Opinion
NO. 01-0892
September 4, 2002
ORDER REASONS
Before the Court are Third Party Plaintiff's motion for summary judgment and Third Party Defendant's cross motion for summary judgment. After carefully considering the papers filed by the parties, and having had the benefit of oral argument, for the following reasons, Third Party Plaintiff's motion for summary judgment is DENIED, and the Third Party Defendant's cross motion for summary judgment is GRANTED. Accordingly, the Third Party Plaintiff. Brambles. is not entitled to full defense and indemnity from Travelers for all claims brought against it in this litigation and is not entitled to attorney fees incurred in defense of the claims brought against it. The claim of Brambles against Travelers is DISMISSED WITH PREJUDICE, each party to bear their own costs.
I. BACKGROUND
This third party claim arises from a personal injury suit by Plaintiff, Eddie Edwards, against Brambles Equipment Services, Inc. The Plaintiff was employed by Laiche and Company and was painting light poles at Eastover Country Club when he was injured while using a man lift owned by Brambles. Brambles had leased the man lift to Laiche and Company pursuant to a rental agreement. The Plaintiff originally filed suit against Brambles alleging damages resulting from his injuries. Plaintiff alleged that his injuries were due to the fault of Brambles based on negligence including alleged failure to discover the defective condition of the man lift, failure to warn of its defective nature, and failure to maintain the man lift.
In February of 2002, Brambles filed a third party demand against Travelers claiming that Travelers was obligated to defend and indemnify Brambles based on Travelers' liability policy with Laiche. Travelers denies that Brambles is covered as an insured under its policy with Laiche. This Court severed the Third Party Demand from the original claim. On May 7, 2002, the parties settled the main demand.
The only remaining claim in this lawsuit is Brambles' Third Party Demand against Travelers. Both parties have filed cross motions for summary judgement on the issue of whether Brambles is an insured and therefore covered under the Travelers policy.
This Court recognizes two main issues relevant to the determination of whether Brambles can recover as an additional insured under the Travelers policy': (1) whether Brambles is an additional insured under the blanket additional insured endorsement even though Brambles was not specifically named as an additional insured; and (2) whether the exclusionary language of the additional insured endorsement bars coverage to Brambles for this claim. Travelers has also raised arguments concerning an employer liability exclusion in the policy and an argument that the Direct Action Statute bars Brambles' claim against Travelers.
It is uncontested by both parties that Laiche and Brambles executed a rental agreement, which provided that the customer (Laiche) "agrees to protect Company [Brambles] with comprehensive general liability insurance covering all losses and damages . . . ." Laiche was covered by a general liability policy with Travelers during a policy period which included December 14, 2000 (the date of the Plaintiff's injury). The Travelers policy included a Blanket Additional Insured Endorsement which provided that an insured included "any person or organization you are required by written contract to include as an insured, but only with respect to liability arising out of your work. This coverage does nut include liability arising out of the independent acts or omissions of such person or organization." "Your work" is defined in the policy as "work or operations performed by you or on your behalf; and materials, parts or equipment furnished in connection with such work or operations."
In this case, Third Party Plaintiff, Brambles, argues that the rental agreement required Laiche to procure Comprehensive General Liability Insurance for Brambles. Brambles also argues that the additional insured endorsement conferred status as an insured person on Brambles because Laiche was required by written contract to include Brambles as an insured. Furthermore, Brambles argues that its liability' arose out of Laiche's work because the Plaintiff was injured during his employment with Laiche. Brambles contends that as an additional insured under the policy, it is covered even when sued for its own independent negligence under Louisiana law.
