Steven Veno et al. v. Peerless Insurance Company et al. (2011)

MEMORANDUM OF DECISION

I

PROCEDURAL BACKGROUND

The parties in this action are the plaintiffs, Steven and Sara Veno and the defendants, Peerless Insurance Company and Liberty Mutual Group, Inc. The plaintiffs have asserted a breach of contract claim against the defendants relating to their failure to provide the plaintiffs with a defense and/or coverage in connection with the R.S. v. Ridgefield Board of Education et al, United States District Court, District of Connecticut, Docket No. 3:06 CV 1783(MRK) action (the R.S. action ).   The plaintiffs claim that due to the defendants' failure to defend, they were forced to incur significant legal costs to defend the claims made.

On May 13, 2011, the defendants moved for summary judgment that no duty was owed to defend and/or provide the plaintiffs coverage on the grounds that the allegations of the complaint fell squarely within certain policy exclusions.   A memorandum in opposition to the motion for summary judgment was filed by the plaintiff, along with a reply brief by the defendants.   On September 6, 2011, oral argument was heard on the defendants' motion for summary judgment.

II

FACTUAL BACKGROUND

The plaintiffs were named insureds in a Homeowners and Umbrella insurance policy, policy number PLP4356363 (Policy), issued by defendant Peerless effective April 1, 2004 through April 1, 2005.   Their minor son B.V., lived in their household at all times relevant to this matter and was, therefore, also considered an insured pursuant to the definition of “insured” in the policy.

In September 2004, five special education students were transported from their homes in Ridgefield, Connecticut by a van to two different special education programs.   The five students included B.V. and R.S., the plaintiff student in the underlying R.S. action.   According to the complaint filed in the underlying action, R.S.' disabilities were so severe that he was unable to speak for himself, unable to request help, unable to protect his health and safety by verbalizing to others that he was being abused or neglected and unable to extricate himself from an abusive or unsafe condition.

The complaint in the underlying action alleged that B.L., another special education student, was seated in the back seat of the van next to R.S. and B.V. was seated in the middle seat of the van.   The complaint alleged that B.V. was a school age student residing in Ridgefield who had been identified by the Ridgefield board of education as a child in need of special education and services.   The complaint also alleged that B.L. had been placed in the special education program because of his aggressive behavior and emotional disturbance and that B.L. was six years older than R.S. The underlying action complaint further alleged that various other defendants, other than B.V. and the Venos, were aware of B.L.'s disability, age and aggressive behaviors, but nonetheless chose to place him on the small van next to R.S. with no supervision other than the van driver.

The complaint in the underlying action further alleged that beginning the first week of school in September 2004, R.S. was whimpering/crying when he was dropped off at his parent's home and that because such crying and whimpering was unusual behavior for R.S., his mother asked the van driver if R.S. cried on the van.   The driver confirmed R.S. was crying on the van, but indicated that R.S. was crying for no reason.   On September 10, 2004, R.S.' mother made another complaint to the van driver after R.S. was crying for a couple of hours after departing the van each day.   The van driver stated that R.S. cried out during the ride, but for “no reason” and then was fine another minute.   On multiple occasions from September 2004 through November 2004, R.S. would arrive home emotionally distraught and his hands had scratches and were reddened.   R.S.' mother repeatedly contacted the department of special education in Ridgefield and complained that R.S. was crying on the bus and was resistant to going to school.   R.S.' mother also advised the van driver that R.S.' crying had become much worse and the van driver stated that R.S. screamed so much on the van that he had to pull over to the side of the road and stop the van until he stopped.

From October 2004 through November 2004, R.S.' mother complained about the escalating behavior on the van and “the evermore evident indicators that R.S. was being subjected to some kind of traumatic experience.”   The complaint further alleged that on November 10, 2004, B.V. reported to his teacher that B.L. was on the van with a knife and that B.L. had been poking R.S. with a folding knife for several weeks.   R.S. was examined and injuries and marks consistent with being poked by a sharp object were found.   The complaint also alleged that a police investigation was conducted and the Trumbull police concluded B.L. had been stabbing and poking R.S. during the van ride daily for approximately two months.

