Bacon Construction Co. v. Arbella Protection Insurance Co., 208 A.3d 595 (R.I. 2019)

Roger Williams University Law Review Roger Williams University Law Review

Volume 25

Issue 3

Vol. 25, No. 3 Summer 2020

Article 30

Summer 2020

Bacon Construction Co. v. Arbella Protection Insurance Co., 208 Bacon Construction Co. v. Arbella Protection Insurance Co., 208

A.3d 595 (R.I. 2019) A.3d 595 (R.I. 2019)

Lucas A. Sylvia

Candidate for Juris Doctor, Roger Williams University School of Law

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2019),"

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671

Insurance Liability Law. Bacon Construction Co. v. Arbella

Protection Insurance Co., 208 A.3d 595 (R.I. 2019). If a general

contractor, listed as an additional insured party in its

subcontractor’s commercial general liability policy, voluntarily

dismisses claims against its subcontractor and settles with the

injured subcontractor’s employee, the general contractor cannot

subsequently demand insurance coverage from the liability policy,

nor can the general contractor force the insurance company to

defend it in litigation.

ACTS AND TRAVEL

Neither party disputed the material facts in this case.

December 12, 2014, an employee of U.S. Drywall (Drywall), Thiago

Almeida (Almeida), suffered severe physical injuries while working

at a construction site.

The plaintiff, Bacon Construction Co., Inc.

(Bacon) was the general contractor and Drywall served as Bacon’s

subcontractor.

Prior to the injury, Bacon subcontracted Drywall’s

services to perform structural work on the University of Rhode

Island campus and, as part of that work, subcontractor Drywall was

required to purchase a commercial general liability insurance

policy from Arbella Protection Insurance Co. (Arbella), which

contained a provision naming Bacon as an additional insured

party.

The policy also stipulated that Arbella would provide

defense and indemnification costs to Drywall for lawsuits arising

from its portion of the work on the project (the clause).

1. Bacon Const. Co. v. Arbella Prot. Ins. Co., 208 A.3d 595 (R.I. 2019).

2. Id. at 597.

3. Id.

4. Id.

5. Id.

6. The related text of the policy, as highlighted by the Court, reads:

Who is An Insured is amended to include as an additional insured

any person or organization for whom you are performing operations

when you and such person or organization have agreed in writing in

672 ROGER WILLIAMS UNIVERSITY LAW REVIEW [Vol. 25:671

On June 25, 2015, Almeida filed a complaint in Rhode Island

uperior Court against Bacon, alleging that Almeida was injured

due to Bacon’s negligence.

Almeida admitted that he was injured

during the course of his subcontracting work, but Almeida did not

allege that Drywall, his employer, was negligent.

In response,

Bacon filed a third-party complaint against Drywall, charging that

the latter was obligated to both defend and indemnify Bacon.

June 27, 2017, Bacon voluntarily dismissed all of its claims against

Almeida and Drywall with prejudice.

Simultaneously, Bacon

tried to recover indemnity and defense costs from Drywall’s insurer,

Arbella, by filing an action requesting declaratory judgment

against Arbella on May 13, 2016.

Bacon then moved for summary

judgment.

In response, Arbella filed an objection and a cross-

motion for summary judgment.

On July 26, 2017, the Superior

Court justice heard each party’s arguments, then issued a bench

decision.

The justice determined that Arbella’s insurance policy

was clear in that it limited Bacon’s coverage to actions resulting

from Drywall’s negligence and, because there was no evidence that

Almeida’s injury was caused by Drywall’s negligence, Bacon could

not recover.

Therefore, the justice granted Arbella’s cross-motion

a contract or agreement, executed prior to an ‘occurrence’, that such

person or organization be added as an additional insured on your

policy. Such person or organization is an additional insured only with

respect to liability for ‘bodily injury’; ‘property damage’ or ‘personal

and advertising injury’ caused, in whole or in part, by:

1. Your acts or omissions; or

2. The acts or omissions of those acting on your behalf; in the

performance of your ongoing operations for the additional insured. Id.

at 599 (emphasis added).

7. Id. at 597.

8. Id. See also id. at n.1. Almeida collected workers’ compensation from

Drywall’s insurer.

9. Id.

10. Id. at 598.

11. Id.

12. Id.

13. Id.

14. Id.

15. Id.

2020] SURVEY SECTION 673

for summary judgment and denied Bacon’s motion for summary

judgment on September 1, 2017.

Bacon appealed.

NALYSIS AND HOLDING

The Rhode Island Supreme Court (the Court) reviews the

grant of motions for summary judgment de novo.

In addition, the

Court adhered to precedent with regard to reviewing a trial justice’s

interpretation of a contract de novo, because “[w]hether an

ambiguity exists in an insurance policy is a question of law[.]”

Bacon advanced four arguments of error: (1) Bacon was afforded

additional insurance coverage under a plain interpretation of the

contract; (2) the insurance policy did not include a “negligence

trigger”; (3) the Superior Court justice incorrectly combined the

analysis of an indemnity clause contained within the Drywall-

Bacon contract with the clause in the Arbella policy; and (4) Arbella

did have a duty to defend Bacon in litigation.

The Court declined

to reach Bacon’s third issue, finding it irrelevant to the Arbella

policy at issue on appeal because the Drywall-Bacon contract was

not at issue on appeal and, more importantly, because Bacon

dismissed all of its claims against Drywall.