On the other hand, Third Party Defendant, Travelers, contends that Brambles is not covered under the policy because it is not an additional insured. Travelers claims that although the rental agreement requires Laiche "to protect" Brambles with comprehensive general liability insurance, Laiche was not obligated to name Brambles as an additional insured under the policy. Further, Travelers argues that the Blanket Additional Insured Endorsement does not apply because Brambles is not specifically named as an additional insured on the policy. In addition, Travelers argues that the Blanket Additional Insured Endorsement does not apply to Brambles because coverage was only afforded for liability arising out of Laiche's work, and the accident at issue was not a result of Laiche's work. Rather, Travelers claims that the accident in this case is a result of Brambles' independent negligence and is, therefore, excluded by the endorsement.
II. LAW AND ANALYSIS
Summary judgment will be granted only if the pleadings, depositions, answers to interrogatories, and admissions, together with affidavits show that there is no genuine issue as to any material fact and that the defendant is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56. If the party moving for summary judgment demonstrates the absence of a genuine issue of material fact "the nonmovant must go beyond the pleadings and designate specific facts showing that there is a genuine issue for trial." Willis v. Roche Biomedical Laboratories, Inc., 61 F.3d 313, 315 (5th Cir. 1995). "[A] dispute about a material fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. To oppose a motion for summary judment, the non-movant cannot rest on mere allegations or denials but must set forth specific facts showing that there is a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 321-22 (1986).
The burden of demonstrating the existence of a genuine issue is not met by "metaphysical doubt" or "unsubstantiated assertions." Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) ( quoting Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586 (1986)). The Court must "resolve factual controversies in favor of the nonmoving party, but only when there is an actual controversy, that is, when both parties have submitted evidence of contrary facts." Id. The Court does not, "in the absence of proof, assume that the nonmoving party could or would prove the necessary facts." Id. If the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, no genuine issue exists for trial. See Matsushita, 475 U.S. at 588. Finally, "the mere existence of some factual dispute will not defeat a motion for summary judgment; Rule 56 requires that the fact dispute he genuine and material." Willis, 61 F.3d at 315. If the evidence leads to only one reasonable conclusion, summary judgment is proper. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986).
This case is brought pursuant to the diversity jurisdiction of this Court. This Court is, therefore, bound to apply substantive law of Louisiana to the issue of coverage. Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817 (1938). Under Louisiana law, the general purpose of liability insurance is to provide the insured protection from damage claims. Breland v. Schilling, 550 So.2d 609, 610 (La. 1989). Because an insurance policy is an agreement between the parties, it should be interpreted by using ordinary contract principles. Smith v. Matthews, 611 So.2d 1377, 1379 (La. 1993). If the language in the insurance contract is clear and unambiguous, the agreement must be enforced as written. Id. Any ambiguous provision in an insurance contract must be construed in favor of coverage to the insured and against the insurer who issued the policy. Smith, 611 So.2d at 1379; Breland, 550 So.2d at 610. Specifically, exclusionary clauses in an insurance contract must be strictly construed against the insurer. Garcia v. St. Bernard Parish Sch. Rd., 576 So.2d 975, 976 (La. 1991). If the language of an exclusion is subject to two or more reasonable interpretations, the interpretation which favors coverage must be applied. Id. at 976.
A. STATUS AS AN ADDITIONAL INSURED
Travelers argues that in order to obtain additional insured status, the law requires a specific provision in a written contract that requires a party to be named as an additional insured. Travelers relies on the cases of Spell v. N.L. Indus., Inc., 618 So.2d 17, 18 (La.Ct.App. 3d Cir. 1993) and Musgrove v. Southland Corp., 898 F.2d 1041, 1043 (5th Cir. 1990) in support of this argument. However, neither the Spell nor the Musgrove cases support such a rule.
In Spell, the court held that the failure of a party to name another party as an additional insured did not affect the enforcement of reciprocal indemnity agreements between the two parties. 618 So.2d at 19. The court did not address the issue of whether an additional insured must be named in order to receive coverage under a blanket additional insured endorsement.