R.S. and his parents sued B.V. and his parents for negligence and negligent supervision on the grounds that B.V. observed the abuse to R.S. and did not report it.   While the complaint alleged that R.S. suffered physical injury, there was no allegation in the complaint in the underlying action that B.V. caused the physical abuse to R.S., nor was any assault or battery claim made against B.V. There was, however, a count in the underlying complaint against B.L. for assault and battery.

The portions of the Policy that are relevant to this action include the following:

SECTION II—Liability Coverages:

“If a claim is made or a suit is brought against an ‘insured’ for damages because of ‘bodily injury’ or ‘property damage’ caused by an ‘occurrence’ to which this coverage applies we will:  (1) Pay up to our limit of liability for the damages for which the ‘insured’ is legally liable ․;  (2) Provide a defense at our expense by counsel of our choice, even if the suit is groundless, false or fraudulent ․”

SECTION II—Exclusions:

“Coverage E—Personal Liability and Coverage F—Medical Payments to Others do not apply to ‘bodily injury’ or ‘property damage:’

a. Which is expected or intended by the insured (Emphasis added.)

f. Arising out of:  ․ 3) Vicarious liability, whether or not statutorily imposed, for the actions of a child or minor using a conveyance excluded in paragraph (1) or (2) above;

g. Arising out of:  ․ 3) Vicarious Liability, whether or not statutorily imposed, for the actions of a child or minor using an excluded watercraft described below;

h. Arising out of:  ․ 3) Vicarious liability, whether or not statutorily imposed, for the actions of a child or minor using an aircraft;

j. Which arises out of the transmission of a communicable disease by an ‘insured.’  (Emphasis added.)

k. Arising out of sexual molestation, corporal punishment or physical or mental abuse.  (Emphasis added.)

l. Arising out of the use, sale, manufacture, delivery, transfer or possession by any person of a Controlled Substance(s) ․” (Emphasis added.)

Under the Umbrella Policy similar relevant insurance coverage sections were as follows:

PART D—Exclusions—What We do Not Cover:

“Exclusions. The following exclusions limit the coverage provided under this policy:

8. Entrustment or Vicarious Parental Liability.

a. We do not cover ‘any loss' arising from:  (1) Entrustment;  (2) Vicarious parental liability for the actions of a child or minor involving the use of any ‘aircraft,’ ‘recreational vehicle,’ ‘motorcycle’ or ‘watercraft’ ․

11.  Intentional Acts. We do not cover ‘any loss' arising from any act committed by or at the direction of any ‘insured’ with the expectation or intent to cause ‘bodily injury’ or ‘property damage.’   However, this exclusion does not apply to the use of reasonable force to protect persons or property if the act is not fraudulent, criminal or malicious.  (Emphasis added.)

PART B—DEFINITIONS

4a. ‘Bodily Injury’ means:  (a) ‘Personal injury;’ or (b) Bodily harm, sickness or disease, including required care, loss of services, death, shock, mental anguish or mental injury that results.”

4b. “However, ‘bodily injury’ does not include injury arising out of:  a) The transmission of a communicable disease by an ‘insured;’ b) Sexual molestation, physical abuse or mental abuse ․”

The plaintiffs turned the underlying action over to their insurance agent who in turn submitted the claim to defendant Peerless.   The defendant denied the plaintiffs a defense as well as refused to cover any losses or damages.   The plaintiffs have alleged they incurred significant legal fees and expenses defending the claims made in the underlying R.S. action.   The claims against the plaintiffs were subsequently withdrawn in the underlying R.S. action without any monetary damages being assessed.

III

DISCUSSIONA. Summary Judgment

The defendants has moved for summary judgment on the plaintiffs' breach of duty to defend claim on the grounds that the allegations of the complaint in the R.S. action fall squarely within Section II, Exclusion subsection (k) of the Policy and Part B—Definitions, subsection 4b of the Umbrella policy.   “Practice Book § 17–49 provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law.   In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party.”  (Internal quotation marks omitted.)  Provencher v. Enfield, 284 Conn. 772, 790–91, 936 A.2d 625 (2007).  “[S]ummary judgment is appropriate only if a fair and reasonable person could conclude only one way ․ [A] summary disposition ․ should be on evidence which a jury would not be at liberty to disbelieve and which would require a directed verdict for the moving party ․ [A] directed verdict may be rendered only where, on the evidence viewed in the light most favorable to the nonmovant, the trier of fact could not reasonably reach any other conclusion than that embodied in the verdict as directed.”  (Citations omitted;  emphasis in original;  internal quotation marks omitted.)  Dugan v. Mobile Medical Testing Services, Inc., 265 Conn. 791, 815, 830 A.2d 752 (2003).

