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NES Equipment Services Corp. v. Acadia Insurance Co.

Superior Court of Massachusetts, Middlesex

September 28, 2016

NES Equipment Services Corp. dba NES Rentals
v.
Acadia Insurance Company et al No. 135257

          Filed September 30, 2016

          MEMORANDUM OF DECISION AND ORDER

          DENNIS J. CURRAN, Associate Justice.

         Introduction

         This case presents an insurance coverage dispute which, reduced to its essence, triggers the question of the allocation of risk of loss in a construction site accident caused by defective rental equipment.

         NES, an equipment supply company, leased a " Skylift" scissor lift and boom to Shepardville Construction Company for a construction project in Connecticut. NES required that, for all rentals of equipment, Shepardville provide insurance for NES and name it as an additional insured on a commercial general liability policy that Acadia Insurance Company had issued to Shepardville and its parent company.[1] In November 2011, two construction workers were injured when the scissor lift that NES leased to Shepardville unexpectedly collapsed due to a defective bolt.[2] The workers sued NES and others in Connecticut, alleging the lift was defective and had not been properly inspected, tested, and put into operations by trained users.[3] The complaint did not name Shepardville as a defendant and alleged no fault on its part. Acadia refused to defend NES, disclaiming coverage of damages related to Shepardville's use of the lift. Ultimately, NES settled the underlying suit with the injured workers for $900, 000.

         NES seeks summary judgment in this breach of contract and declaratory judgment action, claiming that Acadia had a duty under the policy to defend or indemnify NES for the claims of damages against it in the underlying action. Acadia opposes this effort and instead, has filed a cross motion for summary judgment, arguing that NES did not qualify as an additional insured under the policy because Shepardville was not a defendant in the underlying action and was not at " fault." It also claims that there was no written contract or agreement between NES and Shepardville to provide insurance coverage.

         For the following reasons, NES's motion for summary judgment is ALLOWED in part and DENIED in part, and Acadia's motion is DENIED.

         I. BACKGROUND

         A. NES's Dealings with Shepardville

         NES began renting equipment to Shepardville and/or its affiliate, Shawnlee Construction Company in Massachusetts, in 2006.[4] As with most customers, NES commenced this relationship with an agreement to rent equipment at its established prices and subject to specific terms and conditions. In July 2006, Shepardville signed a " Credit Application, " which provided, in relevant part:

Insurance : Customer shall be responsible for carrying commercial general liability including a waiver of subrogation, with limits not less than $1, 000, 000 [e]ach Occurrence and $2, 000, 000 in the aggregate including products and completed operations as well as property insurance covering the equipment rented. Such coverage shall name the Company as an additional insured, covering all losses and damages. Such coverage shall be endorsed to provide coverage on a direct primary basis over other valid and collectible insurance. Customer will provide Company with certificates of insurance evidencing the current coverage in types and amounts and from companies satisfactory to Company. These insurance requirements are intended to cover and indemnify obligations lessors may have to the Company under this contract. Customer hereby assigns to Company all proceeds from such insurance, conveys an equitable lien in said proceeds, and directs any insurer directly to pay such proceeds to Company and authorizes Company to endorse any drafts for checks for such proceeds.

         The specific indemnity terms were further spelled out in a course of dealings between the parties, such as written agreements and delivery manifests for multiple rentals over the years. On a standard rental, Shepardville would receive both a rental agreement, which it would sign, and a delivery manifest, with NES's terms and conditions, including indemnity, printed on the reverse side of the document. The document stated, in relevant part:

3. Customer Obligations
c. Insurance. Customer will provide the company with certificate of insurance evidencing the following forms of coverage with insurance companies satisfactory to the Company.
i). Customer is responsible for carrying commercial general liability insurance, with limits not less than $1, 000, 000 [e]ach Occurrence and $2, 000, 000 in the aggregate for bodily injury and third party property damage including products and completed operations. Such coverage shall include a waiver of subrogation and name the Company as an additional insured. Such coverage shall be endorsed to provide coverage on a primary basis over other insurance.

19. Sale of Equipment

Buyer shall fully indemnify and hold and save Seller harmless against, any and all claims, losses, damages, liabilities, costs or expenses of any kind incurred by Seller for any reason, including as a result of property damage or bodily injures or death, relating to, arising out of, sustained or resulting from, the ownership, operation, sale, use, testing, or handling the Equipment.

20. Indemnity; Assumption of Risk

Customer agrees to fully indemnify and hold harmless the Company . . . for any and all bodily injury, death, destruction, property damage, or any other cost, damages or loss, regardless of whether such injury . . . is caused in whole or in part by negligence, which in whole or in part, arise out of, result from, or relate to the use, operation, condition, or presence of the Equipment by Customer or condition or presence of the Equipment with Customer . . . Customer, on behalf of itself and all Persons at Risk, accepts and fully assumes any and all risks and the possibility of possible injury, death, disability, property damage or loss resulting from the operation of the Equipment and hereby agrees to fully indemnify and hold harmless the Company . . .

23. Electronic Signature and Delivery of Agreements

Customer acknowledges and agrees that this Agreement, Rental Agreements, Condition and Delivery Reports and other agreements between the Customer and Company may be executed and delivered by means of electronic signatures, electronic delivery . . . Customer agrees that it shall not assert as a defense in any action between Customer and Company that any such electronic action or document is not valid as not representing the intent of the parties.

         Upon delivery of the lift at issue, Shepardville received and signed the rental agreement electronically, on a portable hand-held unit.[5] The signature signified Shepardville's agreement to accept the equipment, its rental contract terms and conditions, and further acknowledged delivery of the equipment. It also received the delivery manifest.[6]

         With each rental, NES verified that the insurance coverage was in place by requiring the customer to produce certificates of insurance.[7] Just as on many prior occasions, Roblin Insurance Company verified coverage and issued a certificate of insurance to NES dated November 23, 2011 for ...


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