Nautilus Ins. Co. v. Ferreira

• Decision Date: 19 August 2021
• Docket Number: Opinion 2021 DNH 130,CIVIL 1:20-cv-01053-JL
• Parties: Nautilus Insurance Company v. Washington Ferreira, et al.
• Court: U.S. District Court — District of New Hampshire

Nautilus Insurance Company v. Washington Ferreira, et al.

CIVIL No. 1:20-cv-01053-JL

Opinion No. 2021 DNH 130

United States District Court, D. New Hampshire

August 19, 2021

Michael F. Aylward, Esq.

Linda M. Smith, Esq.

Maureen Counihan, Esq.

Daniel Duckett, Esq.

Joseph Toomey, Esq.

Brian J. S. Cullen, Esq.

MEMORANDUM ORDER

JOSEPH N. LAPLANTE, UNITED STATES DISTRICT JUDGE

This insurance coverage dispute turns on whether one or more policy endorsements exclude coverage for damages claims in an underlying tort lawsuit. The underlying suit came about after Antonio DeSouza suffered injuries and death from a gas explosion that occurred at a residential construction site. The site was part of the “New Boston Subdivision” project, owned by New Boston Subdivision Holdings (“New Boston Holdings”). In the underlying suit, Washington Ferreira, the Administrator of DeSouza's Estate, seeks damages from New Boston Holdings and other entities under a variety of theories for DeSouza's alleged wrongful death. Nautilus Insurance Company, the plaintiff here, provided commercial general liability insurance to New Boston Holdings for the project.

Through this lawsuit, Nautilus seeks a declaration that the Estate's (a defendant here) claims against New Boston Holdings (also a defendant here) in the underlying lawsuit are not covered by the insurance policy and that Nautilus does not have a duty to defend or otherwise provide coverage to New Boston Holdings. This court has jurisdiction under 28 U.S.C. § 1332(a) (diversity) because Nautilus is an Arizona corporation, Ferreira is a citizen of New Hampshire New Boston Holdings is a New Hampshire limited liability company and its sole member resides in New Hampshire, and the amount in controversy exceeds $75, 000.^[1]

Nautilus now moves for summary judgment, arguing that the damages claims in the underlying lawsuit are not covered under its policy with New Boston Holdings, and it is under no obligation to defend New Boston Holdings in that lawsuit. After considering the parties' submissions and hearing oral argument, the court grants Nautilus' motion. The policy's “L205” endorsement excludes coverage for the Estate's bodily injury claims because DeSouza was an employee of a subcontractor of New Boston Holdings, and his injuries arose out of directly or indirectly performing duties related to the conduct of New Boston Holdings' business. The court further finds that there are no genuine disputes of fact as to the nature of New Boston Holdings' business that would preclude summary judgment.

I. Applicable legal standard

Summary judgment is appropriate where “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A dispute is “genuine” if it could reasonably be resolved in either party's favor at trial by a rational fact-finder, and “material” if it could sway the outcome under applicable law. Estrada v. Rhode Island, 594 F.3d 56, 62 (1st Cir. 2010). In analyzing a summary judgment motion, the court “views all facts and draws all reasonable inferences in the light most favorable to the non-moving party.” Id

II. Background

The basic facts are undisputed.^[2] On September 19, 2017, Antonio DeSouza suffered serious bodily injuries and died following a propane gas explosion in the basement of a home in the New Boston Subdivision residential construction project in New Boston, New Hampshire. At the time of the explosion, New Boston Holdings owned the New Boston Subdivision project. DeSouza was working in the home for his employer, USA Painting and Cleaning, one of the project's subcontractors.

Defendants allege that New Boston Holdings was created solely for the purpose of investing in the New Boston Subdivision project. Other than its investment in the New Boston Subdivision, Defendants allege that New Boston Holdings conducts no other business and has no employees.^[3] New Boston Holdings hired a general contractor (John Santo General Contracting, LLC) to develop and construct the New Boston Subdivision.

