Masonic Home of Del., Inc. v. Certain Underwriters

• Decision Date: 22 May 2013
• Docket Number: C.A. No. N12C-08-184 RRC
• Parties: RE: Masonic Home of Delaware, Inc. v. Certain Underwriters at Lloyd's London
• Court: Delaware Superior Court

RE: Masonic Home of Delaware, Inc.

v.Certain Underwriters at Lloyd's London

C.A. No. N12C-08-184 RRC

SUPERIOR COURT OF THE STATE OF DELAWARE

Submitted: February 26, 2013

Decided: May 22, 2013

RICHARD R. COOCH

RESIDENT JUDGE

David G. Culley, Esquire

Tybout, Redfearn & Pell, P.A.

Attorney for Plaintiff

Robert J. Katzenstein, Esquire

Smith, Katzenstein & Jenkins LLP

Attorney for Defendants

Robert A. Benjamin, Esquire

Kaufman Borgeest & Ryan LLP

Attorney pro hac vice for Defendants

On Defendants' Motion to Dismiss.

GRANTED.

Dear Counsel:

Certainf Underwriters at Lloyd's London claim that they have no duty to defend or indemnify the insured, Masonic Home of Delaware, Inc., against a claim that Masonic Home's negligence harmed Abdelhak Moumen when he slipped and fell on a stairway at the Masonic Home because

1. he was an employee of Unidine Corporation, an independent contractor of Masonic Home,

2. he was hurt while and because he was performing duties related to the conduct of Masonic Home's business, and

3. the insurance policies excluded coverage for claims for injuries to "independent contractor[s]".

As such, the Underwriters now ask the Court to dismiss Masonic Home's complaint because it fails to state a claim for which the Court can grant relief. Because an unambiguous exclusion in the parties' insurance contract applies to a claim for harm to an employee of an independent contractor and precludes coverage of Mr. Moumen's claim, the motion is GRANTED, and thus, the complaint is DISMISSED.

I. FACTS¹

The insured, Masonic Home,² runs a nursing home in Wilmington.³ In 2006, Masonic Home engaged an independent contractor, Unidine Corporation, to prepare and serve food at the nursing home.⁴ Unidine promised to provide staff;⁵ it thus hired Abdelhak Moumen and assigned him to the nursing home.⁶

On November 9, 2009, Mr. Moumen allegedly slipped, fell, and suffered serious injuries at the nursing home.⁷ As a result, he sued Masonic Home, claiming that it was negligent because

1. liquid was on certain stairs,

2. he slipped on the liquid, which caused him to fall down the stairs and suffer injuries, and

3. Masonic Home breached its duty to keep its premises in a reasonably safe condition, i.e., it failed to keep the stairs dry.⁸

Trial in this underlying action is scheduled for October 21, 2013.⁹ Mr. Moumen is receiving workers' compensation from Unidine or its insurer.¹⁰

After Mr. Moumen filed his complaint, Masonic Home asked its insurers, Certain Underwriters at Lloyd's of London,¹¹ to defend it from his suit and pay any sum for which it becomes liable in the suit.¹² In a letter to Masonic Home dated January 27, 2012, the Underwriters refused and claimed that they owed no duty to Masonic Home based on an employers' liability exclusion:¹³

We are not obligated to defend or pay any damages, judgments, settlements or Medical Payments on account of any Claim:

(k) for any damage sustained by or injury to:

(1) An Employee or an independent contractor working for you . . . arising out of and in the course of employment by the insured or performing duties related to the conduct of the Insured's business . . . ; or

(2) . . . ;

This exclusion applies whether the Insured may be liable as an employer or in any other capacity and to any obligation to share damages with or repay someone else who must pay damages because of the injury or damage.¹⁴

The Underwriters assert that this term unambiguously disclaimed coverage for a claim of injury if

1. an employee of an independent contractor suffered the injury, and

2. the injury arose out of and in the course of the employee's performing duties related to the conduct of Masonic Home's business.¹⁵

Masonic Home disagreed with the Underwriters' interpretation of the exclusion and filed this declaratory judgment action against them, including a claim for damages.¹⁶

In the complaint, Masonic Home seeks

1. a declaratory judgment, pursuant to Title 10, Section 6501 of the Delaware Code,¹⁷ that the Underwriters must defend Masonic Home from Mr. Moumen's suit and pay any damages awarded to him, and

2. damages for breach of contract.¹⁸

Masonic Home asserts that Underwriters must defend it from Mr. Moumen's suit and potentially pay any damages awarded to him because

1. The employers' liability exclusion is "ambiguous,"

2. The exclusion does not disclaim coverage for a claim unless the injured party is an "Employee," as the policies define the term, or an entity constituting an independent contractor, and

