Cincinnati Specialty Underwriters Insurance Company v. Best Way Homes, Inc. et al.

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Good morning, your honors. May it please the court. I am Christina Russo, and I represent Russell Blot who's sitting here today. Today, I would like to address three issues with this court. First, why the independent contractor endorsement is ambiguous. Second, why there are independent claims against bestway, which do not arise out of the subcontractor's operations. And third, why Cincinnati Insurance should have to prove prejudice before it denies coverage regarding the issue of ambiguity. This is an occurrence based policy with an effective period between 2016 and 2017. The endorsement requires that best way, quote, obtain a formal written contract with all independent contractors and subcontractors in force at the time of the injury or damage. And there's no dispute that didn't happen here, right? Correct. The injury happened in 2017, five years after the work was completed at the Hall Project at the premises. A reasonable interpretation from an insured's point of view is that this endorsement is intended to cover ongoing work when an injury happens at the site, when the subcontractors are working. That's not the case here. If you read the, if you allow the interpretation urged by CSU, the primary question is how could have best way in 2012 complied with conditioned precedent on a policy that wasn't in existence. This policy became effective in 2016. This policy didn't exist in 2012. This policy didn't exist, and The 2012 policy did not have similar Language. I do not know, your Honor, um, that policy, that was A different company. I I do not even know what, uh, that policy says, what those requirements were, because these has been the policy at issue because it's an occurrence based policy. That's true. That's true. And I think you make a very articulate statement about, on that issue, I'm troubled more about the absence of a written insurance endorsement on this policy, uh, for which a sub, the eventual subcontractor wasn't insured and was paid and paid the premium and named Best way as a contractor. And there was no such endorsement for this gentleman who built the deck and the stairs Correct. In this case. Why Doesn't that void the cover? Maybe I'm missing something. I'm sorry, Your Honor. Why doesn't that void the coverage, the absence of such an endorsement By the, by, uh, Bob Woods? Correct. Because that contract in those requirements wouldn't have been in place in 2012. There was nothing about this contract with either Bob Woods or, uh, best Way could have anticipated there was no requirement in 2012 that we know. So you're Saying in 2017, Yes, your Honor, Your client would've had to have looked back and reconstructed to meet this requirement, all the contractors he may have worked with five years ago. Correct. 10 years ago, whatever's been the statute of limitations. Yes. And in this case, best way was also not working at the whole property. That job had been done for five years. It was Mr. Blott who was working for Mr. Hall. When those stairs, those stairs detached, it is this inherent ambiguity you tried to go through real, like mental gymnastics. How, how can they comply? How can they get the endorsement? How can Bob Woods get the endorsement in 2017? Well, the point is their premium was structured so that there had to have been one in the past. That's the point For, In other words, they, the company would say, I, we won't, we want a history that such endorsements are in place, and if they're not, we don't cover that. That's the point where our coverage ends. If there was no endorsement in the past, right, and, and perhaps, your Honor, that would be a stronger argument had these been a claim made policy, but it was an occurrence based policy, so it was not about the claims that could have happened in the past. We are talking occurrence based policy in place. When the occurrence happens, that's when the coverage gets in, in this case, and I believe, your Honor, that is why it would not, uh, void coverage, uh, the lack of an endorsement on these issue. When you look also the plain language of the endorsement, it requires that these contracts be enforced at the time of the injury. It creates an inherent ambiguity and trying to go back in time to recreate something that is impossible makes that at the very best, ambiguous on the issue of rising out of the independent claims against Bestway. These is not a case solely about negligent supervision, which is a core of the cases that have been cited, uh, by CSU. And, um, at the core of, uh, the argument that has been briefed. There are very distinct claims in here. The best way contract with Hall creates very specific duties with regard with regards to Bestway. Quote, builder will be solely responsible for and have control over construction means methods, techniques, sequences, and procedures, and for coordinating all portions of the work under this contract. Close, close quote, quote, builder will comply with all health and building ordinances that are applicable. These case in the complaint, racist independent claims for failure to inspect failure to remedy the dangerous condition and failure to warn of these dangerous conditions. All of these