“[T]he genuine issue aspect of summary judgment requires the parties to bring forward before trial evidentiary facts, or substantial evidence outside the pleadings, from which the material facts alleged in the pleadings can warrantably be inferred ․ A material fact has been defined adequately and simply as a fact which will make a difference in the result of a case.”   (Citations omitted;  internal quotation marks omitted.)  Buell Industries, Inc. v. Greater New York Mutual Ins. Co., 259 Conn. 527, 556, 791 A.2d 489 (2002).  “In seeking summary judgment, it is the movant who has the burden of showing the nonexistence of any issue of fact.   The courts are in entire agreement that the moving party for summary judgment has the burden of showing the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle him to judgment as a matter of law.   The courts hold the movant to a strict standard.   To satisfy his burden, the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact ․ As the burden of proof is on the movant, the evidence must be viewed in the light most favorable to the opponent ․ When documents submitted in support of a motion for summary judgment fail to establish that there is no genuine issue of material fact, the nonmoving party has no obligation to submit documents establishing the existence of such an issue ․ Once the moving party has met its burden, however, the opposing party must present evidence that demonstrates the existence of some disputed factual issue ․ It is not enough, however, for the opposing party merely to assert the existence of a disputed issue.   Mere assertions of fact ․ are insufficient to establish the existence of a material fact and, therefore, cannot refute evidence properly presented to the court under Practice Book § [17–45].”  (Internal quotation marks omitted.)  Zielinski v. Kotsoris, 279 Conn. 312, 318–19, 901 A.2d 1207 (2006).  “In ruling on a motion for summary judgment, the court's function is not to decide issues of material fact, but rather to determine whether any such issues exist.”  Nolan v. Borkowski, 206 Conn. 495, 500, 538 A.2d 1031 (1988).

B. Interpretation of Policy

The defendants contend that summary judgment should enter in their favor because the allegations of the underlying complaint squarely fall within certain exclusions in the Policy and Umbrella Policy:  “Section II—Exclusions, subsection (k) and Part B—Definitions, subsection 4b.”  (Defendants' Mem. P. 7.) The plaintiffs contend that the language of the exclusion sections cited by the defendant are ambiguous and susceptible to two interpretations.

“It is well established ․ that a liability insurer has a duty to defend its insured in a pending lawsuit if the pleadings allege a covered occurrence, even though facts outside the four corners of those pleadings indicate that the claim may be meritless or not covered.”  (Internal quotation marks omitted.)   QSP, Inc. v. Aetna Casualty & Surety, Co., 256 Conn. 343, 352, 773 A.2d 906 (2001).   A duty to defend does not arise only when the injured party can successfully maintain a cause of action against the insured.   The duty arises when the complaint states facts that bring the injury within the policy coverage.   See Moore v. Continental Casualty Co., 252 Conn. 405, 409, 746 A.2d 1252 (2000).  “On the other hand, if the complaint alleges a liability which the policy does not cover, the insurer is not required to defend.”   (Internal quotation marks omitted.)  Springdale Donuts, Inc. v. Aetna Casualty & Surety Co. of Illinois, 247 Conn. 801, 807, 724 A.2d 1117 (1999).   “The defendant's duty to defend ․ is not invoked unless the party named in the complaint falls within the definition of ‘insured’ as included in the policy.”  Hartford Casualty Ins. Co. v. Litchfield Mutual Fire Ins. Co., 274 Conn. 457, 466, 876 A.2d 1139 (2005).

There is no dispute in this action that the plaintiffs and their minor son B.V. were insureds under the Policy and Umbrella Policy.   The issue for the court to determine is whether the allegations made in the underlying action bring the injury claimed within the Policy and Umbrella Policy coverage.

