Scottsdale Ins. Co. v. Torres

• Decision Date: 01 April 2009
• Docket Number: No. 06-2730.,06-2730.
• Citation: 561 F.3d 74
• Parties: SCOTTSDALE INSURANCE COMPANY, Plaintiff, Appellee, v. Raul TORRES, Defendant, Appellant, Carrabassett Trading Company, Ltd., Defendant.
• Court: U.S. Court of Appeals — First Circuit

561 F.3d 74

SCOTTSDALE INSURANCE COMPANY, Plaintiff, Appellee, v. Raul TORRES, Defendant, Appellant Carrabassett Trading Company, Ltd., Defendant.

No. 06-2730.

United States Court of Appeals, First Circuit.

Heard December 4, 2007.

Decided April 1, 2009.

Ross Anneberg, with whom Ellis Law Offices was on brief, for appellant.

Steven P. Perlmutter, with whom Robinson & Cole LLP was on brief, for appellee.

Before LIPEZ and HOWARD, Circuit Judges, and GELPI,^* District Judge.

HOWARD, Circuit Judge.

On August 23, 2004, Raul Torres ("Torres") was seriously injured while working at Carrabassett Trading Company ("CTC") in North Oxford, Massachusetts. Torres came to work at CTC through an agency known as Venturi Staffing Partners, Inc. ("Venturi"). When Torres subsequently sued CTC in state court ("the underlying suit"), CTC contacted its liability insurance carrier, Scottsdale Insurance Co. ("Scottsdale"), for defense and indemnity. Scottsdale subsequently filed suit in federal court,¹ seeking a declaratory judgment that it had no duty to defend or indemnify CTC because Torres was a CTC "employee" within the meaning of Scottsdale's policy, and was therefore excluded from coverage.² After conducting a hearing, the district court granted Scottsdale's motion for summary judgment.³ Scottsdale Ins. Co. v. Carrabassett Trading Co., Inc., 460 F.Supp.2d 251 (D.Mass.2006) ("Scottsdale I"). Because we conclude that material facts remain in dispute, we must reverse the district court and remand for further proceedings.

I. BACKGROUND

The facts recited here are undisputed unless otherwise noted. CTC is a fiber blending and recycling company. Its business involves baling up waste fiber from textile mills — such as waste from carding machines⁴ — and selling the bales to, for example, felt manufacturers. CTC fills orders on an as-needed basis, resulting in inconsistent demand for its products. It has five permanent employees, two of whom are salaried and three of whom are paid hourly.

Venturi hires individuals and places them with client companies for varying lengths of time. During times of high product demand, CTC contacted Venturi to supplement its workforce. Venturi paid the supplied workers, withheld taxes from their paychecks, and took responsibility for workers' compensation insurance. While Venturi retained the right to hire, place, discipline and terminate its employees, CTC was responsible for training, supervision and assigning work tasks. In cases of unsatisfactory performance, CTC could ask the worker not to return to the job. Venturi profited by charging the client CTC a premium over and above the wage, tax, and workers' compensation insurance amounts it charged back to CTC.

Torres had been employed by Venturi or its predecessor since 2001. He was assigned to CTC in August 2003. Torres replaced a different Venturi employee who had been at CTC for about three weeks. Torres worked regularly at CTC until early December 2003. He was again assigned to CTC in mid-January 2004, and except for one week in June, worked regularly until August 2004, when his left arm was severed in an accident involving a wool-picking machine. Torres worked a total of 1613 hours during these two tours of duty at CTC. During roughly the same time span, five other Venturi employees placed at CTC worked between ten and 280 hours. As a result of the accident, Torres sued CTC in Massachusetts state court.

At the time of Torres's accident, Scottsdale was CTC's liability insurer.⁵ Pursuant to the policy's "Bodily Injury and Property Damage Liability" section, Scottsdale agreed to "pay those sums that [CTC became] legally obligated to pay as damages because of `bodily injury' or `property damage' to which this insurance applies." The liability coverage is subject to an "Employer's Liability" exclusion, which, in relevant part, states that the insurance does not apply to "bodily injury to an `employee' of the insured arising out of and in the course of ... performing duties related to the conduct of the insured's business."

The policy also provides the following definitions:

5. "Employee" includes a "leased worker." "Employee" does not include a "temporary worker."

* * * *

10. "Leased worker" means a person leased to you by a labor leasing firm under an agreement between you and the labor leasing firm, to perform duties related to the conduct of your business. "Leased worker" does not include a "temporary worker."

* * * *

19. "Temporary worker" means a person who is furnished to you to substitute for a permanent "employee" on leave or to meet seasonal or short-term workload conditions.

The ultimate question here is whether Torres was a "leased worker," and thus excluded from coverage; or a "temporary worker," thus obligating Scottsdale to provide a defense in Torres's lawsuit.

