnois, 35 Mass. App. Ct. at 286-87 n.1 (provision at issue required subcontractor to indemnify and hold harmless general contractor for any liability “arising out of or in connection with” subcontractor’s work or operations, “whether such liability be the result of the alleged active or passive negligence of the [general contractor]”). [back]
11. Some jurisdictions allow unconditional indemnification, that is to say, indemnity clauses that require the subcontractor to indemnify the general or primary contractor, even for liability arising solely out of latter’s negligence, but this is certainly the minority view. See, e.g., Hagerman Constr. Corp. v. Long Elec. Co., 741 N.E.2d 390 (Ind. Ct. App. 2000); Bethlehem Steel Corp. v. MATX, Inc., 703 A.2d 39 (Pa. Super. Ct. 1997). However, these same jurisdictions require that the language of the clause be clear and unequivocal. [back]
12. Mass. Gen. Laws ch. 149, § 29C (2002), This version was enacted by St. 1985, c. 228, § 3.[back]
13. As originally drafted, the statute provided as follows:
Any covenant, promise, agreement or understanding in or in connection with or collateral to contract or agreement relative to the construction, reconstruction, alteration, remodeling, repair or demolition of a building, structure, highway, appurtenance and appliance, including moving and excavating connected therewith, purporting to indemnify or hold harmless the promisee or indemnitee against liability for damage arising out of bodily injury to persons or damage to property caused by or resulting from the negligence of the promisee, his agents or employees, or indemnitee, and any covenant, promise, agreement, or understanding to insure or name as an insured the promisee or indemnitee against any such liability under any contract of insurance by the promisor, is against the public policy and is void and unenforceable.
St. 1984, c. 484, § 43. [back]
14. Jones, 28 Mass. App. Ct. at 81-82.[back]
15. Of note, the interpretation of indemnity clauses, it would seem, has remained the exclusive province of the Appeals Court, with Justice Kass distinguishing himself as the author of many notable decisions. [back]
16. See, e.g., Bjorkman v. Suffolk Constr. Co. Inc., 42 Mass. App. Ct. 591, 592 (1997); Callahan v. A.J. Welch Equip. Corp., 36 Mass. App. Ct. 608, 611 (1994); Harnois, 35 Mass. App. Ct. at 288. [back]
17. See, e.g., Johnson v. Modern Continental Constr. Co., Inc., 49 Mass. App. Ct. 545 (2000); Miley v. Johnson & Johnson Orthopaedics, Inc., 41 Mass. App. Ct. 30, 33 (1996).[back]
18. 28 Mass. App. Ct. 77 (1989).[back]
19. Id. at 81.[back]
20. “[I]ndemnity clauses are not to be read grudgingly against the indemnitee but ‘like any ordinary contract, with attention to language, background, and purpose.’” Id. at 80, quoting Speers v. H.P. Hood, Inc., 22 Mass. App. Ct. 598, 600 (1986).[back]
21. 31 Mass. App. Ct. 626 (1991).[back]
22. Id. at 627.[back]
23. Id. at 629. [back]
24. Id. at 630, quoting Crimmins & Pierce Co. v. Kidder Peabody Acceptance Corp., 282 Mass. 367, 379 (1933).[back]
25. See also Collins v. Kiewit Constr. Co., 40 Mass. App. Ct. 796 (1996) (enforcing indemnity clause notwithstanding fact that jury assessed indemnitee’s negligence at 97 percent). Collins is otherwise significant because the Appeals Court addressed but rejected “proportionate indemnity, ” the concept that a subcontractor’s contractual obligation to indemnify the general contractor (or others) is limited to its own share of the cumulative negligence. Id. at 799-800 (“We discern nothing in our case law or the language or history of § 29C that prevents parties from agreeing to full indemnification in the event of concurrent negligence.”) In any event, apportioning indemnity would be impractical, as parties to an indemnity agreement could not do so absent a trial or other adjudicatory process. [back]
26. 35 Mass. App. Ct. 286 (1993).[back]