claims and all of these obligations under the contract, even sequentially, need to happen after Bob Woods has left, uh, the construction project. So he builds the staircase. Now, best way has an independent duty to inspect it. Now, best way has an independent duty to correct a dancer. But Aren't you Dan, or aren't we with respect dancing on the head of a pin here? Because ultimately it arose out of using nails, uh, instead of brackets, let's say, uh, to hold the unit together? I don't believe so, your Honor, because bot four best way omission in the ultimate act of inspecting the stairs, these accident wouldn't have happened. But four best way, failing to remedy this dangerous condition this fall would not happen. But for best way, not warning about this dangerous condition, this accident wouldn't have happened. But, but also you can extend that, but for the, uh, inappropriate, uh, fastening to the structure, this wouldn't have happened. And that's what the trial court relied on that, but for connection. Correct, your Honor. And unlike many of the cases which, uh, deal with arising out of in the negligent supervision, what you have is one act, whether it be the bus hitting the child, one act, the, the, the other defendants did not have to do anything additional. The sexual molestation case, you have one act in here, what the full contract required was the building of the stairs, and later after that, okay, we needed best way to follow with obligations. So, So that's how you distinguish Philbrook is the one act in philbrook, Correct? Yes. That this is not one act case and this court has long recognized that arising out of it has to be more than just a tenuous connection. Okay. If, for example, Bob Woods Construction would have also, um, been required to inspect, to, uh, comply with building codes, he was, from what we know, he was in charge of building the stairs. These additional obligations were solely of best way homes. The these duties did not belong at all to Bob Woods Construction. And I think these omissions bring these claims outside of all the other cases where the court has found that the claim are or, and the damages arose out of another act on the issue of prejudice. Even if this court finds that the endorsement is applicable to the work done in 2010 12, I'm sorry, and it is unambiguous, this court should still require CSU to prove prejudice. Well, notice is not an issue in this case, is it? Correct. So Why, why is prejudice even Pertinent on prejudice is pertinent, your Honor, because in the cases, New Hampshire has only required prejudice in issues of that late notice on occurrence space policies. The other cases, the reasoning behind not requiring prejudice, it's because there's an inherent, um, inability of the insurance company to investigate the claim. So, for example, in the cases of the fa on the case of failure to submit to the, um, examination under oath, that hampered their ability to actually investigate the claim, the cases relating to, uh, failure to obtain consent for a settlement, it affects the insurance company. The ability to, for example, look, are their assets to go after that is traditionally what we are dealing with. They actually affect the ability of the insurance company to investigate and protect their rights. In this case, CSU has never alleged that they are unable to investigate the claim because there were no written contracts in place. In fact, even in the CSUV Milone case heavily relied on excited, uh, by, uh, Cincinnati, that court with these identical, uh, endorsement required them to prove prejudice. Now that court found that there had been in fact prejudice. If this court rules that prejudice needs to be proven by CSU, it has to remand the case back to the trial court because the trial court's ruling has simply been, there is no need for CSU to prove prejudice. There has been no factual findings regarding whether or not there, uh, has been prejudice. There have been allegations and speculations, for example, that, uh, maybe Bob Woods Construction would have, uh, may I briefly finish this? My time is up, would have extended, uh, the required coverage past the two years. Thank you

Attorney, your Honor. Reserve two minutes. Attorney po Uh, may it please the court. Um, my name is Attorney Chris Poin, and I represent the Cincinnati Specialty Underwriter Company that I will refer to as, uh, CSU. Um, I, I wanna deal with attorney Russo's three arguments, um, here, uh, first, uh, claiming that the, uh, endorsement that we're talking about with somehow ambiguous, as I've indicated in, in the brief, um, the, the language here is, is very clear. The Superior Court and Judge Delker, when they were looking at the endorsement, found it to be, uh, and it was his words that they were actually abundantly clear and unambiguous in its requirements. This was a, a, a policy that, uh, CSU had issued, uh, with the effective policy dates of June 29th, 2016 through June 29th, 2017, with the accident occurring on May 19th, 2017, what the endorsement asked the policy holder to do it, it was actually a condition precedent to coverage. This is a commercial general liability policy, but this endorsement puts other restrictions on the policy holder. And essentially, if you are a contractor, which in this particular case