The Court first rejected Bacon’s assertions that Bacon was

entitled to insurance coverage under the Arbella policy and that the

Arbella policy did not contain a negligence trigger.

The Court

determined that the clause referred specifically to Drywall as the

“named insured,” while referring to Bacon as the “additional

insured.”

Following precedent on contract interpretation, the

Court stated that it “would not depart from the literal language of

the policy absent a finding that the policy is ambiguous.”

determine whether an ambiguity exists in contractal language, the

16. Id.

17. Id.

18. Id.

19. Id. at 598–99 (quoting Merrimack Mut. Fire Ins. Co. v. Dufault, 958

A.2d 620, 625 (R.I. 2008)).

20. Id. at 599.

21. Id. at 599, n.3.

22. Id. at 599–600.

23. Id. at 599.

24. Id. at 600 (quoting Lynch v. Spirit Rent-A-Car, Inc., 965 A.2d 417, 425

(R.I. 2009)) (brackets omitted).

674 ROGER WILLIAMS UNIVERSITY LAW REVIEW [Vol. 25:671

Court must “read a policy in its entirety, giving words their plain,

rdinary, and usual meaning.”

The Court found it clear that the

clause placed a firm limitation on Bacon’s availability for coverage,

specifically, that Bacon may only receive coverage arising from

situations where Drywall’s actions or omissions make Drywall

liable.

Although, as Bacon contended, the clause did not contain

the word negligence, the Court was convinced that there was a

negligence trigger in place because the clause included phrases like,

“caused, in whole or in part,” and “liability for ‘bodily injury’” on the

part of Drywall.

Furthermore, the clause mandated that a party

must show how the named insured’s actions or omissions caused

the bodily injury, heavily implying the existence of a negligence

trigger.

Finally, the Court opined that, were it to follow Bacon’s

argument on liability coverage to its logical conclusion, Bacon

would end up with a greater amount of insurance coverage than

Drywall because Bacon would be covered for personal injury claims

based on negligence while Drywall, the named insured, would be

excluded from such protections.

Having rejected Bacon’s arguments regarding coverage and the

negligence trigger, the Court next rejected Bacon’s assertion that

Arbella had a duty to defend Bacon.

The Court applied the

“pleadings test” to an insurer’s duty to defend.

Under the

pleadings test, an insurer has a duty to defend the insured if, when

looking at the content of the complaint, “[the] complaint contains a

statement of facts which bring the case within or potentially within

the risk coverage of the policy[.]”

Bacon hung its hat on the word

“potentially,” arguing that because Almeida slipped while working

at the construction site, there was a potential for some

apportionment of contributory negligence to Almeida, and that such

contributory negligence was covered by the language of the

25. Id. (quoting Peloquin v. Haven Health Ctr. of Greenville, LLC, 61 A.3d

419, 431–32 (R.I. 2013)).

26. Id.

27. Id.

28. Id.

29. Id.

30. Id. at 601.

31. Id.

32. Id. (quoting Med. Malpractice Joint Underwriting Ass’n of R.I. v.

Charlesgate Nursing Ctr., L.P., 115 A.3d 998, 1004 (R.I. 2015)).

2020] SURVEY SECTION 675

clause.

The Court rejected this argument for the simple fact that

the Almeida complaint only alleged negligence against Bacon and,

by voluntarily dismissing its claims against Drywall while reaching

a settlement with Almeida, Bacon fatally closed the door to any

vicarious-liability claims Bacon could have raised.

OMMENTARY

The crux of the case rested on two principal points: first, on the

specific language of the contractual clause, and second, on the

procedural fact that Bacon dismissed its claims against Drywall

while settling separately with Almeida.

The Court was correct to

uphold the lower court’s grant of summary judgment in Arbella’s

favor. As the Court pointed out, it seems antithetical for a general

contractor to receive greater insurance protection when the main

signatory to the insurance policy is the subcontractor, presumably

a corporation with less financial means and therefore a more vested

interest in receiving protection for whatever it can considering that

the policy explicitly would not cover the subcontractor if a personal

injury resulted from the subcontractor’s negligence.

Furthermore, had the Court allowed Bacon’s arguments to seize the

fort, the Court would be torturously twisting the plain language of

the clause which clearly laid out the very narrow circumstances

under which Bacon would be covered by the insurance policy.

effect, the Court would be rendering the clause meaningless. Bacon

would essentially be receiving a ‘free pass’ for making what in

retrospect appears to be an error in procedural legal judgment.

Indeed, both the Superior Court justice and the Court indicated

that had Bacon not voluntarily withdrawn its claims against

Almeida and Drywall, the result would be different altogether

hanging on vicarious liability.

Finally, this case illustrates what

a poor strategic decision it was for Bacon to voluntarily dismiss its

claims against the other parties because the Court appeared to

leave the door open for vicarious liability as an avenue for Bacon’s

33. Id. at 601.

34. Id. at 601–02.

35. See id. at 602.

36. See id. at 600.

37. See id.

38. Id. at 602.

676 ROGER WILLIAMS UNIVERSITY LAW REVIEW [Vol. 25:671

recovery, an avenue that was effectively closed by Bacon’s own

ctions.

ONCLUSION

The Rhode Island Supreme Court affirmed the judgment of the

Superior Court, holding that (1) Bacon, as general contractor, was

not entitled to coverage under the “additional insured” clause of

Arbella’s commercial insurance policy, and (2) Arbella, the insurer,

did not have a duty to defend Bacon in the underlying action.

Lucas A. Sylvia

39. Id. at 595.