At the time of the events in question, New Boston Holdings was insured by Nautilus under a commercial general liability insurance policy. Under the policy, Nautilus agreed to “pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury' or ‘property damage' to which this insurance applies.”^[4] Nautilus further agreed to “defend the insured against any ‘suit' seeking those damages.”^[5] Insurance under the policy applies to “bodily injury” only if that injury “is caused by an ‘occurrence' that takes place in the ‘coverage territory.'”^[6] Under the policy, an “occurrence” is “an accident, including continuous or repeated exposure to substantially the same harmful conditions.”^[7] Insurance under the policy does not apply to:

“Bodily injury” to:

(1) An “employee” of the insured arising out of and in the course of:

(a) Employment by the insured; or

(b) Performing duties related to the conduct of the insured's business; or

(2) The spouse, child, parent, brother or sister of that “employee” as a consequence of Paragraph (1) above.

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.

This exclusion does not apply to liability assumed by the insured under an “insured contract”. (“Exclusion e”)^[8]

The policy also contains several endorsements, including exclusion endorsement “Form L205”, titled “Exclusion - Injury to Employees, Contractors, Volunteers and Other Workers”, which replaced Exclusion e. The top of the first page of the L205 endorsement states that “THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.” The body of the endorsement provides, in relevant part, that:

This insurance does not apply to . . . “Bodily injury” to:

(1) “Employees”, “leased workers”, “temporary workers”, “volunteer workers”, statutory “employees”, casual workers, seasonal workers, contractors, subcontractors, or independent contractors of any insured; or

(2) Any insured's contractors', subcontractors', or independent contractors' “employees”, “leased workers”, “temporary workers”, “volunteer workers”, statutory “employees”, casual workers, seasonal workers, contractors, subcontractors, or independent contractors

arising out of and in the course of:

(a) Employment by any insured; or

(b) Directly or indirectly performing duties related to the conduct of any insured's business; or

(3) The spouse, child, parent, brother or sister of that “employee”, “leased worker”, “temporary worker”, “volunteer worker”, statutory “employee”, casual worker, seasonal worker, contractor, subcontractors, or independent contractor arising out of Paragraph (1) or (2) above.

This exclusion applies:

(1) Regardless of where the:

(a) Services are performed; or

(b) “Bodily injury” occurs; and

(2) Whether any insured may be liable as an employer or in any other capacity; and

(3) To any obligation to share damages with or repay someone else who must pay damages because of the injury.

. . .

All other terms and conditions of this policy remain unchanged.^[9]

The policy also contains exclusion endorsement “Form L282, ” titled “Exclusion - Contractors and Subcontractors.” The L282 endorsement contains the same capitalized warning as the L205 endorsement and modifies the scope of commercial general liability coverage under the policy. The L282 endorsement states in full:

The following exclusion is added to 2. Exclusions of Section I - Coverage A -Bodily Injury And Property Damage Liability, Coverage B - Personal And Advertising Injury Liability and Coverage C - Medical Payments:

This insurance does not apply to “bodily injury”, “property damage”, “personal and advertising injury” or medical payments arising out of work performed by any contractor or subcontractor whether hired by or on behalf of any insured, or any acts or omissions in connection with the general supervision of such work.

All other terms and conditions of this policy remain unchanged.^[10]

In April 2020, the Estate filed a wrongful death action in the Hillsborough County Superior Court against New Boston Holdings, John Santo General Contracting, and the project's other subcontractors (the “DeSouza Lawsuit”). The DeSouza Lawsuit asserts three causes of action against New Boston Holdings: (1) Count 1 for negligence; (2) Count 7 for vicarious liability for the negligence of its contractors or subcontractors; and (3) Count 10 for non-delegable duty.

In Count 1, the Estate alleges that:

At all times relevant to this action, the Defendant, New Boston, its agents, servants and/or employees, had a duty to provide a reasonably safe workplace for workers engaged in construction of the Premises; a duty to design the Premises in a non-negligent fashion; a duty to construct the Premises, including appurtenances such as the gas utility and piping, installation of the furnace and conversion kit, installation of the underground propane tank and filling of the tank with propane gas prior to the explosion, without negligence; a duty to supervise employees and contractors who were employed to construct the Premises, including appurtenances such as the gas utility and piping, installation of the furnace and conversion kit, installation of the underground propane tank and filling of the tank with propane gas, in a manner that would not allow undetectable explosive gas to accumulate in the basement of the Premises; a duty to put in place a system or detector that would audibly warn any occupant of the Premise of the build-up of undetectable explosive gas in the basement of

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