I’ve written about this a lot in past issues of CO: insurers using a variety of exclusions to limit coverage for construction site bodily injury claims. The results have been mixed. But in Atlantic Casualty Insurance Co. v. Price, No. 15-12889 (D. Mass. July 26, 2016) the insurer achieved its objective.

The coverage issue grows out of a straightforward claim. Doyle Price (as Onsite Construction) was the general contractor for the demolition and construction of a home. Price subcontracted with Anderson Insulation to work on the home. Antonio Sousa, one of Anderson Insulation’s employees, was injured while working on the site and filed suit, alleging that Price was negligent in not ensuring the safety of the workplace.

Onsite Construction was insured under a general liability policy issued by Atlantic Casualty. Atlantic Casualty disclaimed coverage based on an endorsement titled “Exclusion of Injury to Employees, Contractors and Employees of Contractors.” Sousa was an employee of an Onsite Construction contractor. Coverage litigation ensued, with Sousa named as a party.

The exclusion, in part, nixed coverage for “bodily injury” to any “contractor” for which any insured may become liable in any capacity.

For purposes of this exclusion the definition of “employee” was replaced by the following: “Employee” “shall include, but is not limited to, any person or persons hired, loaned, leased, contracted, or volunteering for the purpose of providing services to or on behalf of any insured, whether or not paid for such services and whether or not an independent contractor.”

Further, “contractor” was defined to state that it “shall include, but is not limited to, any independent contractor or subcontractor of any insured, any general contractor, any developer, any independent contractor or subcontractor of any general contractor, any independent contractor or subcontractor of any developer, any independent contractor or subcontractor of any property owner, and any and all persons working for and or providing services and or materials of any kind for these persons or entities mentioned herein.”

Sousa couldn’t get around the fact that the exclusion applied on its face: the exclusion applied to injuries to employees who work for OnSite’s contractors.

With nowhere to go on the policy language, Sousa turned to other avenues in an effort to get around the exclusion – essentially that the policy was ambiguous and that the exclusion rendered the policy without substantial economic value. However, the court rejected all of them.

As for ambiguity, the court concluded that “mere complexity of a policy is not itself a basis for finding ambiguity.” Further, just because the definition of “contractor” exceeded sixty words, and uses the word “contractor” itself six times, did not make it ambiguous. “Wordiness on its own,” the court stated, “does not cause ambiguity.”

The more interesting issue is the argument that the policy is void, as against public policy, because it is without substantial value. I imagine that many contractors would feel this way because the exclusion takes away coverage for a substantial risk that they face – worksite injuries involving contractor’s employees.

However, the court rejected this argument: “[A] provision in an insurance policy that negates the very coverage that the policy purports to provide in the circumstances where the person is liable is void as against public policy. However, if the policy still provides coverage for some acts, it is not illusory simply because of a potentially wide exclusion. . . . The policy here is not illusory or void as against public policy simply because it has many exclusions. There are a number of events for which Price would be provided coverage even considering all of the exclusions. Atlantic Casualty notes that injuries to the homeowners, neighbors, architect, engineer, town building inspectors, deliverymen, and realtors would all be covered by the policy. In this way the policy is similar to that discussed in B & T, in that it covers injuries to a range of individuals who might be at the worksite even if not Sousa’s injuries. Finally, the policy here also covers property damage and ‘personal and advertising injury liability.’ Although these two types of damage are not at issue here, that they could be covered demonstrates that the policy as a whole is not illusory.”

Atlantic Casualty achieved what it set out to do – eliminate coverage for a large swath of construction site bodily injury claims. The problem for insureds is that they often do not become aware of these types of exclusions until after a claim is made. And, whether they could have purchased the policy without them is another story – based on availability and affordability.