United States Liability Insurance Company v. Benchmark Construction Services, Inc.

Homeowners hired general-contractor Benchmark Construction Services (Benchmark) (defendant) to renovate their home. The homeowners separately hired architect Thomas Huth. Huth hired Sara Egan to decorate an interior wall. While Egan’s employee Meghan Bailey painted the wall, she fell from a ladder perched on scaffolding. Bailey brought a state-court personal-injury lawsuit against Benchmark alleging it negligently set up the ladder and scaffolding. Benchmark had general liability insurance through United States Liability Insurance Company (USLIC) (plaintiff), so Benchmark asked USLIC to defend it in the lawsuit. USLIC stated that Bailey’s claims were excluded from coverage, so it had no duty to defend Benchmark. An endorsement altered the scope of the coverage laid out in the policy. Although the policy generally covered bodily injury, endorsement L-500 excluded bodily injury to any employee of any contractor or subcontractor arising out of rendering services of any kind for which any insured may become liable in any capacity. USLIC sought a declaratory judgment that the policy excluded Bailey’s claims and that it did not have to defend Benchmark. Benchmark counterclaimed, seeking a declaratory judgment that Bailey’s claims were covered and that USLIC had a duty to defend Benchmark. Following cross-motions for summary judgment, the district court held in favor of USLIC. Benchmark appealed.