314 Conn. 161
Conn.2014Background
- In 2000 the Drowns sued Associated Women’s Health Specialists (Health Specialists) and two physicians for malpractice; Health Specialists was vicariously liable but not sued for direct negligence.
- Health Specialists was insured by Medical Inter-Insurance Exchange (Exchange); Exchange defended the suit for ~6 years without reserving rights but failed to attend court-ordered mediations in 2006.
- Exchange’s failure to appear led the trial court to enter default on liability against Health Specialists; Health Specialists and the Drowns then settled for the $2 million policy limit, with Health Specialists assigning its rights against Exchange to the Drowns.
- Exchange became insolvent in 2008; the Connecticut Insurance Guaranty Association (association) assumed responsibility for covered claims under the Connecticut guaranty statute and denied coverage, invoking policy exclusion (i).
- The trial court awarded summary judgment for the defendants, holding Exchange’s pre-insolvency breach estopped the association and that the policy covered the vicarious claims; the Appellate Court reversed, finding exclusion (i) unambiguous and that the association was not estopped.
- The Connecticut Supreme Court affirmed the Appellate Court: the association may challenge whether a claim is a statutory “covered claim,” and exclusion (i) unambiguously bars coverage for vicarious liability arising solely from an individual physician’s malpractice.
Issues
| Issue | Plaintiff's Argument (Association) | Defendant's Argument (Drowns/Health Specialists) | Held |
|---|---|---|---|
| 1. Whether Exchange’s pre-insolvency breach of the duty to defend estops the association from denying coverage | Association: It may contest coverage because it is liable only for statutory “covered claims” that arise out of the insurer’s policy; pre-insolvency misconduct doesn’t expand that scope | Defs: Association stands in Exchange’s shoes and should be estopped from denying coverage because Exchange defended without reservation and its breach caused the default and settlement | Held: No estoppel — association’s liability is limited to “covered claims” under §38a-838(5); pre-insolvency misconduct does not convert an uncovered liability into a covered claim (Potvin controlling) |
| 2. Whether policy exclusion (i) excludes vicarious liability for malpractice by an individual physician not listed on the declarations page | Association: Exclusion (i) unambiguously excludes vicarious liability that arises solely from acts/omissions of individual physicians or nurse anesthetists, regardless of declarations page listing | Defs: Exclusion ambiguous; it should be read to apply only to listed paramedicals and not to individual physicians or it renders corporate coverage illusory; contra proferentem favors coverage | Held: Exclusion (i) is plain and unambiguous — qualifying phrase applies only to paramedicals; exclusion bars coverage for vicarious liability arising solely from an individual physician’s malpractice; policy is not illusory when read with condition (g) |
Key Cases Cited
- Potvin v. Lincoln Serv. & Equip. Co., 298 Conn. 620 (interpreting "covered claim" limitation and holding association not liable for sanctions outside policy coverage)
- Connecticut Ins. Guaranty Assn. v. Fontaine, 278 Conn. 779 (rule that contra proferentem applies to guaranty association disputes over policy interpretation)
- Esposito v. Simkins Indus., Inc., 286 Conn. 319 (describing limited, statutory nature of guaranty association liability)
- Hunnihan v. Mattatuck Mfg. Co., 243 Conn. 438 (background on guaranty association purpose and limits)
- Johnson v. Connecticut Ins. Guaranty Assn., 302 Conn. 639 (construing identical exclusion language as ambiguous in context of paramedical coverage)