No, a Purchase Order Is Not Like Insurance, State High Court Says in Reversal

Published on 1/23/2023
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Legal Books and Gavel
Source: Insurance Journal

A grocery chain is entitled to recoup costs it incurred defending an automatic door installer against negligence claims brought against them both, but it is not entitled to recover the costs it incurred defending itself under the terms the installer’s purchase order.

The Massachusetts Supreme Judicial Court has reversed a ruling by a lower court judge who ruled that Shaw’s Supermarkets was entitled to recover all costs under the duty to defend clause in Stanley Access Technologies’ purchase order. The high court found this lower court judge erred in importing the “in for one, in for all” rule, also known as the “complete defense” rule, from insurance into the purchase order context. This rule requires an insurer to defend all claims in a complaint brought against an insured if at least one claim falls within the scope of the insurer’s duty to defend.

The plaintiff alleged she was injured by an automatic door installed by Stanley at a Shaw’s market. The plaintiff argued that Stanley was negligent because it improperly installed the motion sensor on the automatic door and that Shaw’s was negligent because it failed to conduct “a daily safety check” and preventative maintenance on the door. After Stanley and Shaw’s separately defended the respective claims against them, a Superior Court jury returned a verdict in their favor.

Shaw sought recovery of all of the costs it incurred in the case, citing the terms of the Stanley purchase order for the door. Stanley’s purchase order included a clause saying it “indemnifies, defends and holds harmless” Shaw’s “from and against any and all claims, actions, fines, penalties, liabilities, damages, injuries, costs and expenses (including, without limitation, costs and expenses for investigation and litigation and reasonable attorneys’ fees) which arise out of or in connection with Supplier or any of its employees’, agents’, subcontractors’, or independent contractors’ breach of any covenants, warranties or representations made herein.”

Shaw’s argued that it was entitled to recover all of its expenses because the purchase order was “analogous” to an insurance agreement and obligated Stanley to defend the entire suit under the “in for one, in for all” rule.