3. Mr. Moumen's injury did not "arise out of" his performing duties related the conduct of Masonic Home's business.¹⁹

In response, the Underwriters have asked the Court to dismiss the complaint because it fails to state a claim on which the Court can grant relief.²⁰ But first, because Masonic Home is challenging the policies' choice-of-law provision,²¹ the Court must first decide which State's law applies in this case.²²

II. CHOICE OF LAW²³

When forming the instant insurance policies, the parties agreed that New York law would govern the interpretation of the policies' terms:

It is hereby understood and agreed by both the [Masonic Home] and [the] Underwriters that any dispute concerning the interpretation of this Policy shall be governed by the laws of New York, United States of America.²⁴

This clause is narrow in scope; even if the Court enforces the clause, the Court would only interpret the policies under New York law.²⁵ Yet Masonic Home still asks the Court to set aside the parties' bargained-for choice of law clause and apply the law of the place where the insured risk was - Delaware.²⁶ The Court will honor the parties' bargained-for choice of lawclause because, as the Underwriters have argued,²⁷ Masonic Home has not shown that Delaware law and New York law would yield different results.²⁸

If parties disagree on what law applies to an issue, yet the laws would yield the same outcome, then "there is a 'false conflict,' and the Court should avoid the choice-of-law question."²⁹ But also, the Court should not "trump the freedom of contract lightly."³⁰ The Court should protect expectations, not upset them:

Contract law is designed to protect the expectations of the contracting parties. It is intended to enforce the expectancy interests created by the parties' promises so that they can allocate risks and costs during their bargaining. The goal of contract law is to hold parties to their agreements so that they receive the benefits of their bargains. It is not the function of the court to relieve a party to a freely negotiated contract of the burdens of a provision which becomes more onerous than had originally been anticipated.³¹

Delaware honors the freedom of contract and enforces the bargains of sophisticated parties.³² And in general, the Court will enforce a bargained-for choice of law clause.³³

Masonic Home is asking the Court to set aside the parties' choice of law clause, but Masonic Home has not shown that the application of Delaware law and New York law would yield different results.³⁴ The Court will therefore interpret the policies under New York law.

III. STANDARD OF REVIEW³⁵

The Underwriters ask this Court to dismiss Masonic Home's complaint under Superior Court Civil Rule 12(b)(6).³⁶ Under this Rule, the Court shall dismiss a complaint if it "fail[s] to state a claim upon which relief can be granted."³⁷ The Court must limit its review to the complaint's face,³⁸ acceptall well-pleaded allegations as true,³⁹ and draw all reasonable inferences in the non-movant's favor.⁴⁰ But the Court should not credit unsupported conclusions.⁴¹ And it will dismiss the complaint if and only if the claimant cannot "recover under any reasonably conceivable set of circumstances susceptible of proof."⁴²

IV. DISCUSSION

The Court should grant the Underwriters' motion to dismiss under Superior Court Civil Rule 12(b)(6) if

1. the employers' liability exclusion is unambiguous, and

2. it applies to Mr. Moumen's claim.⁴³

A. The Employers' Liability Exclusion is Unambiguous Because There is Only One Reasonable Interpretation of the Exclusion - that It Can Apply to a Claim for Harm to an Employee of an Independent Contractor.

When interpreting a contract, the Court must ascertain the parties' expressed intent:⁴⁴

A contract has, strictly speaking, nothing to do with the personal, or individual, intent of the parties. A contract is an obligation attached by the mere force of law to certain acts of the parties, usually words, which ordinarily accompany and represent a known intent.⁴⁵

In general, the best proof of this intent is what the parties wrote.⁴⁶ Therefore, if a written contract is unambiguous - i.e., subject to only one reasonable interpretation - then the Court interprets the contract's terms per their plain meaning.⁴⁷ The Court may not consider extrinsic evidence⁴⁸ or change terms to reflect its own "notions of fairness and equity."⁴⁹ Instead, the Court just honors the bargain stuck.⁵⁰

As such, the Court will interpret the employers' liability exclusion per its plain meaning, unless the term is ambiguous, as Masonic Home maintains.⁵¹ Whether a contract's terms are ambiguous is a threshold question,⁵² which the Court answers as a matter of law.⁵³ A term is unambiguous if

1. it has "a definite and precise meaning," and

2. "there is no reasonable basis for a difference of opinion" about that meaning.⁵⁴

The Court may consider only what is inside a contract's four corners⁵⁵ and should

1. read the contract as a whole,⁵⁶

2. harmonize its terms,⁵⁷ and

3. give effect to every term.⁵⁸

Finally, a term is not ambiguous just because the parties have advanced different interpretations:⁵⁹ a term is ambiguous only if both interpretations are reasonable.⁶⁰

Each party here interprets the employers' liability exclusion differently, but only one interpretation is reasonable - the one under which the term can apply to claims for harm to an employee of an independent contractor working for Masonic Home.

No party disputes that the exclusion can apply to claims...