27. Id. at 287.[back]
28. Id. [back]
29. Id. [back]
30. Harnois, 35 Mass. App. Ct. at 287 (emphasis added).[back]
31. Id. [back]
32. Id. [back]
33. See, e.g., Callahan, 36 Mass. App. Ct. at 611 (“Unlike the indemnity clause in the Harnois case, Sutton’s [the putative indemnitor] obligation to indemnify is limited to an injury resulting from the negligence or act or omission of Sutton or its agents ‘to the fullest extent permitted by law.’ Because of that limitation, we do not consider the indemnity clause void under §29C.”). [back]
34. 41 Mass. App. Ct. 30 (1996).[back]
35. Id. at 31.[back]
36. Id. [back]
38. Miley, 41 Mass. App. Ct. at 31. [back]
39. Id. at 31-32, nn.4-5.[back]
40. Id. at 34 (emphasis added).[back]
41. Id. at 33. [back]
42. However, the subcontractors likely still would have prevailed under the second prong of the Appeals Court’s approach. See Part I.B, infra.[back]
43. 43 Mass. App. Ct. 66 (1997).[back]
44. Id. at 67.[back]
47. Sciaba, 43 Mass. App. Ct. at 67.[back]
48. Id. at 68 (emphasis added, emphasis in original omitted).[back]
49. Id. at 69 (“The clause we are required to interpret requires indemnity for any act, such as being on the job, without requirement that the subcontractor be the cause of the accident and the injury.”).[back]
50. Toward that end, the Appeals Court held:
We read the phrase “any Subcontractor” in the indemnity clause to mean precisely that, any subcontractor, whether employed by [the putative indemnitee or indemnitor]. The clause we are required to interpret requires indemnity for any act, such as being on the job, without requirement that the subcontractor be the cause of the accident and injury. As matter of contract language interpretation, therefore we decide, as did the Superior Court judge, that the subcontract violates the provisions of § 29C and, therefore, is void.
Id. at 69.[back]
51. See text of section 29C, supra note 12, at p. 2. (“ . . . not caused by the subcontractor or its . . . subcontractors . . . ”) (emphasis added).[back]
52. 47 Mass. App. Ct. 367 (1999).[back]
53. Id. at 367.[back]
54. Id. [back]
55. Id. at 368-69, citing Kelly, 31 Mass. App. Ct. at 629.[back]
56. Francese, 47 Mass. App. Ct. at 367. [back]
57. Id. at 368.[back]
58. Id. at 369.[back]
59. Id. at 368-70.[back]
60. 40 Mass. App. Ct. 779 (1996).[back]
61. Id. at 780.[back]
62. Id. [back]
64. Herson, 40 Mass. App. Ct. at 780 n.2.[back]
65. Id. at 781 n.3.[back]
67. Id. at 783. The court noted that “[t]he language of the indemnification clause encompasses just such temporal lags and there is nothing unfair in this regard about holding Mass Electric to its agreement.” Id. at 782-83.[back]
68. Croall v. Mass. Bay Transp. Auth., 26 Mass. App. Ct. 957, 958 (1988), citing Shea v. Bay State Gas Co., 383 Mass. 218, 222 (1981). In Croal, the putative indemnitor, the MBTA, argued that it was entitled to implied indemnification from a contractor simply because it required the contractor to purchase liability insurance. Of course, the MBTA may have been entitled to coverage under the contractor’s policy if it also required the contractor to name the MBTA as an “additional insured.” Corall, 26 Mass. App. Ct. at 958. [back]
71. 39 Mass. App. Ct. 1, 3-4 (1995). The question was left open in Callahan, 36 Mass. App. Ct. at 608. See also Seeley v. Commercial Elec. Contractors, 16 Mass. L. Rptr. 490, 2003 WL 21781395 (Mass. Super.) (Houston, J.) (“It is well settled that ‘[t]he language of [section 29C] no longer requires a finding of negligence in order to trigger indemnity provisions.’”) (citations omitted).[back]
72. Id. at 2.[back]
75. DeMatteo, 39 Mass. App. Ct. at 3.[back]
77. Id. at 4.[back]
78. Id. at 3.[back]
79. Id. at 4.[back]
80. See, supra notes 34-42, and accompanying text.[back]
81. Miley, 41 Mass. App. Ct. at 33.[back]
82. DeMatteo, 39 Mass. App. Ct. at 4.[back]
