“Any Property Owner” Could Be Almost Anyone in the World

Words are tricky things, as contracts remind us every day. When I teach contract ambiguity, a lot of the cases seem to revolve around insurance contracts, with the doctrine of contra proferentem coming into play. A recent case out of Michigan, Atlantic Casualty Insurance Co. v. Gustfason, No. 325739, provides another example. 

Gustafson operated a landscaping business. While one of his employees was clearing brush on a homeowner’s property, the homeowner was watching off to the side and was struck with debris and injured. The homeowner sued Gustafson, and Gustafson contacted his insurance agent. Atlantic Casualty reported that the loss to the homeowner was excluded from the insurance policy, so Gustafson sued Atlantic Casualty, contending that the loss was covered by the policy. 

The relevant clause in the policy stated that it didn’t apply to bodily injury to any “contractor,” and then defined “contractor” using a long string of examples: including but 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 general developer, any independent contractor or subcontractor of any property owner and any and all persons providing services or materials.

The emphasis there is added, because Atlantic Casualty sought to exclude the homeowner’s injuries by asserting that he was “any property owner.”

The court pointed out that the phrase “any property owner” was extraordinarily broad and would include almost everyone in the world “except perhaps for a newborn baby,” because most people can be found to at least own the clothes they’re wearing, which would make that person a property owner. Such a broad reading, excluding virtually the entire planet, would render the policy illusory. 

Atlantic Casualty apparently acknowledged that the phrase was broad as written and instead argued that what it really meant was “the owner of the real property upon which the insured is performing work.” The court, however, found that it made sense, given the other items in the list, to interpret “any property owner” to mean “those who are being compensated, or who otherwise have a commercial interest, for being on the job site.” In that case, “any property owner” would cover not the real property owners whose land was being worked on but owners of any equipment being used (possibly rented) to work on the real property. 

Because “any property owner” is an ambiguous term and the court found itself with two reasonable interpretations, it employed contra proferentem and interpreted the contract against Atlantic Casualty, who had drafted the contract. Therefore, it stated that “any property owner” did not include those “without a commercial interest in the project,” and therefore did not include the residential homeowners, which meant the policy covered the homeowner. 

While I generally like the court’s reasoning and interpretation in this case, I do find it slightly odd to decide that a property owner doesn’t have a commercial interest in the project being performed on his own land. Presumably he is paying for the work and therefore does have a commercial interest in making sure that the work is being done properly. Even if he’s not paying for it, the improvement to his land will likely increase its value, also giving him a commercial interest in what’s happening. I think the better phrasing is to interpret it as someone who is being compensated for their presence on the job site.