Court Finds Rental Contract Shifted Liability for Lift Accident to Renter

United Rentals’ insurance carrier is not liable for damages caused by an accident involving one of its electric boom lifts because the small business that rented the equipment signed a contract that, in effect, placed all of the liability on its own insurance carrier, a federal appellate court ruled.

The ruling Friday by the 1st Circuit Court of Appeals marks a thorough defeat for Scottsdale Insurance Co. The carrier had refused to pay even for the cost of defending a lawsuit filed by man who was struck and injured by the boom lift, which had a malfunctioning backup beeper. Scottsdale contended that United Rentals’ insurer, Ace American Insurance Co., was solely liable.

The Scottsdale policy barred any payout if other insurance coverage was in place. But the 1st Circuit found that United didn’t really have any insurance for the accident and the rental contract promised the renter would provide coverage by naming United as an additional insured on its own policy.

“Because United Rentals has no ‘other valid and collectible insurance,’ the Scottsdale Policy affords coverage to United Rentals here, and no further analysis of each policy’s “other insurance” provision is needed,” the court said.

The dispute between the carriers stems from a June 22, 2007 accident during a trade show at the Rhode Island Convention Center in Providence. Gomes Services Inc., a window washing and pressure cleaning business based in Medford, Massachusetts, had rented the boom lift from a United facility. The “travel alarm” on the lift was allegedly not operating.

The boom struck and injured Ayotte. He and his wife filed a lawsuit against United, Gomes and others. United asked Gomes and Scottsdale to defend United against the suit. Scottsdale refused, arguing that Gomes had not agreed to add United as an additional insured; the rental contract required only that Gomes show proof of coverage.

U.S. District Court Judge Douglas P. Woodlock ruled in 2015 that United was an “additional insured” under the Scottsdale policy, but did not decide whether Scottsdale or Ace was the primary insurer.

Afterward, the insurers agreed to settle the lawsuit with Ayotte. Scottsdale agreed to reimburse United $510,000 for its costs.

Litigation between the two insurers continued, however, with each carrier saying the other owed coverage. In 2018, Woodlock ruled that the Scottsdale policy was excess to the Ace policy, meaning Ace had to pay out first.

Both sides appealed.

The 1st Circuit said the case required it to decide if “self-insurance” is the same thing as “insurance.” The panel said the court have been split on that question, but most have decided it is not.

United Rentals has purchased two policies from Ace. One was an “ultimate net loss” policy that was merely a fronting agreement. It provided $2 million in coverage with a $2 million deductible. Ace agreed to pay claims against United, but the contract required United to pay the carrier back.

The second commercial general liability policy offered $3 million in coverage, but only after United paid $2 million in “self-insured retention.”

“For present purposes and in the context of our analysis, ‘insurance’ is about risk shifting and ‘self-insurance’ — a perfectly good phrase in other contexts —is the opposite of ‘insurance,'” the appellate panel said.

The court vacated the district court’s ruling that Ace was the primary insurer for the Ayotte lawsuit.