83. See, e.g., Johnson v. Modern Continental Constr. Corp., 49 Mass. App. Ct. 545, 548 (2000) (“Under the Miley standard, there must be proof that the subcontractor’s action or inaction provoked the mishap.”). [back]
85. The trial judge made the following findings: Modern’s employees failed to securely fasten the plywood to the sling being used to hoist the bundle, to tie tag lines to direct the load to prevent it from inadvertently swinging out over where Johnson was working, to inform Johnson of the plan to move the plywood, and to provide a horn that would have warned Johnson that plywood was being moved. Id. at 549. [back]
86. Id. at 547.[back]
87. Johnson, 49 Mass. App. Ct. at 547.[back]
89. Merchants Ins. Co. of N.H. v. United States Fid. & Guar. Co., 143 F.3d 5 (1st Cir. 1998). The Merchants Insurance decision is discussed infra at notes 113-120, and accompanying text.[back]
90. Modern suggested the “but for” causation test was satisfied in light of the trial judge’s additional findings that “Mohawk chose the time and place of Johnson’s work area knowing that Modern’s employees were working on a deck close by and that the horn on the crane which inadvertently swung over Johnson’s workplace was not loud enough to provide sufficient warning to anyone working in Johnson’s work area.” Johnson, 49 Mass. App. Ct. at 549. [back]
91. Id. at 548-49.[back]
92. Herson, 40 Mass. App. Ct. at 786.[back]
93. The language of “additional insured” clauses in construction contracts varies from contract to contract. Some clauses simply require the subcontractor to “purchase and maintain such insurance as will protect [subcontractor] and the Construction Manager, Owner, and Architect/Engineer,” while others are more direct and state that “[General Contractor] must be named as ‘additional insured’ for primary coverage.” For a discussion of the different types of “additional insured” provisions, see Lisa Oonk, The Construction Industry: Coverage Issue Created By Claims Against Additional Insureds, 28-SUM Brief 8, 10 (West 2001).[back]
94. The general contractor’s motivation in seeking coverage under the subcontractor’s liability, when it could simply tender its defense to its own insurer, is economic. The cost of insurance is invariably tied to the insured’s loss and claim history, and the fewer the number of claims, the lower the general contractor’s premiums. [back]
95. Technically, the subcontractor’s insurer bears the risk, but this is invariably the case with exposure flowing from indemnity claims, as all commercial liability policies afford coverage for “liability assumed under a contract, ” such as an indemnity provision. See generally A. Windt, Insurance Claims & Disputes § 11.07 (3d ed. 1997). [back]
96. Such circumstances, not all that uncommon, arise when the plaintiff is one of the named insured/subcontractor’s employees, and he or she is injured in the course of performing his or her work, but solely because of the “additional insured’s” negligence. Of course, these fact patterns invariably raise the specter of comparative negligence, which is imputed to the named insured/subcontractor. [back]
97. Henceforward, unless otherwise noted, any reference to “additional insured” clauses, provisions, or endorsements refers to the language within the named insured’s policy, and not to the clause or provision in the construction contract that required insurance in the first place. [back]
98. Transamerica, 33 Mass. App. Ct. at 449.[back]
99. See Oonk, supra note 93, at 10-11.[back]
100. Id. nn.11-13.[back]
101. 33 Mass. App. Ct. 446 (1992).[back]
102. Id. at 449.[back]
103. Id. at 448.[back]
104. Id. [back]
105. Transamerica, 33 Mass. App. Ct. at 448.[back]
106. Id. [back]
107. Id. at 448-49. For reasons not explained in the decision, Turner did not pursue its indemnity claim against Blaesing, which was covered under its policy with Transamerica for “liability assumed under a contract.” The Appeals Court noted, “Davis’s injury strikes us as the model of the sort of liability the indemnity provision in the subcontract anticipated and against which Transamerica was providing insurance.” Id. at 451. [back]
