Wright–ryan Constr. Inc. v. Aig Ins. Co. of Canada

• Citation: 647 F.3d 411
• Decision Date: 27 July 2011
• Docket Number: No. 10–1096.,10–1096.
• Parties: WRIGHT–RYAN CONSTRUCTION, INC. and Acadia Insurance Company, Plaintiffs, Appellants,v.AIG INSURANCE COMPANY OF CANADA, Defendant, Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

647 F.3d 411

WRIGHT–RYAN CONSTRUCTION, INC. and Acadia Insurance Company, Plaintiffs, Appellants,

v.AIG INSURANCE COMPANY OF CANADA, Defendant, Appellee.

No. 10–1096.

United States Court of Appeals, First Circuit.

Heard Sept. 13, 2010.Decided July 27, 2011.

John S. Whitman, with whom Richardson, Whitman, Large & Badger was on brief, for appellants.Jeffrey T. Edwards, with whom Preti, Flaherty, Beliveau & Pachios, LLP was on brief, for appellee.Before TORRUELLA, RIPPLE,^* and LIPEZ, Circuit Judges.LIPEZ, Circuit Judge.

This appeal requires us to determine which of two commercial general liability (CGL) insurance policies should be considered “primary” for coverage of a claim arising from an accident at a construction site in Portland, Maine. At the time of the subject claim, Wright–Ryan Construction, Inc. (Wright–Ryan) was insured under its own CGL insurance policy, issued by Acadia Insurance Company (Acadia), and appeared as an “Additional Insured” on a subcontractor's CGL policy, issued by AIG Commercial Insurance of Canada (AIG). Wright–Ryan and Acadia filed a complaint for a declaratory judgment that AIG was obligated to defend Wright–Ryan and for compensation of costs incurred by Acadia in Wright–Ryan's defense. On cross-motions for summary judgment, the district court granted judgment in AIG's favor, holding that Acadia's CGL policy provided primary coverage for the accident claim, with the AIG policy affording solely excess coverage.

Appealing from this grant of summary judgment, Wright–Ryan and Acadia contend that the district court erred as a matter of law in its interpretation of the “Other Insurance” clauses of the two CGL policies, which govern priority of coverage between overlapping insurance policies. According to plaintiffs, a proper reading of these “Other Insurance” clauses dictates that the AIG policy be deemed primary. We agree and therefore reverse.

I.

The salient details of this insurance dispute are uncontested. Wright–Ryan, a Maine construction company, was hired by the University of Southern Maine as the general contractor for the construction of a building known as University Commons. Wright–Ryan in turn subcontracted with the Canadian company Norgate Metal, Inc. (Norgate) for the fabrication and erection of structural steel for the project. Although Wright–Ryan had its own CGL insurance policy, Wright–Ryan required Norgate, as a condition of the subcontract, to obtain CGL insurance for the University Commons project in the amount of $2 million and name Wright–Ryan as an additional insured on the policy. Norgate procured the requisite coverage through AIG,¹ which issued a certificate of liability insurance to Wright–Ryan and the University of Southern Maine naming them “Additional Insureds” to Norgate's policy, providing insurance coverage on a primary and non-contributory basis for all liability “arising out of [Norgate's] premises or operations.”

In August 2007, Thomas Behrens, an employee of a company hired by Norgate to assist with the erection of structural steel, tripped while dismounting from a ladder at the construction site and fell through an unguarded stair opening. Behrens fell four stories and landed on wet pavement at ground level, suffering serious injuries. A little over six months later, Behrens filed suit against Wright–Ryan in Maine's Superior Court for negligence in connection with the accident. Norgate and Behrens's employer were joined as defendants in a later amended complaint.

Upon receipt of the complaint, Wright–Ryan sent a letter to Norgate and AIG tendering to them the defense of the Behrens suit under Norgate's CGL policy. With no response forthcoming from either AIG or Norgate, Wright–Ryan's CGL carrier, Acadia, assumed responsibility for the company's defense. Acadia succeeded in settling the suit against all three defendants for $150,000 in 2009.

Wright–Ryan and Acadia filed a complaint for declaratory judgment against AIG in late 2008 in the federal court for the District of Maine, seeking a declaration that AIG was obligated to defend Wright–Ryan in the Behrens lawsuit. Following settlement of the Behrens lawsuit, Wright–Ryan and Acadia amended their complaint to seek reimbursement for the $150,000 settlement payment and over $40,000 of attorney's fees incurred in Wright–Ryan's defense.

