Atlantic Casualty Insurance Company v. PASZKO MASONRY, INC. and ROBERT RYBALTOWSKI

In the
United States Court of Appeals
For the Seventh Circuit
Nos. 12-2405, 12-2485
ATLANTIC CASUALTY INSURANCE COMPANY,
Plaintiff-Appellee,
v.
PASZKO MASONRY, INC. and ROBERT RYBALTOWSKI,
Defendants,
and
CHICAGO MASONRY CONSTRUCTION, INC.;
PRINCE CONTRACTORS, INC.; and 4929 FOREST, LLC,
Defendants-Appellants.
Appeals from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 09 C 7452—Joan B. Gottschall, Judge.
ARGUED APRIL 12, 2013—DECIDED JUNE 7, 2013
Before BAUER, POSNER, and FLAUM, Circuit Judges.
POSNER, Circuit Judge. In this diversity suit governed by
Illinois law, an insurance company seeks a declaratory

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2 Nos. 12-2405, 12-2485
judgment that it has no duty to defend any of the
four defendant companies listed in the caption (Prince,
Paszko, Chicago Masonry, and Forest) against Robert
Rybaltowski’s personal injury suit against those compa-
nies. The district court granted summary judgment
in favor of Atlantic on the ground that Rybaltowski was
a contractor and that therefore the insurance policy ex-
cludes coverage of the companies’ liability to him.
Atlantic issued the insurance policy to only one of the
companies, Paszko (against which a default judgment
was entered both in the personal injury suit and in this
suit, which is why it isn’t an appellant). The three other
defendant companies, however, argued in the district
court that the policy covers them as well, as additional
insureds. See National Union Fire Ins. Co. v. American
Motorists Ins. Co., 707 F.3d 797, 800-01 (7th Cir. 2013)
(Illinois law). The district judge, agreeing with Atlantic
that Rybaltowski’s suit was within the exclusion, found
it unnecessary to decide whether the companies were
additional insureds. The parties do not mention the
issue in this court, but it may become critical if we remand.
The defendant companies worked on the construc-
tion of an apartment building at 4929 Forest Avenue in
Downers Grove, Illinois. The building was completed
in 2009; the accident giving rise to this suit occurred
during construction in 2007. Rybaltowski was an em-
ployee of a waterproofing company named Raincoat
Solutions, which had submitted a bid to Prince, the
general contractor, to perform caulking (sealing joints or
gaps). Raincoat would thus be a subcontractor of Prince

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Nos. 12-2405, 12-2485 3
if Prince accepted its bid. Prince accepted it—subject,
however, to approving in advance the color of the caulking
material that Raincoat would use and satisfying itself,
also in advance, that the caulker was competent to do
the work. So Raincoat’s boss brought Rybaltowski to
the project site to demonstrate how he would do the
caulking. Raincoat did not expect to be paid for the dem-
onstration, which involved caulking a few windows.
After the demonstration but before Rybaltowski left
the site, a beam supporting masonry equipment fell on
him, causing injuries for which he sought redress in the
tort suit. A half hour or so after the accident Raincoat
and Prince signed the subcontract.
The insurance policy that Atlantic had issued to Paszko
was a Commercial General Liability Insurance policy.
Atlantic’s version of the policy contained an exclusion,
captioned “Injury to Employees, Contractors and Em-
ployees of Contractors,” from coverage for “ ‘bodily
injury’ to any ‘contractor’ arising out of or in the course
of the rendering or performing services of any kind or
nature whatsoever by such ‘contractor’ for which any
insured may become liable in any capacity.” The exclu-
sion stated that “ ‘contractor’ shall include but is not
limited to any independent contractor or subcontractor
of any insured, any general contractor, any developer,
any property owner, any independent contractor or
subcontractor of any general contractor, any independent
contractor or subcontractor of any developer, any inde-
pendent contractor or subcontractor of any property
owner, and any and all persons working for and or pro-
viding services and or materials of any kind for these