108. The genesis of this appeal was a report pursuant to Mass. R. Civ. P. 64. Not lost on the Appeals Court panel, the trial judge reported the dispute to the Appeals Court without first interpreting the disputed contract language. Transamerica, 33 Mass. App. Ct. at n.2. [back]
109. Id. at 449.[back]
110. Id. at 450.[back]
112. Transamerica, 33 Mass. App. Ct. at 450. [back]
113. 143 F.3d 5 (1st Cir. 1998).[back]
114. Id. at 11.[back]
115. Id. at 7.[back]
116. Id. [back]
117. Merchants Insurance, 143 F.3d at 7. [back]
118. Id. at 9.[back]
120. Id. at 10, citing McIntosh v. Scottsdate Ins. Co., 992 F.2d 251, 254-55 (10th Cir. 1993). In McIntosh, the United States Court of Appeals for the Tenth Circuit took note of other decisions wherein courts construed the endorsement broadly, but actually ruled for the additionally insured by default, holding that the language was patently ambiguous. According to the Tenth Circuit, “At best, the phrase ‘but only with respect to liability arising out of [the named insured’s] operations’ is ambiguous as to whose negligence is covered and whose negligence is excluded from coverage.” McIntosh, 992 F.2d at 254.[back]
121. McIntosh, 992 F.2d at 254-55, citing Philadelphia Elec. Co. v. Nationwide Mut. Ins. Co., 721 F. Supp. 740, 742 (E.D. Pa. 1989) (holding that clause adding additional insureds “for any work performed by [the named insured] on their behalf” covered additional insureds for their own negligence related to the work of named insured ); Casualty Ins. Co. v. Northbrook Prop. & Cas. Ins. Co., 501 N.E.2d 812, 815 (Ill. App. Ct. 1986) (holding that phrase “arising out of operations performed for the additional insured by the named insured” covered additional insured for its own negligence); Dayton Beach Park No. 1 Corp. v. National Union Fire Ins. Co., 175 A.D.2d 854, 855, 573 N.Y.S.2d 700, 701 (2d Dep’t 1991) (holding that the phrase “arising out of . . . operations performed for the additional insured . . . by the named insured” covered additional insured for its own negligence). See generally Windt, supra note 95, §11.30, citing Charter Oak Fire Ins. Co. v. Trs. of Columbia Univ., 198 A.D.2d 134, 604 N.Y.S.2d 55 (App. Div. 1993) (holding that additional insured endorsement extending coverage “with respect to liability arising out of operations performed for (the additional insured) by or on behalf of (the named insured) does not limit its coverage . . . to those situations in which (the additional insured) is only vicariously liable”). [back]
122. 385 F.3d 47 (1st Cir. 2004).[back]
124. K.C. Electric’s policy with Lumbermens named Healy as an additional insured, “but only with respect to liability arising out of: a. ‘Your work for [K.C. Electric] by [Healy].” The policy went on to define “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.” Id. at 50. [back]
125. Id. at 48. National Union filed a separate declaratory judgment action seeking a determination that the concurrent coverage available to Healy under its own policy with National Union represented excess coverage. Id. Both actions were appealed to the First Circuit; the concurrent coverage issue was remanded for further proceedings on disputed factual questions. Id. at 53-55.[back]
126. National Union, 385 F.3d at 50.[back]
127. Lumbermens asserted that Leahy was going to lunch and Sheehan was simply traversing the tunnel to his work area and that neither was working for the purposes of triggering additional insured coverage. Conversely, National Union steadfastly asserted that Leahy and Sheehan were indeed working when they were injured on the jobsite. Id. at 52.[back]
128. The court stated:
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.
