## Facts

- Union Paving Company was the general contractor on a Pennsylvania road reconstruction project and subcontracted excavation work to Thomas and other subcontractors.
- The subcontract contained a broad, no-fault indemnity provision requiring the subcontractors to indemnify Union Paving for losses arising out of the subcontract work, even if the loss was not caused by the subcontractors’ negligence.
- During the subcontract work, a motorist drove into an excavation associated with the project and was injured.
- The motorist sued Union Paving and recovered a judgment based on Union Paving’s supervision of the work and its public duty connected with the highway project.
- After paying the motorist’s judgment, Union Paving sued the subcontractors seeking reimbursement under the subcontract’s indemnity clause.
- The subcontractors were insured under a liability policy issued by United States Casualty Company.
- The policy stated that it did not apply to liability the insured assumed under a contract or agreement unless that contract was listed or specifically covered by endorsement.
- Although the policy included an endorsement specifically covering Thomas’s work for Union Paving on a different project (a sewage disposal plant), no endorsement listed or covered the road project subcontract at issue.
- The subcontractors filed a third-party complaint against United States Casualty Company, asserting the insurer was responsible to defend and indemnify them for the general contractor’s indemnity claim and alleging the insurer knew of the accident but did not intervene or participate in the earlier tort suit.
- The federal district court dismissed the third-party complaint for failure to state a claim; the subcontractors appealed.

## Issues

1. Whether a liability policy that excludes coverage for liability assumed under an unlisted contract covers a subcontractor’s duty to indemnify a general contractor under a broad, no-fault indemnity clause.
2. Whether a general contractor’s suit seeking recovery under a subcontract indemnity provision can be treated as a negligence claim for purposes of triggering liability coverage.
3. Whether the insurer’s alleged knowledge of the accident and failure to intervene, defend, or settle in the earlier tort action can create coverage or a duty to defend in the later indemnity action.

## Decision

- The Third Circuit affirmed the dismissal of the third-party complaint.
- The court held the subcontractors’ asserted exposure to Union Paving arose from a contractual indemnity promise, and the policy’s contractual-liability exclusion barred coverage because the subcontract was not listed or endorsed.
- The court rejected the argument that the indemnity action should be treated as the same as a direct negligence action against the subcontractors for coverage purposes.
- The court held allegations that the insurer knew of the accident and did not participate in the prior tort litigation did not supply coverage or state a claim where the policy did not insure the contractual obligation being sued upon.

## Legal Principles

- A liability policy exclusion for “liability assumed by the insured under any contract or agreement” bars coverage when the insured’s obligation exists because of a hold-harmless or indemnity clause, unless the policy schedules that contract or otherwise provides specific coverage.
- A claim pleaded and pursued as contractual indemnity is treated as a contract claim for coverage analysis, even if facts about negligence may be discussed in the background or used to measure loss.
- An endorsement covering one identified contract or project does not extend coverage to a different, unlisted contract or project.
- Insurer duties to defend or indemnify are determined by the policy’s grant of coverage and exclusions; allegations of notice or nonparticipation in related litigation do not expand coverage beyond the policy.

## Conclusion

Because Union Paving’s claim against the subcontractors sought recovery based on a broad contractual indemnity provision, and the subcontract was not listed or endorsed under a policy that excluded unlisted contractually assumed liability, the Third Circuit held the insurer owed no coverage and affirmed dismissal of the third-party complaint.


Union Paving Co. to Use of United States Casualty Co. v. Thomas, 186 F.2d 172 (1951)