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4 Nos. 12-2405, 12-2485
persons or entities mentioned herein.” So if when
Rybaltowski was injured his employer, Raincoat, either
was a subcontractor or was providing services of any
kind to a contractor (namely Prince), within the meaning
of the exclusion, Rybaltowski was a “contractor” as
well, because he was working for Raincoat. In-
cidentally, Raincoat, not having been joined as a de-
fendant in Rybaltowski’s tort suit, does not claim to be
an additional insured under Atlantic’s policy.
The exclusion is poorly drafted. The term “contractor”
is exemplified rather than clearly defined. The wording
of the exclusion leaves uncertain whether Raincoat was
a contractor simply because companies that engage in
construction are called “contractors,” or whether it did
not become a “contractor” until it signed a contract
with Prince or until it provided materials or services
other than the demonstration of caulking, or whether
the demonstration itself was a service provided by a
contractor. The complaint in Rybaltowski’s tort suit
refers to Raincoat as a “contractor,” but this has no sig-
nificance for the interpretation of Atlantic’s policy,
to which Rybaltowski was a stranger. See Pekin Ins. Co.
v. Wilson, 930 N.E.2d 1011, 1019 (Ill. 2010). The facts
alleged in a complaint against an insured, charging a
tort or other wrong, are critical to determining the
insurer’s duty to defend, id. at 1017, but the tort plaintiff
has no authority to interpret the insurance contract.
That’s a matter for the court. Id. at 1016.
If Raincoat was “providing services . . . of any kind” to
Prince (we assume that “of any kind” modifies services

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Nos. 12-2405, 12-2485 5
as well as materials, a plausible reading to which
neither party takes exception) when the accident
occurred, Rybaltowski, who “work[ed]” for and provided
services to Raincoat, was also a “contractor,” and so the
accident is not covered. Although the policy does not
define the critical term “providing services . . . of any
kind,” one possible interpretation would involve com-
paring Raincoat to a theatrical employment agency.
Suppose the producer of a play asks an agency to send
20 actors to him to audition for five parts. The producer
wants that many auditioners in order to increase the
likelihood of being able to hire five outstanding actors.
There is a sense in which all 20, including the rejects, are
“providing services” to the producer; they are facilitating
his picking the best by providing a range of possibilities.
Rybaltowski was auditioning by doing a free demonstra-
tion of caulking.
The intended meaning of “providing services” could be
narrower, however; and courts interpret an ambiguous
term in an insurance contract in favor of the insured.
The reason is that “insureds want insurance against the
vagaries of interpretation,” Great West Casualty Co. v.
Mayorga, 342 F.3d 816, 818 (7th Cir. 2003); see also
Stone Container Corp. v. Hartford Steam Boiler Inspection &
Ins. Co., 165 F.3d 1157, 1161-62 (7th Cir. 1999), as well as
against the risks clearly stated in the policy—especially
since an insured has no realistic possibility of negotiating
clarification of ambiguous policy language. Outboard
Marine Corp. v. Liberty Mutual Ins. Co., 607 N.E.2d 1204,
1207 (Ill. 1992); see also Payless Shoesource, Inc. v. Travelers

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6 Nos. 12-2405, 12-2485
Cos., Inc., 585 F.3d 1366, 1372-73 (10th Cir. 2009); Bosecker
v. Westfield Ins. Co., 724 N.E.2d 241, 244 (Ind. 2000).
Ignoring the other defendant companies, to simplify
analysis, we ask first whether the exclusion of coverage
for injuries to “contractors” as understood by Atlantic
to exclude coverage for liability to Rybaltowski would
so limit Prince’s coverage (assuming Prince is covered as
an additional insured) as to make it implausible that
anyone would want such a policy. That would be a
reason to doubt Atlantic’s interpretation.
Not that the interpretation would make the coverage
provided by Atlantic’s policy (whether to Paszko, the
original purchaser of the policy, or to Prince or other
contractors or subcontractors who claim to be covered
by it) illusory. See American Country Ins. Co. v. Cline, 722
N.E.2d 755, 761-62 (Ill. App. 1999); American Country Ins.
Co. v. Kraemer Bros., Inc., 699 N.E.2d 1056, 1062 (Ill. App.
1998). The exclusion would still be inapplicable to a
passerby, deliveryman, building inspector, police officer,
garbage collector, or other person who might be injured
at a construction site without being involved in the con-
struction at the site. True, the vast majority of persons
at such a site—and the persons most likely to be
injured there—are construction workers, employed by
contractors or subcontractors and thus “contractors”
themselves within the meaning of the exclusion. But
Prince did not need Atlantic’s policy in order to protect
itself against liability to those workers. It had bought
its own Commercial General Liability policy, and its
policy contains no contractor exclusion. Probably Prince