Musgrove is also distinguishable. In Musgrove, employees of a company were killed while performing work at Citgo pursuant to a contract between the employer and Citgo. 898 F.2d at 1043. Claims were brought against Citgo and the employer. Citgo filed third party complaints against the employer and its insurers. The employer had both a general liability policy and an excess liability' policy at the time of the accident. Because the employer was not contractually obligated to obtain excess insurance coverage for Citgo, the court found that Citgo was not covered under that policy, despite the fact that the excess policy included a blanket additional insured endorsement. Id. at 1044. With regard to the general liability insurance policy, the employer was contractually required to name Citgo as an additional insured but failed to do so. Citgo argued that it was covered for the contractual breach under an endorsement providing blanket contractual coverage. However, the court held that the general liability policy did not afford Citgo coverage for its contractual claim against the employer, pointing out that the contract between the parties did not contain an indemnity agreement applicable to that particular loss. Id. The coverage issue under the general liability policy did not involve a blanket additional insured endorsement.
No published Louisiana court decision directly addresses the issue of whether an additional insured must be specifically named in order to be covered under a Blanket Additional Insured Endorsement. However, several federal courts have held that when a contract requires one party to obtain insurance covering the other party, a blanket additional insured endorsement provides liability coverage even though the other party was not specifically named as an insured under the policy. Woods v. Dravo Basic Materials Co., Inc., 887 F.2d 618, 622 (5th Cir. 1989); Gulf Oil Corp. v. The Mobile Drilling Barge, 441 F. Supp. 1, 6 (E.D. La. 1975); Travelers Indemnity Co. v. Navigators Ins. Co., No. C99-4509, 2000 WL 630859, at *3 (May 8, 2000 N.D. Cal.); Rosato v. Karl Koch Erecting Co., Inc., 865 F. Supp. 104, 105 (E.D.N.Y. 1994); St. Paul Fire Marine Ins. Co. v. Hanover Ins. Co., 187 F. Supp.2d 584, 587 (E.D.N.C. 2000). The Blanket Additional Insured Endorsement has been commonly considered by courts as "automatically extend[ing] additional insured status to organizations or persons by virtue of the contract requiring insurance." Travelers Indemnity Co., 2000 WL 630859 at *3 (citing various federal cases).
All of these cases involved an identical Blanket Additional Insured Endorsement as in the Travelers policy and the contracts between the parties did not contain an express requirement that the party be named as an additional insured.
The Spell and Musgrove decisions do not affect the law that a blanket additional insured endorsement provides coverage to a person or organization which the insured is contractually obligated to insure even if that person or organization is not specifically named as an additional insured. Applying the well established rule of law to this case, Brambles must be considered as an additional insured even though it was not specifically named because the written contract with Laiche required Laiche to "protect the Company with comprehensive general liability insurance," and Brambles qualifies under the terms of this agreement.
B. COVERAGE UNDER THE ADDITIONAL INSURED ENDORSEMENT
Although Brambles is an additional insured, it does not automatically follow that they are covered for this particular claim. An endorsement to the policy provides that coverage is limited to "liability arising out of `your work,'" referring to the work of the insured, Laiche. The next sentence in the endorsement specifically states that "this coverage does not include liability arising out of the independent acts or omissions of [the additional insured]."
Only one case involves identical language in an additional insured endorsement as in this case. In St. Paul Fire Marine Ins. Co. v. Hanover Ins. Co., 187 F. Supp.2d 584 (E.D.N.C. 2000), a general contractor claimed status as an additional insured under the subcontractor's general liability insurance policy, based on a requirement in the contract between the two that the subcontractor was to indemnify and defend the contractor for claims arising out of the subcontractor's work. The subcontractor's general liability insurance policy contained a blanket additional insured endorsement with identical language as the endorsement in this case.
In St. Paul Fire Marine Ins. Co., the injured plaintiff was employed by a subcontractor hired by the subcontractor (insured) who was performing work for the general contractor.