Id. at 52. The First Circuit analogized the case to McCarthy Bros. Co. v. Continental Lloyds Ins. Co., 7 S.W.3d 725 (Tex. App. 1999). There, the employee slipped and fell while en route to his employer’s trailer to retrieve tools. The Texas court, relying on Merchants Insurance, held that “[t]here was more than a mere vocational relationship between the injury and [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].” National Union, 385 F.3d at 52, quoting McCarthy Bros., 7 S.W.3d at 730.[back]
129. National Union, 385 F.3d at 52.[back]
131. Mass. Gen. Laws ch. 149, § 29C (2002) (emphasis added).[back]
132. Conversely, a general contractor seeking to enforce a broad “additional insured” provision that offends section 29C could argue that if the legislature intended to include any but traditional indemnity clauses in construction contracts within the ambit of section 29C, it could have expressly done so, as did the drafters of the original version of the statute. See supra note 13.[back]
133. See supra notes 84-91 and accompanying text. [back]
134. Johnson, 49 Mass. App. Ct. at 548 (emphasis added, citations omitted). The First Circuit decision to which the Appeals Court referred was Merchants Insurance, discussed at notes 113-120, supra, and accompanying text.[back]
135. “Lumbermens also argues that we should construe the policy to bar coverage because [section 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.’” National Union, 385 F.3d at 53 n.3.[back]
137. Merchants Insurance, 143 F.3d at 5.
After all, if USF&G had really intended to limit coverage under the additional insured Endorsement to those situations in which an added insured such as D’Agostino was to be held vicariously liable only for the negligence of the principal insured such as Great Eastern, USF&G was free to draft a policy with qualifying language that expressly implemented that intention.
See also McIntosh, 992 F.2d at 255 (“As the Philadelphia Electric court stated, ‘if the parties had intended coverage to be limited to . . . vicarious liability . . . , language clearly embodying that intention was available.’”).[back]
138. Suffolk Superior Court Civil Action No. 98-4414-H (Kern, J.) (Feb. 22, 2000).[back]
139. The author represented Suffolk Construction Company in the declaratory judgment action (only).[back]
140. Id. at 1.[back]
141. Id. at 1-2.[back]
142. Id. at 2.[back]
143. Suffolk additionally pressed an indemnity claim in the underlying tort action, but the clause in its subcontract was declared void and unenforceable under section 29C.[back]
144. Suffolk Superior Court Civil Action No. 98-4414-H (Kern, J.) (Feb. 22, 2000).[back]
145. The text of the exclusionary language in U.S. Fire’s policy read: “This insurance does not apply to: (3) ‘Bodily injury or ‘property damage’ arising out of any act or omission of the additional insured [Suffolk] or any of their ‘employees, ’ other than the general supervision by the additional insured(s) of [Cheviot’s] ongoing operations performed for the additional insured.”[back]
146. Id. at 6.[back]
147. Suffolk Superior Court Civil Action No. 98-4414-H (Kern, J.) (Feb. 22, 2000).[back]
148. Suffolk pressed the argument that the liability arising out of [Cheviot’s] ongoing operations for [Suffolk] was triggered by virtue of the facts that Sewall was Cheviot’s subcontractor’s employee and was injured while performing the glazing work called for in Suffolk’s subcontract with Cheviot, and that the exclusionary language essentially turned the endorsement on its head. [back]
149. Id. at 6.[back]
151. 2002 WL 391345 (Suffolk Super. Ct. 2002) (Connolly, J.).[back]
152. Id. at *1.[back]
153. The “additional insured” clause in Royal’s policy differed from the language in Merchants Insurance, but only in the sense that there was a temporal limitation, restricting coverage to accidents when the named insured was still on the jobsite. Id. at *2 n. 4.[back]
154. Id. [back]
155. Id. [back]
156. The exclusionary language in Royal’s “additional insured” endorsement restricted the general contractor’s (Suffolk’s) coverage as an additional insured to “vicarious liability arising solely out of the scope of the work as defined in the contract.” Id. at 3 n. 5.[back]
157. Suffolk Construction Company, 2002 WL 391345 at *3. [back]
158. Id. at *1.[back]
159. Id. at *2.[back]
160. “Royal simply added supplemental language, that while clear when read on its own, when read in conjunction with the first part of the contract, fails to expressly demonstrate an intent to limit coverage to vicarious liability.” Id. at *2.[back]
161. Id. at *2 n. 6. The judge no doubt recognized that construction accident claims virtually always give rise to direct negligence claims against the general contractor, whose common law and non-delegable statutory duties include ensuring a safe workplace. [back]
162. See supra note 134 and accompanying text.[back]
163. See supra notes 135-136 and accompanying text.[back]