“It is the function of the court to construe the provisions of a contract of insurance ․ The [i]nterpretation of an insurance policy ․ involves a determination of the intent of the parties as expressed by the language of the policy ․ [including] what coverage the ․ [insured] expected to receive and what the [insurer] was to provide, as disclosed by the provisions of the policy ․ [A] contract of insurance must be viewed in its entirety, and the intent of the parties for entering it derived from the four corners of the policy ․ [giving the] words ․ [of the policy] their natural and ordinary meaning ․ [and constructing] any ambiguity in the terms ․ in favor of the insured.”  (Internal quotation marks omitted.)  Connecticut Ins. Guaranty Assn. v. Fontaine, 278 Conn. 779, 784–85, 900 A.2d 18 (2006), citing Hartford Casualty Ins. Co. v. Litchfield Mutual Fire Ins. Co., supra, 274 Conn. 463.

“Our jurisprudence makes, clear, however, that although ambiguities are to be construed against the insurer, when the language is plain, no such construction is to be applied.”  (Internal quotation marks omitted.)  Heyman Associates No. 1 v. Ins. Co. of Pennsylvania, 231 Conn. 756, 770, 653 A.2d. 122 (1995).   “Indeed, courts cannot indulge in a forced construction ignoring provisions or so distorting them as to accord a meaning other than that evidently intended by the parties.”  (Internal quotation marks omitted.)  Id., at 771.

The defendants argue that the language of Section II, Exclusion subsection (k) is not ambiguous and the doctrine of contra proferentem is inapplicable.   The plaintiffs conversely argue that the language in the Exclusion (k) clause is ambiguous and that ambiguity is demonstrated by the two vastly different interpretations of the clause by the parties.  “The fact that the parties advocate different meanings of the [insurance policy] does not necessitate a conclusion that the language is ambiguous.”  (Internal quotation marks omitted.)  Springdale Donuts, Inc. v. Aetna Casualty & Surety Co. Of Illinois, supra, 247 Conn. 806.  “Rather, insurance policy language is ambiguous if we determine that it is reasonably susceptible to more than one reading.”  (Internal quotation marks omitted.)  Connecticut Ins. Guaranty Assn. v. Fontaine, supra, 278 Conn. 786.  “[W]hen the words of an insurance contract are, without violence, susceptible of two [equally reasonable] interpretations, that which will sustain the claim and cover the loss must, in preference be adopted ․ [T]his rule of construction favorable to the insured extends to exclusion clauses.”  (Citation omitted;  internal quotation marks omitted.)  Travelers Ins. Co. v. Namerow, 261 Conn. 784, 796, 807 A.2d 467 (2002);  see also Allstate Ins. Co. v. Barron, 269 Conn. 394, 406, 848 A.2d 1165 (2004).

The court starts its ambiguity inquiry with an examination of the language contained in the exclusion sections cited by the defendants.   The defendants first cite to Section II, subsection (k) of the Policy to its preclusion of coverage.   Subsection (k) precludes coverage for a bodily injury claim as follows:  “Arising out of Sexual molestation, corporal punishment or physical or mental abuse.”  (Emphasis added.)   The defendants further cite to the Definitions Section in the Umbrella policy, in particular section 4b which states:  “[h]owever, ‘bodily injury’ does not include injury arising out of:  (a) The transmission of a communicable disease by an ‘insured;’ (b) sexual molestation, physical abuse or mental abuse ․” The plaintiffs contend that the exclusion language in subsection (k) and Definitions section 4b are ambiguous and unclear on their face in that the cited language is silent as to whether the exclusion pertains to the acts of an “insured” or “any person.”   The plaintiffs further argue that such sections can reasonably be interpreted as only pertaining to the actions of the insured.

The court concludes that the policy language in Section II, Exclusion subsection (k) is ambiguous because the defendants reasonably read this clause as limiting the insurer's obligation to defend claims relating to physical or mental abuse, while the plaintiffs adopt a reasonable but limited reading of the policy language that the cited exclusions apply only to acts of the insured.   Having concluded that the cited policy exclusion language is ambiguous, the court is free to apply the contra proferentem rule and consider extrinsic evidence.

The first extrinsic evidence that this court looks to is the other exclusion language in the Policy, in particular the immediate exclusion language in Section II surrounding subsection (k).  It is clear that the language contained in these immediate surrounding exclusions vary as to who the exclusion applies to as follows:

(j). Which arises out of the transmission of a communicable disease by an ‘ insured.’  (Emphasis added.)

(k). Arising out of sexual molestation, corporal punishment or physical or mental abuse;  (Emphasis added.)

(l). Arising out of the use, sale, manufacture, delivery, transfer or possession by any person of a Controlled Substance(s) ․ (Emphasis added.)

