A Massachusetts intermediate appellate court recently found no coverage for a general contractor listed as an additional insured under a subcontractor’s general liability insurance policy. The general contractor sought coverage for a negligence action brought by an employee of the subcontractor regarding workplace injuries.

At issue were two relevant provisions in the policy: a separation of insureds clause and a cross liability exclusion. The separation of insureds clause required the policy to apply as “if each Named Insured were the only Named Insured” and “[s]eparately to each insured against whom claim is made or ‘suit’ is brought.” The clause would not apply only “with respect to the Limits of Insurance, and any rights or duties specifically assigned … to the first Named Insured.” The cross liability exclusion barred coverage for bodily injury claims brought by an “employee of any insured.”

The general contractor cited Massachusetts case law that the separation of insureds clause limits the effect of exclusionary language. It contended that because the separation of insureds clause requires treatment of each additional insured as if it were the sole insured, the cross liability exclusion is limited to claims brought by employees against their employer. Any other outcome would render the separation of insureds clause meaningless. Alternatively, the general contractor argued the cross liability exclusion is ambiguous in this context when read in conjunction with the separation of insureds clause, requiring the exclusion to read narrowly and in favor of coverage.

The court disagreed, relying on the cross liability exclusion’s use of “any” instead of “the” Insured. According to the court, this meant that there would be no coverage for a suit by employees of any insured against their employer or against another insured. The court reasoned that the exclusion’s purpose is to prevent claims “by one insured [or its employees] against another [or its employees].”

Based on that, the court held the policy did not provide coverage for the claim against the general contractor because the subcontractor’s employee was an employee of an insured under the policy. The court’s decision contradicts other holdings involving similar language. See, e.g., Shelby Realty LLC v. National Surety Corp., 2007 WL 1180651, at *4 (S.D.N.Y. 2007) (finding that employee exclusion did not apply in light of separation of insureds clause where one insured’s employee sued another insured).

As the Massachusetts court’s opinion highlights, potential pitfalls exist in obtaining coverage as an additional insured. While alternative sources of recovery can prove helpful to project owners, general contractors, and retailers of goods and services, the specific wording and interplay of various provisions, such as separation of insured clauses and cross liability exclusions, can result in a lack of coverage. Entities therefore should consult experienced brokers and coverage counsel at the time of contracting and policy placement to guard against results such as the one facing Phoenix in this case.

The case is Phoenix Baystate Construction, Co., Inc. v. First Financial Insurance Company, 145 N.E.3d 911 (Mass. App. Ct. 2020) (unpublished table decision).