best, uh, way homes was, it was requiring that contractor to, uh, go out and get a written contract, uh, with a subcontractor. And that contract needed to have certain provisions. One, uh, included indemnity provisions and a requirement that that subcontractor have insurance, which would include, uh, additional insured coverage. This was the first policy CSU issued to this insured. Uh, I, I believe, uh, your Honor, that this is the, is the second, second, uh, the, the particular policy, because this was an occurrence based form. Mm-Hmm. This was the policy that, that was actually triggered that, uh, you know, started the process going as to whether U had a defense The prior year was a CSU policy. I believe that. So the first time your company insures, does that mean that the insured has to go back eight years and recreate all those contracts? What it required was if, if, in, in this particular case, if it because it involved, uh, the project, um, of, um, uh, Mr. Hall, um, that if, if the, uh, claim for an injury which occurred on, on May 19th, 2017 involved the work of Bob Wood, which it did in this particular case, CSU, would look back to see, at the time that you engaged this contractor for this project, did you in fact follow these obligations on under the policy? Uh, and in this particular case, uh, in the lower court, everyone agreed that that was not done right. The point is It's too late. I'm sorry. It's right. Go ahead. It's too late. Well, well, at, at, Do they have to go back and say, oh, by the way, in reviewing your policy language, does the insured have to recognize that they better be sure those last I use eight years statute to repose all those subcontracts? Do they go back and get those people to make conforming agreements, or do they just have to recognize that anything they've done in the past without a conforming written agreement won't be covered? That's correct. How do they sort that out? Uh, well, it's, uh, uh, the, the requirement, your Honor, would be at the time that the claim was made, because it's in occurrence based policy, uh, you'd look to see, okay, you hired Bob Wood in this particular case, did you get a contract? Right. If you didn't get a written contract, then the coverage doesn't apply. Right. How does the normal insured understand that when they sign up for your coverage, that those prior contracts need to be in writing or there's no coverage under this policy? Well, I, I would submit as, as the lower court determined that the language was clear and un unambiguous. I mean, they certainly weren't hiding the ball, uh, on, on that requirement. Um, and in this particular case, because those conditions precedent coverage were not fulfilled, there was, there was, there was no coverage. And What kind of endorsement is there in the industry under a claims made policy or an occurrence policy for such coverage? I've never heard of one. Well, your Honor, I know for the traditional commercial general liability policies that are occurrence based, there, there are certain endorsements that provide additional insured, uh, uh, coverage. I mean, it's pretty standard in, in the construction industry that if, if the contractors or general contractors are entering into contracts, a lot of the a i a documents and, and contracts require subcontractor to provide insurance, you know, proof of insurance to a general contractor. And typically, uh, and I know that there was some debate here of the certificate of insurance, um, that essentially just says that in this particular case, you know, if, uh, if Bob Wood was, um, retained, if he had a certificate of insurance, all that shows is that he had insurance. It didn't show that he fulfilled what a lot of the endorsements show that if, if, if you, if there are additional insured endorsements, you need to go to your carrier and say, in Bob Woods' situation, I'm in a contract with Best Way Homes, and I'm, I'm gonna be working, um, on, uh, William Hall's house. He requires me to, uh, get, uh, an endorsement that that lists you, that lists best way homes as additional insured. And I, I need that, uh, secured. So that, that's pretty typical. We don't, we don't know if the policy in 2012 required that Policy The best way policy. We don't know that the language was the same in the 2012 policy that would've triggered best way going to call Lodge, whoever to get that, um, reciprocal coverage. We don't, your Honor, because that, because we're dealing with an occurrence based form. Right. It was this particular policy that would be triggered at, at the time, because it was a May 19th, 2017 accident. Right. And so, and, and the insured only has to go back so far given the statute of limitations. Correct. The statute of re reports. Correct. Which might actually apply here. We don't know that, but Right. It's not that burdensome for the insured. No, no. Um, so on, I I just wanna briefly touch on, on the issue of prejudice. Um, the, the plain language of the endorsement doesn't say anything about prejudice as a precondition. Um, that, that somehow, in order for that to be invoked or for, for CSU to say, we have a coverage defense here because the policy holder didn't fulfill any of these conditions, and therefore we're denying coverage that somehow CSU needs to prove prejudice. I mean, the, the