In Mid-Continent Casualty v. Hunter Crane, 40 FLW D1371c, (Fla. 4th DCA June 10, 2015), the 4th DCA discussed a commercial general liability insurance company’s duty to defend under its CGL policy when its insured has contractually agreed to indemnify, defend and hold harmless one of the insured’s vendors.
Contractor, Cloutier Brothers, Inc. leased a crane and a crane operator from Hunter Crane. The Rental Agreement said that Cloutier would indemnify, defend and hold harmless Hunter Crane from any and all claims regardless of whether the claim was based on Hunter Crane’s negligence.
Robert Damiano was injured while working on the Cloutier construction site when a truss fell from the crane while be operated by the Hunter Crane employee. Damiano sued Hunter Crane, who in turn, filed a third party action against Cloutier, seeking contractual indemnification. Cloutier submitted the claim to its insurer, Mid-Continent.
The Mid-Continent insurance policy exempted from coverage “bodily injury” or “property damage” Cloutier was “obligated to pay . . . by reason of the assumption of liability in a contract or agreement.” There were two exceptions to this “contractual” exemption from coverage: (1) where Cloutier would have been liable “in the absence of the contract or agreement” or (2) where Cloutier “[a]ssumed” the liability “in a contract or agreement that is an ‘insured contract’, provided the ‘bodily injury’ or ‘property damage’ occurs subsequent to the execution of the contract or agreement.” Regarding the second exception, the Policy defined an “insured contract” as:
That part of any other contract or agreement pertaining to your business (including an indemnification of a municipality in connection with work performed for a municipality) under which you assume the tort liability of another party to pay for “bodily injury” or “property damage” to a third person or organization, provided the “bodily injury” or “property damage” is caused, in whole or in part, by you or by those acting on your behalf. Tort liability means a liability that would be imposed by law in the absence of any contract or agreement.
In requesting a defense, Cloutier asserted the Rental Agreement was an “insured contract” falling under the exemption’s second exception. The Insurer countered that it had no duty to defend or indemnify.
Other courts addressing this “insured contract” language have held that the insurance will only apply to situations when the named insured is vicariously liable for the acts of another. Obviously, that is a severe limitation on the reach of the coverage provided by the “insured contract” language. The 4th DCA stated that the “insured contract” language should not be read so narrowly. Instead,
the ‘language indicates that policy coverage is not limited solely to vicarious liability, but that coverage extends to situations in which liability is shared’ by the insured/indemnitor and its indemnitee. Nor-Son, Inc. v. W. Nat’l Mut. Ins. Co., No. A11-2016, 2012 WL 1658938, at *3 (Minn. Ct. App. May 14, 2012); see also Steven G.M. Stein & Jean Gallo Wine, The Illusions of Additional Insured Coverage, 34-Spring Constr. Law. 14, 23 (Spring 2014) (“The newer language clearly covers a broader range of liability than that which is solely vicarious in nature.”).
Therefore, an indemnity agreement can be an ‘insured contract’ under the policy where the injury is caused by the indemnitee’s negligence, so long as the named insured ‘caused’ some part of the injuries or damages or is otherwise vicariously liable. See generally Harleysville Ins. Co. v. Physical Distribution Servs., Inc., 716 F.3d 451, 459-62 (8th Cir. 2013).
The 4th DCA then went on to say that underlying lawsuit contained no allegations that Cloutier “caused some part of the injury or damage.”
As a result, the allegations of Hunter Crane’s third party complaint did not demonstrate that Damiano’s injury was caused by either Cloutier or those working on Cloutier’s ‘behalf,’ so as to bring the Rental Agreement within the definition of an ‘insured contract,’ an exception to the exclusion from coverage. The eight corners of the complaint and the policy do not provide a basis for the Insurer’s duty to defend. Because the accident arose from a claim excluded from coverage under the policy, the Insurer has no duty of indemnification.
But remember, the “insured contract” language of the policy provides coverage if there is an indemnity agreement, and the bodily injury is “caused, in whole or in part, by you or by those acting on your behalf.” Here the underlying lawsuit pled that the bodily injury was caused in whole by Hunter Crane. The 4th DCA found that Hunter Creek was not working on behalf of Cloutier. The analysis in the case on the on “behalf” of issue is not persuasive.
It is unclear if the Supreme Court or other DCA’s will agree that Hunter Crane was not working on “behalf” of Cloutier. If Hunter Crane was not working on behalf of Cloutier, then who were they working for? Cloutier hired Hunter Crane. Cloutier paid Hunter Crane. Presumably, Cloutier told the crane operator when to show up to work, when to leave, where to work, and what work to do throughout the day. If that isn’t working on behalf of someone, what is.