Appeals Court holds that policy endorsement does not have to be grammatically correct to be effective; underwriters dance in streets

Michael Daigle was hired to put a new roof on a building in Maine, and to seal two windows. Lavigne visited the job site and, looking for Daigle, climbed up on scaffolding that Daigle's crew used to access the roof. When a portion of the scaffolding snapped, Lavigne fell and broke his neck.

Daigle had a general liability policy with Penn-America. Penn-America denied coverage for Lavigne's claim, and a declaratory judgment lawsuit followed. At issue whether an endorsement effectively precluded coverage for claims arising from roofing.

The endorsement contained preprinted language at the top of the form offering three introductory phrases, each with a box for a checkmark. The phrase that was checked read, "In consideration of the premium charged, it is understood and agreed that . . ."

The form then listed nineteen items, such as "premium" and "coverage," none of which were checked in their corresponding boxes. Below that were four alternative actions, such as "is corrected to read as listed below" and "is amended and changed to read as listed below." None of those boxes were checked.

Finally, typed in bold was the phrase "EXCLUDING ANY AND ALL CLAIMS ARISING FROM ROOFING."

Below that phrase were spaces for a date and initial, both of which were blank.

In Penn-Am. Ins. Co. v. Lavigne, __ F.3d __, 2010 WL 3307367 (1st Cir.), the United States Court of Appeals for the First Circuit held that under the law of Maine the endorsement effectively excluded coverage for claims arising from roofing.

The checked and added phrases read in their entirety, "In consideration for the premium charged, it is understood and agreed that EXCLUDING ANY AND ALL CLAIMS ARISING FROM ROOFING[.]" The court noted that that language is not a complete sentence nor a comprehensible fragment of one.

The court held, however, that the test for interpretation of an insurance policy is not whether the policy is grammatically correct, but whether it is reasonably susceptible of different interpretations. The court held that disregarding the endorsement, as urged by Lavigne, would not "construe the endorsement strictly against the insurer, but rather [] render it meaningless." It held that an ordinary person in the shoes of the insured would understand that the endorsement excluded coverage for claims arising from roofing.