plain language of the endorsement doesn't say anything about prejudice. So we would submit that that really doesn't apply here. Um, and the, uh, other argument that remains is just the claims that, uh, that Mr. Budget was making, uh, against Best Way homes. What we would submit that the Filbert case and the, uh, the cases that this court has dealt with as far as the language of arising out of, um, as the Superior Court, uh, ruled that the language in the endorsement, which states that this insurance will not apply to any loss claim or suit, or any liability or any damages arising out of operations or completed operations performed by you or by any independent contractor, we, we'd submit that the work that was done in this particular case, um, by, uh, wood, it was his defective deck, and the fact that he had poor construction, uh, that caused Mr. Blot to actually be, be injured. All of these claims, uh, arose out of those operations best way Homes didn't do any work, uh, by themselves. If they did do work or contribute to this project, then this exclusion, I would argue certainly would not apply. But here, the supervision or lack thereof isn't a separate claim. It, it, it, it is not, your Honor. And that really is the, the issue here. How, how broad does this court interpret the arising out of language? And, and I would submit that, uh, in those two instances that Attorney Russo actually, the two cases that she referenced, her argument of the Merrimack School District case versus national, uh, school Bus and also the Filbrick case, um, it pretty much dealt with how expansive is this arising out of issue and what the, what the court looked at on those two instances is that we considered that language to be pretty broad and comprehensive. And if we applied that standard to these facts, all of the damages arose out of this construction. What About the, the duty to inspect? Well, um, your Honor, that would also be related to, uh, the, the operations of Mr. Wood, because Best Way Homes didn't, do you know any of the work? So any claims, as the endorsement says, arising out of either any liability or damages claim, the damages claims here all resulted from the collapsed deck. So it would be our position that the, as far as this endorsement is that the negligent supervision or the negligent hiring claims would be captured because the damages arose exclusively due to the work of the subcontractor and the operations. Do you agree With the distinction that that Attorney Russo made about Brook? That it's a single instance? I, I, I don't, your Honor, I don't, I don't follow that, that logic because I don't believe that, um, that whether it's a single or multiple, I don't know that that makes any difference in the analysis. I think that the court has to look to see, uh, whether, um, you know, the operations at the time, I mean, what, what actually triggered the damages at, at issue. And, and I know the Merrimack School district case, it was the incident of the, of the bus accident that, that the National School bus had actually hit, hit the student and everything, the flow from that, there was a similar, um, uh, claim of a negligence supervision that was made by the parents of the student at the time. And, um, and National School Bus tried to put the stop sign up to school district and say, well, you know, yeah, we have an indemnity provision, but we're not gonna, we're not gonna indemnify you for that. 'cause they're claiming supervision of students at a bus stop. And, and this court ruled that? Well, no, I mean that the, this whole incident arose out of the bus operations and that the negligent supervision claim would be captured by that particular language. And, and similarly in the Philbrook case, um, in that unfortunate case involving the two families and, and sexual molestation, there was a, a, an insurance policy at play where Liberty Mutual at the time was saying, um, there's no coverage for any claims arising outta sexual molestation. And there was a similar claim by the plaintiffs that they were alleging negligent supervision and negligent entrustment. You used the term related to, in connection with the negligent supervision case. You said it was related to. Isn't that, uh, just the, uh, essential semantic discussion here, whether arising out of means, everything related to, or is it just, in this case, it's sufficient to be related to in order to arise out of? Um, I, I would submit, your Honor, that I'll just use this court's more broad definition, uh, uh, originating from growing out of, or flowing from is, is what this court used in, in the Merrimack School District case. So I, I would submit that, that that seems to be the expansive, um, definition. And I, I know that my time is Mr. Poland. I'd like to go back to the first issue that you talked about. I would agree with you without hesitation that this language is clear, at least with respect to contract entered into or work done between June of 16 and June of 17. But where I find it more difficult is to read this language and, and conclude that it applies to contracts entered into and work done in 2012. Given the tenses that are used, it's doesn't talk in the past tense. It talks in the present tense about, uh, obtained a formal written agreement. Your contractor have agreed, have