The Travelers policy issued to the subcontractor in Sr. Paul entitled the additional insured coverage "only with respect to liability arising out of [the subcontractor's] work. The additional insured endorsement also provided that "This coverage does not include liability arising out of the independent acts or omissions of [the additional insured]." Id. at 588.
Interpreting this language in the endorsement, the court found that "in order to give meaning to the `independent acts' provision of the endorsement, the court must construe the `arising out of [the insured's work]' provision as one providing coverage in cases where the alleged liability is vicarious." Id. at 590. Thus, according to the court, it was required to "analyze the complaint in an attempt to determine whether the alleged liability arises from the [the insured] subcontractor's work, i.e. whether [the plaintiff] seeks to hold the [additional insured] liable for [the insured's] acts or failure to act." Id. In St. Paul Fire Marine Ins. Co., because the complaint did not mention vicarious liability at any point, the court found that the additional insured's liability did not arise out of the insured's work, but instead out of its own independent acts and omissions. Therefore, the court held that the contractor who claimed status as an additional insured was not covered under the policy because the complaint asserted liability based upon the independent acts of the contractor and coverage for such liability was excluded in the additional insured endorsement. Id. at 594.
Aside from the St. Paul case, several federal and Louisiana state courts have considered the same limiting language, "arising out of `your work,'" in a blanket additional insured endorsement, but without the exclusionary language for independent acts of the additional insured. It is well settled that a limitation on liability, such as "arising from the insured's operations" or "arising from insured's work" in an additional insured endorsement will nevertheless provide coverage to an additional insured even if the additional insured is solely negligent. See Mid-Continent Cas. Co. v. Swift Energy Co., 206 F.3d 487, 497 (5th Cir. 2000), Saavedra v. Murphy Oil, U.S.A., Inc., 930 F.2d 1104, 1110 (5th Cir. 1991); North Am. Specialty Ins. Co. v. Louisiana Power Light, No. 93-2646, 1994 WL97791, at *3 (E.D.La. Mar. 23, 1994); Baker v. Sears, Roebuck Co., 753 So.2d 1011, 1015 (La.Ct.App. 2d Cir. 2000), Myers e. Burger King Corp., 618 So.2d 1123, 1127 (La.Ct.App. 4th Cir. 1993); Gates v. James River Corp. of Nevada, 602 So.2d 1119, 1121 (La.Ct.App. 1st Cir. 1992). Specifically, in Gulf Oil Corp. v. Mobile Drilling Barge, 441 F. Supp. 1, 6 (E.D. La. 1975), the court applied Louisiana law and held that an additional insured was covered for its own negligence, even when the parties stipulated that the named insured was not at Fault, under a similar additional insured endorsement providing that coverage was limited to "operations by or in behalf of or facilities used by the named insured."
However, these cases are distinguishable because they involve direct relationships between the insured and the person claiming status as an additional insured, i.e. the insured doing work for the additional insured or vice versa. In the present case, there was no such direct relationship between Brambles (who claims status as additional insured) and Laiche (the insured). Rather, the insured, Laiche, was performing work for an unrelated company when the accident occurred which caused injuries to the plaintiff. Furthermore, these cases do not contain the additional exclusion for independent acts or omissions of the additional insured as the Travelers endorsement does in this case.
Only one Louisiana court has reviewed a blanket additional insured endorsement when a lease was involved. In Haylock v. Jerusalem Temple, 578 So.2d 999 (La.Ct.App. 4th Cir. 1991), the sponsor of a circus leased an auditorium from the city of New Orleans in order to stage the event. An accident occurred when a circus patron fell while walking from a ramp to the arena lobby, an area that was solely under the control of the city who was exclusively responsible for maintaining the area where the plaintiff fell. The circus producer's liability insurance policy included an additional insured endorsement which provided that the coverage to additional insureds extended "only with respect to occurrences arising out of ownership or operation of the named insured's circus." Both the sponsor of the circus and the city claimed status as additional insureds under the circus producer's liability policy. The court held that the plaintiffs use of the ramp to go to the restroom was incidental to the operation of the carnival and, therefore, the city and the sponsor of the circus were both covered as additional insureds even though the area where the plaintiff was injured was under the city's control and unrelated to the performance of the circus. Id. at 1001.
