BOSTON (March 21, 2012) – Jennifer L. Rousseau recently persuaded a federal judge in Massachusetts to rule that a liability insurance policy and related umbrella policy did not preclude a carrier’s duty to defend a major food industry franchisor in a premises liability and personal injury lawsuit.
The judge determined that an “intra-insured” exclusion in the policies did not apply to an indemnity agreement between the firm’s client and a franchisee that employed a man seriously injured while working at the franchisee’s leased property. The decision is the first federal court ruling in Massachusetts to interpret the “intra-insured” exclusion in the context of an insurance contract.
The franchise agreement required the franchisee to name the firm’s client as an “additional insured” under the franchisee’s primary and umbrella liability policies. The agreement also required the franchisee to indemnify the firm’s client for any claims, including personal injury, related to the operation of the franchisee’s business.
The firm represented the food industry chain franchisor at the request of its own insurance carrier.
In December 2007, the franchisee’s employee was repairing equipment on the roof of a building leased by the franchisee. He suffered catastrophic injuries when he fell off the roof during the repairs. The injured man eventually obtained workers’ compensation benefits, and filed a lawsuit in state court against several defendants, including the firm’s client, to recover for his injuries.
The franchisee’s liability carrier subsequently filed a declaratory judgment lawsuit seeking a ruling that it had no duty to defend the firm’s client and other defendants related to the man’s state court action. The liability carrier based its argument in part on the “intra-insured” exclusion, which stated that the policy didn’t apply to claims among and between insureds.
However, the judge rejected the carrier’s argument, saying the intra-insured exclusion was ambiguous as applied to indemnity agreements because the primary and umbrella policies did not explicitly preclude coverage for an indemnitee under an insured contract as an additional insured.
As a result, the franchisee reasonably expected coverage for its indemnity obligations, the judge said.
Applying the exclusion as urged by the carrier would, the judge wrote, “effectively bar coverage for an indemnitor’s obligation to an indemnitee under the insured contracts” even though the policies contained no such language.
“Because the judge’s decision is the first federal ruling in Massachusetts on the intra-insured exclusion, it will provide guidance to policyholders with indemnity obligations and to carriers whose policies contain this exclusion,” Rousseau said.
About Barton Gilman
Barton Gilman is one of New England’s leading civil litigation law firms with offices in Boston and Providence, including its active insurance coverage litigation practice. Its experienced trial attorneys appear regularly in the federal and state courts of Massachusetts, Rhode Island and Connecticut. The Providence Business News has named the firm four consecutive years as one of Rhode Island’s Best Places to Work (2008–2011).