In its recent decision in Preferred Contrs. Ins. Co. Risk Retention Group v. Oyoque Masonry, Inc., 2013 U.S. Dist. LEXIS 105386 (S.D. Tex. July 26, 2013), the United States District Court for the Southern District of Texas had occasion to consider the application of an “action over” exclusion to an underlying personal injury claim.

PCIC insured Oyoque Masonry, Inc. (“OMI”) under a general liability policy.  OMI was hired to install a concrete wall at a residential subdivision.  The wall had been fabricated by a company related to OMI, and delivered to the jobsite by a trucking business – Gulf Coast – a company also related to OMI.  Gulf Coast hired an independent contractor, Calvin Finnels, to truck the wall from the fabrication facility to OMI’s worksite.  After the wall was lifted by forklift from the delivery truck, Mr. Finnels remained on the site to assist an OMI with installation of the wall.  Mr. Finnels was injured while performing this work, and he later brought suit against Gulf Coast and OMI.

The PCIC policy contained at “action over” exclusion stating:

This Policy does not apply to any claim(s) for "bodily injury", arising out of claim(s), or suit(s) by general contractors, subcontractors, independent contractors, their employees or volunteer workers, or any persons or companies who are affiliated with such persons or entities who provide work or products on job sites where the insured provides work, products or services as a contractor or subcontractor. This exclusion applies whether or not the persons or entities making such claims are hired, or retained by the insured on the job site where the claim(s) or suit(s) arise from.

PCIC argued on motion for summary judgment that the action over exclusion barred coverage for the Finnels suit because Mr. Finnels was an independent contractor – a fact that he expressly pled in his complaint.  OMI, on the other hand, argued against the application of the exclusion on several grounds, most pertinently that the exclusion did not apply because Gulf Coast was not a subcontractor of OMI. 

The court rejected OMI’s attempt to limit the scope of the exclusion, observing that by its express terms, the exclusion applies to any suit brought by a general contractor, subcontractor or independent contractor.  The court held that because Mr. Finnels alleged he was an independent contractor, the exclusion had clear application.  In so holding, the court reasoned that Gulf Coast’s “subcontractor status is relevant only if Finnels was one of its "employees", "volunteer workers", or "affiliated with" it, as provided in the Action Over exclusion.”  The court also rejected OMI’s contention that the exclusion applied only to independent contractors hired by OMI (i.e., the named insured) but not to independent contractors hired by other parties such as Gulf Coast.  The second sentence of the exclusion, reasoned the court, made clear that the identity of the employer is irrelevant.  As such, explained the court “because Finnels was an independent contractor under the Policy, the precise nature of the contractual relationship (if any) between Gulf Coast and OMI is immaterial.”