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The Rough Notes Company Inc.

Nice try, but no coverage

Nice try, but no coverage

October 28
07:27 2019

Nice try, but no coverage

Bacon Construction Company, Inc., was hired as general contractor for a construction project at the University of Rhode Island. Bacon subcontracted with U.S. Drywall for structural work on the project. Pursuant to the subcontract agreement, U.S. Drywall was required to obtain a general liability policy that listed Bacon as an additional insured. U.S. Drywall purchased a commercial general liability policy from Arbella Protection Insurance Company, Inc., that included an endorsement that named Bacon as an additional insured. The policy provided for defense and indemnification costs to U.S. Drywall to work on the project.

On December 12, 2014, while performing work at the construction site, an employee of U.S. Drywall, Thiago Almeida, sustained severe injuries when he slipped on ice and fell down a staircase. On June 25, 2015, Almeida filed a complaint against Bacon, alleging that its negligent acts were the proximate cause of his injuries. Although the complaint asserted that Almeida was performing work in accordance with the subcontract, it contained no allegations against his employer, U.S. Drywall.

In response, Bacon filed a third-party complaint against U.S. Drywall, asserting that it was contractually obligated to defend and indemnify Bacon. In an amended complaint, Bacon included a claim for breach of contract against U.S. Drywall.

On June 27, 2017, Bacon made what it characterized as “a strategic legal decision” to dismiss all claims in the suit with prejudice, including those against U.S. Drywall.

Concomitantly, Bacon sought to recover indemnity and defense costs from U.S. Drywall’s insurer, Arbella. Bacon alleged that, because the Arbella policy named Bacon as an additional insured, Bacon was entitled to indemnification. Arbella, however, took the position that, “based on the additional insured endorsements, Bacon would be an additional insured only with respect to liability for bodily injury caused by our insured’s acts or omissions.”

On May 13, 2016, Bacon had sought a declaratory judgment that Arbella was contractually obligated to indemnify and defend Bacon as an additional insured relative to the Almeida action. Bacon subsequently moved for summary judgment, arguing that, pursuant to the unambiguous provisions of the Arbella policy, Bacon, as an additional insured, was afforded the same coverage as U.S. Drywall.

Arbella filed an objection, along with a cross-motion for summary judgment, countering that it had no duty to defend or indemnify Bacon as an additional insured because the allegations against Bacon in the Almeida complaint fell outside the scope of coverage provided by the policy. Arbella asserted that Bacon was entitled to coverage only for liability caused by U.S. Drywall’s acts or omissions; and, according to Arbella, because the Almeida complaint alleged negligence solely against Bacon, Arbella was not required to provide coverage with respect to the Almeida action.

On July 26, 2017, a Rhode Island Superior Court justice heard arguments on both motions and issued a decision in which she determined that the Arbella policy was clear and restricted additional insured coverage to “that which was due, at least in part, to U.S. Drywall’s negligence.” The justice further explicated that, after “looking at the original complaint that contains only allegations against Bacon only for Bacon’s own negligence[,]” as well as “the insurance policy language, and the fact that there is nothing here to suggest that any of these actions could have been attributed to U.S. Drywall, [she did] not believe the facts as presented would trigger the additional insured coverage clause[.]” Arbella’s cross-motion for summary judgment was granted, and Bacon’s motion for summary judgment was denied. Bacon appealed.

On appeal, Bacon contended that the Superior Court justice erred in denying its motion for summary judgment and granting Arbella’s cross-motion for summary judgment because, according to Bacon, it was entitled to additional insured coverage under the Arbella policy. Specifically, Bacon argued that the justice erred by: (1) ruling that Bacon was not afforded additional insured coverage under a plain-language reading of the endorsement; (2) ruling that the endorsement included a negligence trigger; (3) con-flating the U.S. Drywall-Bacon subcontract and the Arbella policy analyses; and (4) ruling that, based on the allegations in the Almeida complaint, Arbella did not have a duty to defend Bacon.

The high court disagreed, stating that the clear and unambiguous wording of the additional insured endorsement contained limiting, fault-based language that restricted Bacon’s coverage to situations where liability was attributable, at least in part, to the negligence of U.S. Drywall, the named insured.

With respect to Bacon’s contention that the additional insured endorsement did not contain a negligence trigger, the court stated that a trigger was provided because the endorsement included the terms “liability” and “bodily injury caused by” one’s acts or omissions. The policy explicitly excluded U.S. Drywall’s liability for bodily injury to one of its employees.

The court also disagreed with Bacon’s contention that the Superior Court justice erred in ruling that Arbella did not have a duty to defend Bacon. The court observed that the justice determined that the Almeida complaint contained only allegations against Bacon for Bacon’s own negligence. The fact that Bacon voluntarily dismissed with prejudice all claims against U.S. Drywall and reached a settlement with Almeida was fatal because these actions extinguished any vicarious liability claims that Bacon could have raised. The judgment of the Superior Court was affirmed.

Bacon Construction Company, Inc., v. Arbella Protection Insurance Company, Inc.-Supreme Court of Rhode Island-June 4, 2019-No. 2017-350-Appeal (PC 16-2169).

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