II. STANDARDS OF REVIEW

A. Summary judgment

We review the district court's grant of summary judgment de novo. Specialty Nat'l. Ins. Co. v. OneBeacon Ins. Co., 486 F.3d 727, 732 (1st Cir.2007). The presence of cross-motions "`neither dilutes nor distorts this standard of review.'" Id. (quoting Mandel v. Boston Phoenix, Inc., 456 F.3d 198, 205 (1st Cir.2006)); see also Littlefield v. Acadia Ins. Co., 392 F.3d 1, 6 (1st Cir.2004) ("Cross motions simply require [the court] to determine whether either of the parties deserves judgment as a matter of law on facts that are not disputed.").

Summary judgment "should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." AGA Fishing Group Ltd. v. Brown & Brown, Inc., 533 F.3d 20, 23 (1st Cir.2008); Fed.R.Civ.P. 56(c). The party with the burden of proof must provide evidence sufficient for the court to hold that no reasonable fact-finder could find other than in its favor. Torres Vargas v. Santiago Cummings, 149 F.3d 29, 35-36 (1st Cir.1998). A dispute is "genuine" if the evidence about the fact is such that a reasonable jury could resolve the point in favor of the non-moving party. Rodriguez-Rivera v. Federico Trilla Reg'l Hosp., 532 F.3d 28, 30 (1st Cir.2008). A fact is "material" if it has the potential of determining the outcome of the litigation. Id.

B. Insurance policy construction

The parties agree that Massachusetts law applies to this case. Accordingly, we begin with the unexceptional proposition that Scottsdale owes a duty to defend CTC if the allegations in the underlying lawsuit are reasonably susceptible to an interpretation that they state a claim covered by CTC's policy. Liquor Liab. Joint Underwriting Ass'n. of Mass. v. Hermitage Ins. Co., 419 Mass. 316, 644 N.E.2d 964, 967 (1995). Conversely, there is no duty to defend a claim that is excluded from coverage. Metro. Prop. & Cas. Ins. Co. v. Fitchburg Mut. Ins. Co., 58 Mass.App.Ct. 818, 793 N.E.2d 1252, 1254 (Mass.App.Ct. 2003).

The interpretation of insurance contracts is generally a matter of law for the court. Home Ins. Co. v. Liberty Mut. Fire Ins. Co., 444 Mass. 599, 830 N.E.2d 186, 188 (2005). The court must "construe the words of the policy according to the fair meaning of the language used, as applied to the subject matter." Jacobs v. U.S. Fid. & Guar. Co., 417 Mass. 75, 627 N.E.2d 463, 464 (1994) (citing Johnson v. Hanover Ins. Co. 400 Mass. 259, 508 N.E.2d 845, 849 (987)). Where the words in the policy are not ambiguous, "they must be construed in their usual and ordinary sense." Id. Ambiguity exists when the policy language is susceptible to more than one meaning. Lumbermens Mut. Cas. Ins. Co. v. Offices Unlimited, Inc., 419 Mass. 462, 645 N.E.2d 1165, 1168 (1995). Ambiguous policy terms are construed in favor of the insured. Hazen Paper Co. v. U.S. Fid. & Guar. Co., 407 Mass. 689, 555 N.E.2d 576, 583 (1990). At the same time, however, ambiguity is not created simply because the parties offer different interpretations of the policy language. Lumbermens, 645 N.E.2d at 1168.

If a contract term is found to be ambiguous, and the court finds it necessary to rely on extrinsic evidence to resolve the dispute, then a question of fact appropriate for jury consideration may arise. See Preferred Mut. Ins. Co. v. Gamache 42 Mass.App.Ct. 194, 675 N.E.2d 438, 442 (1997) (summary judgment vacated where intent to cause harm was at issue and genuine issue of material fact remained as to intoxicated insured's mental capacity), aff'd 426 Mass. 93, 686 N.E.2d 989 (1997); see also Foisy v. Royal Maccabees Life Ins. Co., 356 F.3d 141 (1st Cir. 2004) (district court correctly submitted the question of parties' intent to the jury). Finally, the insurer has the burden of proving that an exclusion applies. Allmerica Fin. Corp. v. Certain Underwriters at Lloyds, London, 449 Mass. 621, 871 N.E.2d 418, 425 (2007).

III. LEGAL ANALYSIS

While our ultimate resolution may differ, the district court's analysis and focus on the issues is both accurate and helpful. We therefore borrow liberally from that court's opinion, noting our disagreement at the appropriate juncture.

The insurance policy at issue in this case is a "comprehensive general liability" policy. Such policies are designed to "protect an insured employer for losses to third parties arising out of the operation of the insured's business." Scottsdale I, 460 F.Supp.2d at 255; (citing Monticello Ins. Co. v. Dion, 65 Mass.App.Ct. 46, 836 N.E.2d 1112, 1113 (2005)). Injuries to employees are typically excluded from coverage because employers are expected to have separate workers' compensation insurance. Id. In that vein, the Code of Massachusetts Regulations requires employee leasing agencies to have workers' compensation insurance for its employees. Id. (citing Home Ins. Co., 830 N.E.2d at 190). Thus, the policy at issue here is typical in that it excludes "employees" from coverage, and considers "leased workers" to be "employees." Id.

Against this...