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Atlantic Cas. Ins. Co. v. Pazko Masonry, Inc.

718 F.3d 721 (7th Cir. 2013)

Words & Phrases

Exclusions: Employee

Trial Judge

Honorable Joan B. Gottschall

Appellate Judge

Judge Posner


Contractor exclusion was ambiguous where the phrase “providing materials or services of any kind” could apply not only when services are compensated, but also as part of a demonstration.

Fact Summary

During construction of an apartment building, Robert Rybaltowski was injured when a masonry beam fell on him.  Rybaltowski was an employee of Raincoat Solutions, which had submitted a bid for waterproofing work to the project’s general contractor, Prince Contractors.  Rybaltowski was on the construction site to provide an unpaid demonstration of certain work Raincoat had proposed as part of its bid.  His injury occurred after the demonstration had been successfully completed but before he had left the project site.  Prince and Raincoat signed the subcontract for the waterproofing work shortly after the accident that injured Rybaltowski.  Rybaltowski subsequently filed suit against a number of entities involved in the project, including Prince and Paszko Masonry.

Atlantic Casualty had issued a CGL policy to Paszko, and the other defendant entities claimed that they were also covered under that policy as additional insureds.  The policy contained an exclusion for bodily injury to any contractor arising out of the provision of services by that contractor.  The exclusion defined “contractor” to include any independent contractor or subcontractor of essentially any entity associated with the project and any employee of any such contractor.  Atlantic Casualty denied coverage to the additional insureds and filed a declaratory judgment action in federal district court in Illinois, arguing that the policy’s exclusion applicable to injury to contractors eliminated any duty to defend them.  The district court entered summary judgment in favor of Atlantic Casualty       

On appeal, the Seventh Circuit interpreted the exclusion to mean that if Raincoat either was a contractor or was providing services of any kind to Prince, as the general contractor, then Rybaltowski, as Raincoat’s employee, was also a contractor under the terms of the exclusion.  The court found, however, that the exclusion was poorly drafted and left uncertain whether Raincoat was a “contractor” simply because that is the title commonly used for all companies engaged in construction, or whether it did not become a contractor for purposes of the exclusion until it signed a contract with Prince or until it provided materials or services beyond the waterproofing demonstration, or whether the demonstration itself was a service provided by a contractor.  The court concluded that application of the exclusion depended on whether or not Raincoat had been providing services or any kind to Prince at the time of the accident.  If it was providing services, it was a contractor under the exclusion’s terms, and Rybaltowski, who worked for Raincoat, was also a contractor, with the result that coverage would be excluded.