Exclusion subsection (j) applies to bodily injury “arising out of the transmission of a communicable disease by an ‘insured,’ subsection (l) applies to bodily injury arising out of the sale, manufacture, delivery, transfer or possession by ‘any person.’   Exclusion subsection (k), which is located right in between Exclusion subsections (j) and (l), is silent as to who that exclusion applies to, be it the ‘insured’ or ‘any person.’ “

Since physical and mental abuse are generally characterized as “intentional acts,” a reasonable reading of the Policy would require that subsection (k) be read in conjunction with the “Intentional Acts” exclusion of the Policy.   Section 11(a) of the Exclusions section of the Policy specifically excludes from coverage bodily injury claims which are “expected or intended by the ‘insured ’ “ (Emphasis added.)   In addition, the “Intentional Acts” exclusion section of the Umbrella Policy also states:  “We do not cover ‘any loss' arising from any act committed by or at the direction of any ‘insured’ with the expectation or intent to cause ‘bodily injury’ or ‘property damage.’   “ (Emphasis added.)

“The premise behind the [contra proferentem] rule is simple.   The party who actually does the writing of an instrument will presumably be guided by his own interests and goals in the transaction.   He may choose shadings of expression, words more specific or more imprecise, according to the dictates of these interests ․ A further, related rationale for the rule is that [s]ince one who speaks or writes, can by exactness of expression more easily prevent mistakes in meaning, than one with whom he is dealing, doubts arising from ambiguity are resolved in favor of the latter.”  (Internal quotation marks omitted.)   Connecticut Ins. Guaranty Assn. v. Fontaine, supra, 278 Conn. 789, n.7, citing Israel v. State Farm Mutual Automobile Ins. Co., 259 Conn. 503, 508–09, 789 A.2d 974 (2002).   The policy reasons behind the contra proferentem rule is “more rigorously applied in the context of insurance contracts than in other contracts.”  Connecticut Ins. Guaranty Assn. v. Fontaine, supra, 278 Conn. 789, n.7. The Connecticut Supreme Court's “interpretation of ambiguous policy language in favor of coverage under the doctrine of contra proferentem has become near axiomatic in insurance coverage disputes.”  Id., 788–89;  see also R.T. Vanderbilt Co. v. Continental Casualty Co., 273 Conn. 448, 465 n.25, 870 A.2d 1048 (2005).  “Courts in such situations often apply the contra proferentem rule and interpret a policy against the insurer.”  Metropolitan Life Ins. Co. v. Aetna Casualty & Surety Co., 255 Conn. 295, 306, 765 A.2d 891 (2001).

The court finds that the ambiguous language contained in Exclusion subsection (k) should be construed in accordance with the reasonable expectations of the insured plaintiffs when they entered into the contract.   There is no dispute that the defendant drafted the policy at issue.   Section II of the Policy specifically sets forth that “[i]f a claim is made or a suit is brought against an ‘insured’ for damages because of ‘bodily injury’ caused by an occurrence to which this coverage applies we will:  (1) Pay up to our limit of liability for the damages for which the “insured” is legally liable ․;  (2) Provide a defense at our expense by counsel of our choice, even if the suit is groundless, false or fraudulent ․” The Policy also specifically excludes from bodily injury, those claims arising out of intentional acts of the insured.   As Exclusion subsection (k) sets forth all intentional acts, it was reasonable for the plaintiffs to have expected that it was going to be defended with respect to claims for bodily injury which were not intentionally committed by the insured.

The allegations in the complaint in the R.S. action relating to B.V. and plaintiffs are essentially that B.V. witnessed the abuse and did not report it to anyone.   There are no allegations that B.V. physically or mentally abused R.S. or that B.V. intentionally caused bodily injury to R.S. Thus, the court finds that the allegations made in the complaint in the underlying R.S. action bring the claimed bodily injury within the policy coverage.   A liability insurer has a duty to defend its insured in a pending lawsuit if the pleadings allege a covered occurrence.

Based on the foregoing, the defendant is not entitled to judgment as a matter of law that it had no duty to defend and the defendant's motion for summary judgment is denied.

IV

CONCLUSION

Based on the foregoing, the defendant's motion for summary judgment is denied.

BY THE COURT

OZALIS, J.

Ozalis, Sheila A., J.