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Nos. 12-2405, 12-2485 7
seeks coverage under Atlantic’s policy rather than under
its own only because its primary insurer might raise
Prince’s premiums should Prince require that insurer
to defend or indemnify it. See National Union Fire Ins. Co.
v. American Motorists Ins. Co., supra, 707 F.3d at 802.
Prince could have obtained still more coverage by
requiring each of its subcontractors to make it an addi-
tional insured under a policy that insured the subcon-
tractor against liability to the subcontractor’s employees.
Because workers’ compensation law protects a subcontrac-
tor from a tort suit by his own employees, though not the
general contractor from a tort suit by those employees,
the general contractor would be requiring the subcon-
tractor to carry a form of insurance—insurance against
tort liability to the subcontractor’s own employees—that
the subcontractor would not need or want. Still, such
insurance often is required by construction contractors.
4 Philip L. Bruner and Patrick J. O’Connor, Jr., Bruner and
O’Connor on Construction Law § 11:44, p. 67 (2012 Supp.);
see, e.g., National Fire Ins. v. Walsh Construction Co., 909
N.E.2d 285, 287-88 (Ill. App. 2009). Or Prince could have
required indemnification by its subcontractors or pre-
scribed specific safety precautions to reduce the liability
risk from injuries to its subcontractors’ employees, and
might have needed additional coverage only for injuries
to passersby or other visitors not engaged in construction.
These approaches would not have worked in the
present case, because Prince had no contract with
Raincoat in which to insert an “additional insured” clause
or a requirement of indemnification or other provisions

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8 Nos. 12-2405, 12-2485
for Prince’s own protection. Prince may have been an
additional insured under Paszko’s policy, and Paszko
was responsible for the toppling of the masonry equip-
ment on the unfortunate Rybaltowski. But that’s the
policy that contains the contractor exclusion.
We don’t understand the attraction of an insurance
policy such as Atlantic’s that contains such a broad exclu-
sion; a Google search suggests that the exclusion is rare,
and maybe it is confined to policies issued by Atlantic.
Still, broad as it is, the exclusion does not render
coverage illusory. Nor can we say that it can’t be as
broad as Atlantic believes because then no one would
buy the policy. But we still must decide how broad it is.
And resolving ambiguity as we must against the insurer,
we conclude that it is not broad enough to embrace
the accident to Rybaltowski.
The district court’s contrary ruling was terse: “The
language of the Exclusion is incredibly broad: ‘providing
materials and or services of any kind.’ Raincoat Solu-
tions’ bid and mockup work fell within this expansive
language. The court must conclude that Raincoat
Solutions qualifies as a ‘contractor’ as set out in the
policy.” We don’t know what the judge meant by “bid
and mockup work.” Submitting a bid is like applying
for a job, and a job application is not usually thought a
service to the prospective employer, though it is a provi-
sion of information and has value to the recipient, at
least if the applicant for the job is worth consideration.
Maybe in describing the bid as “work” or as a service the
judge was picking up a suggestion by Atlantic that

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Nos. 12-2405, 12-2485 9
Rybaltowski’s caulking was not just a demonstra-
tion—that if satisfactory it would remain on the windows
he’d caulked. For the demonstration did not involve
caulking a mock-up, although that is the word the judge
used; it involved caulking actual windows of the build-
ing. But as far as appears, the caulking could easily have
been removed, and so was tentative until the contract was
signed, which happened after the accident.
The demonstration caulking could be thought the pro-
vision of a service, either because the caulking remained
on the windows (as it probably did, since Prince gave
the caulking subcontract to Raincoat, implying that
Rybaltowski’s work was satisfactory), or because the
demonstration led to the signing of the contract and thus
to the subsequent provision by Raincoat of what unques-
tionably were construction services. Raincoat’s internal
calculation of the price to include in its bid could also,
though more dubiously, be thought the provision of a
service, because it too led to the bid that led to the demon-
stration caulking and after the subcontract was signed
to the contractual caulking.
Also plausible, however, is the alternative interpreta-
tion that services are not provided until the contractor
(with or without a signed contract, because a provider of
services is a “contractor” within the meaning of the
exclusion regardless of whether he has a contract) begins
to do compensated work on the project. It is as plausible
as the interpretation adopted by the district judge or the
one actually preferred by Atlantic—that a “contractor” is
anyone in the construction business, whether or not he

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10 Nos. 12-2405, 12-2485
is rendering a construction service when the injury
occurs. It does seem a little odd to treat a construction
worker as if he were a passerby just because he was
demonstrating a construction service rather than perform-
ing a contracted-for service. But if this is a loophole in
the wordy exclusion, Atlantic could have plugged it
by excluding any and all construction workers from
coverage, rather than contractors. The alternative inter-
pretation—that Rybaltowski was not a contractor when
he was injured—thus rules the case. And so Atlantic
has a duty to defend the appellants if they are deter-
mined to be additional insureds.
The judgment is therefore reversed and the case re-
manded for further proceedings consistent with this
opinion.
REVERSED AND REMANDED.
6-7-13

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