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Home Insurance Co. v. Liberty Mutual Fire Insurance Co.7/7/2005
Suffolk.
May 6, 2005
Present: Marshall, C.J., Greaney, Ireland, Spina, Cowin, & Sosman, JJ.
Insurance, Workers' compensation insurance, Construction of policy, Coverage. Workers' Compensation Act, Coverage. Consumer Protection Act, Insurance.
Civil action commenced in the Superior Court Department on October 22, 2001.
The case was heard by Allan van Gestel, J., on motions for summary judgment.
The Supreme Judicial Court on its own initiative transferred the case from the Appeals Court.
This insurance coverage action arises from an injury to a leased employee. The insurance company of a lessee-special employer seeks indemnification and reimbursement of costs for defense from the insurance company of the lessor-general employer under workers' compensation and employers liability policies the lessor's insurer issued to the lessor. A judge in the Superior Court granted summary judgment to the lessor's insurer. We transferred the case here on our own motion, and now affirm on different grounds. For the reasons discussed below, we find that under the plain language of the policies the lessee-special employer was not insured. Therefore, no coverage liability existed and the lessee's insurer is not entitled to either indemnification or costs of defense.
1. Background
Carmelo Mercado was an employee of Abel Leasing Company, Inc. (Abel), and as such was leased to Pure Tech International, Inc., for employment at its Massachusetts facility, Pure Tech SPP, Inc. (collectively, Pure Tech). Mercado sustained serious injuries related to his employment in August, 1995, while leased to Pure Tech. He filed a workers' compensation claim against Abel and received compensation for his claims through Abel's insurer, Liberty Mutual Fire Insurance Company (Liberty).
In April, 1996, Mercado filed a third-party civil action against Pure Tech, alleging negligence for failure to ensure that the machinery that injured him was functioning in a reasonable and safe manner and for failing to implement policies and procedures that would have prevented the accident. Pure Tech's comprehensive general liability insurer, Home Insurance Company, defended the action.
At some point prior to trial, Pure Tech had filed a motion for summary judgment asserting the exclusive remedy of workers' compensation defense, but its expert determined that Pure Tech had no better than a thirty per cent chance of success on that motion. Pure Tech's counsel stated the likelihood of success as "less than [fifty per cent] due to the uncertainty in the law of this Commonwealth on the issue and the damaging testimony." He put the risk of a finding of liability if the matter went to a jury at ninety per cent. In light of this, a settlement was reached on or about October 25, 2000, for $850,000. Pure Tech incurred $129,770.29 in defending against the tort claim before settlement was reached. Some of the settlement recovery was used to satisfy a lien Liberty had for reimbursement of the workers' compensation benefits it had paid on behalf of Abel.
On September 29, 2000, over four years after the suit initially was filed, just over two months before the firm trial date of December 4, 2000, and less than one month before the final settlement was reached, Home Insurance sent Liberty a first demand letter "demand that Liberty Mutual acknowledge its obligations to Pure Tech, assume full responsibility for the defense and indemnification of Pure Tech . . . and control any negotiations to settle the case." Liberty never responded. Pure Tech ultimately assigned to Home Insurance any claims it may have against Liberty fo
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