named you. It doesn't say had named you or did name you. So it, I guess I, I just have trouble understanding how, uh, how someone would read this and conclude that it, uh, that it makes any sense to apply these to something that happened four years before. Your Honor, I, I guess I don't, I don't find it to be that troubling, only because the first paragraph says, in, in order for the coverage to apply, you had to one, obtain a formal written contract with all independent contractors and subcontractors enforced at the time of the injury or damage essentially, that you, you had to have had something that, that existed, that was signed and executed at, at, at the time that you hired. So in this instance, and best Way Homes hired Bob Wood, um, the, the, in, in order for this occurrence based form to be triggered, you, you would've had to have had a written contract with the, that particular subcontractor. And if you did not, then if a claim is presented later on, then there would be no coverage. I, I Doesn't, the last paragraph also address that when it, it discusses completed operations performed for you by any independent contractor. Yeah. Well, I mean, I, I took that language, your Honor, to me, that, that, I mean the, typically the CGL policies deal with completed operations. Once a contractor is finished, finished the project and leaves, if there's a risk that, that's what's contemplated by the CGL policy, if it's an ongoing operation, typically those are covered by performance bonds that the contractors get, you know, for injuries or accidents that occur while the product is on, is taking place at that time and not completed. Is the subcontractor insurance available for that length of time? It says enforce at the time of the injury, so four years later? Well, YY you have to have that reciprocal coverage Force. Uh, your Honor, I, I read that language to include that, that you would've had to have had a contract in place In the past Correct force At the time of the year. Well, it would, if, if you actually, at the time of the contract, if, if you would've secured the, the written contract, it would be present, it would be executed at the time that an injury, uh, occurred. I, I disagree it Old, but Right. I disagree with, with attorney and Whether they had actual coverage in place. They had contract to do it for a period of time expired. You aren't saying they have to actually have active coverage from the subcontractor in place. They just had to have satisfied that coverage obligation, indemnification obligation in the past, whether it's active now or Not. Yeah, a a according to, to the endorsement, there were three conditions. There had to be a written contract. That contract had to have had provisions, which would've included not only indemnity language, but an obligation of the subcontractor. In this instance, Bob Wood, you had, you had to have had insurance, and you should name Best Way Homes as additional insured at the time that Best Way Homes hired Bob Wood for the project. Right. Yeah. So you turn, I think I have a double warning light. That means I'm really off my time. Thank you. I will just very briefly address a couple of points made, um, by Attorney Poin. If the argument is the insured should have looked at this endorsement, just understood that he had no coverage for past claims, then he should have been made clear. Because when there is an exclusion that they, an insurance company seeks, relies on deny coverage, they need to make it clear to the insurer. When you look at these coverage, a current space, from the insured's point of view, they go, they pay a premium. So they are covered for claims that are made during that effective time. They look at that endorsement and say, okay, any work that we're doing in this period, we need to comply with all of these conditions precedent, and it looks forward any need to maintain that coverage for two years going forward. How is the insured put on notice that on an occurrence based policy, I am not going to be covered because I can't go back in time to get these contracts. They are selling a product. They have no intention on paying. And insurance is like a promise, you know, it, it's unlike any other business. You go buy a car, you give them money, they give you a car, you want a soda, you give the money, they give you a soda, you buy insurance, you give them money, they give you a promise. Well, my, my my question is what if the, um, what if the contractor, the subcontractor, did have insurance as indicated, the contractor, and it was an occurrence? Um, I'm not an, yeah, I was an occurrence based policy. There'd be no coverage under that. Correct. If the, if The subcontractor had an occurrence policy in place in whenever the building was, whenever the stairs were constructed, there'd be no coverage. Correct. Alright. Because it would've been past the time period when it would have been covered. Right. So the, the coverage would've have to have been claims made, the rather significant premium, I would think. Correct, because it would've had to cover five years later when the claim was presented. And this is precisely your honors, why New Hampshire does not favor condition precedents in insurance contracts. Thank you. Thank you very much. Counsel Cases submitted. Court sustain a.