The parties each moved for summary judgment, and the matter was submitted to a magistrate judge for review. The magistrate judge's recommended decision reached two key conclusions. First, it concluded that Behrens's accident arose out of Norgate's “premises or operations,” and thus Wright–Ryan was entitled to coverage under Norgate's AIG policy. Second, it concluded that the AIG policy was excess to Wright–Ryan's Acadia policy for purposes of the Behrens claim. Because the amount expended to defend and settle the Behrens suit was well within the limits of the Acadia policy—which the magistrate judge concluded to be primary coverage for the Behrens claim—the magistrate judge recommended that AIG's motion for summary judgment be granted. Adopting the magistrate judge's recommended decision in its entirety, the district court judge entered judgment against Acadia and Wright–Ryan.

This timely appeal followed.

II.

The issue in this appeal is straightforward. AIG has not challenged the district court's holding that Wright–Ryan is entitled to coverage for the Behrens claim under its policy. The sole and determinative question is whether the district court correctly held Wright–Ryan's Acadia CGL policy to be primary and the AIG policy excess. Reviewing the court's legal construction of the insurance contracts de novo, see Penn–Am. Ins. Co. v. Lavigne, 617 F.3d 82, 84 (1st Cir.2010), we arrive at the opposite conclusion.

Under Maine law, which the parties agree governs the interpretation of the insurance policies here, the “paramount principle in the construction of contracts is to give effect to the intention of the parties as gathered from the language of the agreement viewed in the light of all the circumstances under which it was made.” Greenly v. Mariner Mgmt. Group, Inc., 192 F.3d 22, 26 (1st Cir.1999) (quoting Whit Shaw Assocs. v. Wardwell, 494 A.2d 1385, 1387 (Me.1985)) (internal quotation marks omitted). Unambiguous provisions in insurance contracts, as with any other contract, must be interpreted as written, “giving force to their plain meaning.” Id. (citing Jack v. Tracy, 722 A.2d 869, 871 (Me.1999)). The mere fact of a dispute over the meaning of a particular provision does not render that provision ambiguous; it will be so deemed only when an ordinary person would not understand that the provision has a single accepted meaning. Id.

To untangle the priority of the Acadia and AIG policies, we focus on a provision entitled “Other Insurance,” present in near identical form in both contracts. These provisions are not unique to the insurance contracts at issue here. “Other Insurance” provisions are a standard element of liability insurance policies, intended to govern the relationship between and obligations of insurers whose policies provide overlapping coverage for the same claim or loss. See 15 Lee R. Russ & Thomas F. Segalla, Couch on Insurance § 219:1 (3d ed. 2011). There is just such an overlap here. Wright–Ryan has coverage for the Behrens claim under both the Acadia policy and the AIG policy. Wright–Ryan is a party to and appears as the Named Insured on the Acadia policy, and, while not a party to the AIG policy, Wright–Ryan has been added as an “Additional Insured” to that policy for all liability “arising out of [Norgate's] premises or operations.” Thus, we look to the policies' “Other Insurance” provisions to determine which of these coverages is primary.

“Other Insurance” provisions typically take one of three forms: an “escape” clause, which completely denies coverage when other insurance is available; a “pro rata” clause, which operates to share coverage of a claimed loss with other available insurance policies; or an “excess” clause, which extends coverage for a claim only when other insurance available for the claim has been exhausted. See Home Ins. Co. v. St. Paul Fire & Marine Ins. Co., 229 F.3d 56, 61 (1st Cir.2000). The provisions at issue here are of the third, “excess” variety. The relevant portions of the two provisions read as follows:

a. Primary Insurance

This insurance is primary except when b., below, applies....

b. Excess Insurance

This insurance is excess over:

(1) Any of the other insurance, whether primary, excess, contingent, or on any other basis ... (a) That is ... coverage for “your work”; ...

(2) Any other primary insurance available to you covering liability for damages arising out of the premises or operations for which you have been added as an additional insured by attachment of an endorsement.

When this insurance is excess, we will have no duty ... to defend the insured against any “suit” if any other insurer has a duty to defend the insured against that “suit”.

The above language renders the policies excess in two situations: (1) where there exists another insurance policy covering “your work,” a term defined in both the AIG and Acadia policies as “[w]ork or operations performed by you or on your behalf”; and (2) where there exists another liability insurance policy for the premises or operations that is “available to you” and on which “you have been added as an additional insured.” Inescapably, the key to interpreting and applying these provisions is the definition of “you.”

The parties have given us two choices of definition, each of which produces a different answer to the priority inquiry. Appellants Wright–Ryan and Acadia argue that “you” means only the “Named Insured” identified in each policy. Read in this manner, the terms of the policies produce complementary results: the Acadia policy indicates that its coverage must be excess to AIG's, and the AIG policy that its coverage is primary.

Not...