However, the Haylock decision is distinguishable from the present case. First, in Haylock, the lessor-lessee relationship is between the parties claiming status as additional insureds, not between the additional insured and the insured as in this case. Second, the blanket additional insured endorsement does not include the exclusionary language found in the endorsement in this case, that is, the language excluding liability for the independent acts of the additional insured. Thus, this decision also does not serve as a basis for interpreting the endorsement in this case.
Rather, this Court is persuaded by the reasoning of the St. Paul decision and agrees that the only way to give effect to the language in the endorsement excluding liability arising from independent acts and omissions is to interpret the provision granting coverage for liability "arising out of [the insured's] work" to provide coverage where the alleged liability of the additional insured is vicanous. In this case, the Plaintiff's Complaint does not allege vicarious liability of Brambles due to acts or omissions of Laiche. Rather, the only allegations of vicarious liability refer to Brambles' liability for acts and omissions of its employees, not of Laiche. In fact, no basis exists for Brambles to be vicariously liable for the acts of Laiche because no employer-employee relationship exists between the two. However, the fact that Brambles could not be vicariously liable for acts of Laiche does not negate the policy's terms. The exclusionary language in the endorsement cannot be interpreted one way for Brambles and in another way for other possible additional insureds, who may have the requisite employer-employee relationship that would give rise to vicarious liability to that additional insured for acts and omissions of Laiche.
In the present case, Brambles' argument regarding the interpretation of the exclusionary language in the endorsement would have been stronger had Brambles been specifically named as an additional insured. However, this endorsement was not written with the sole intent of providing coverage to Brambles. Rather, the Court finds that it is clear and unambiguous from the plain language of the insurance contract that the endorsement applies to any person or organization with whom Laiche had agreed by written contract to insure. Insurance provisions must be interpreted according to the intent of the parties. Blackburn v. Nat'l. Ins. Co. of Pittsburgh, 784 So.2d 637, 641 (La. 2001). If the language in the insurance contract is clear and unambiguous, the agreement must be enforced as written. Smith v. Matthews, 611 So.2d 1377, 1379 (La. 1993). Because the additional insured endorsement clearly applied to any one with whom Laiche, the insured, has a written contract to insure, the endorsement must be interpreted in a way that considers any person or organization that qualifies as an additional insured. To interpret the endorsement only with respect to the relationship between Brambles and Laiche would be to interpret the endorsement contrary to the intent of the parties and the clear language of the contract.
The fact that the St. Paid case was based on the law of North Carolina. With does not recognize vicarious liability for contractors for the acts of subcontractors, is irrelevant to the decision of the court in St. Paul and in this case. As the court in St. Paul recognized, "the absence of a basis for vicarious liability under North Carolina law would not preclude such a holding as long as the requisite allegations . . . were present." St. Paul Fire Marine Ins. Co., 187 F. Supp.2d at 594. Because the Plaintiffs did not allege vicarious liability of Brambles for the acts of Laiche, the exclusionary language in the additional insured endorsement excludes coverage to Brambles in this case.
In light of this Court's finding that Brambles does qualify as an additional insured, coupled with the fact that the additional endorsement excludes coverage for this particular claim, it is not necessary for the Court to address Travelers' arguments regarding the employer's liability exclusion and the Direct Action Statute as a bar to the suit.
III. CONCLUSION
For the foregoing reasons, Third Party Plaintiff's motion for summary judgment is DENIED and the Third Party Defendant's cross-motion for summary judgment is GRANTED. Accordingly, the claim of Brambles against Travelers is DISMISSED WITH PREJUDICE, each party to bear their own costs.