Subcontractor Deemed Independent Contractor Subject To Exclusion In Commercial General Liability Policy

SubcontractorFollowing closely on the heels of my colleague’s August 17 post regarding the independent contractor classification, the Massachusetts Appeals Court last week rendered a decision highlighting the significance of this classification in the construction world.  In Cable Mills, LLC v. Coakley Pierpan Dolan And Collins Insurance Agency, Inc., 2012 WL 3893165 (Mass. App. Ct. 2012), the court held that a structural engineer retained by the owner’s architect was an “independent contractor” whose claims were excluded under the owner’s commercial general liability (“CGL”) policy.   

Cable Mills, LLC (“Cable Mills”) owned a mill in Williamstown, Massachusetts.  Cable Mills retained Feingold Alexander & Associates, Inc. (“Feingold”) to provide architectural services in connection with renovating the mill.  Feingold retained William Barry (“Barry”) to provide structural engineering consultation for the project.  Barry suffered injuries after falling through a floor at the site.  Barry sued Cable Mills, which turned the matter over to its CGL insurer, Certain Underwriters at Lloyd’s London (“Lloyds”).  Lloyds refused to defend or indemnify Cable Mills based on the following exclusion, which is standard in CGL policies:

This insurance does not apply to ‘bodily injury,’ ‘property damage,’ ‘personal injury,’ ‘advertising injury,’ or medical payments for operations performed for you by independent contractors or your acts or omissions in connection with your general supervision of such operations. 

After Lloyds refused coverage, Cable Mills filed this action against its agent, Coakley Pierpan Dolan and Collins Insurance Agency, Inc. (“Coakley”), and Coakley sued Lloyds seeking a declaration that the exclusion did not apply to Barry.  Coakley and Cable Mills argued that Barry was not an “independent contractor” and that he was not performing services for the insured, Cable Mills.  As support, they relied primarily on the fact that Barry’s contract was with Feingold.        

The court sided with Lloyds and found that Barry was subject to the exclusion.  In doing so, the court interpreted the language in the exclusion broadly so as to include all work done to further the renovation project, which included the services performed by Barry.  The lack of contractual privity between Barry and Cable Mills was not fatal to that interpretation.    Furthermore, the court found that a subcontractor such as Barry can indeed be deemed an independent contractor, as long as the subcontractor maintains discretion and control over the means and methods of the subcontracted work.  The court reviewed the language in the agreements between Cable Mills, Feingold, and Barry and determined that Barry was appropriately designated as an independent contractor.   

Cable Mills appears to expand the universe of persons working on Massachusetts construction projects who will be deemed “independent contractors” for purposes of analyzing the independent contractor exclusion that is common to most CGL policies.

About David Fine

David is an partner in the firm's Litigation Group and is chair of the Construction Law Group. David serves as litigation counsel for contractors, subcontractors, suppliers and other business concerns within the construction industry. He regularly advises his clients on matters such as contract drafting and dispute resolution, surety bond claims, mechanics liens and bid protests. David works closely with a number of local and regional trade organizations, and he often lectures and writes about topics pertinent to the construction industry.
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