DAY KIMBALL HEALTHCARE INC v. ALLIED WORLD SURPLUS LINES INSURANCE COMPANY (2021)

SUMMARY ORDER

Day Kimball Healthcare, Inc. and Erica J. Kesselman appeal from the October 13, 2020 judgment of the United States District Court for the District of Connecticut (Dooley, J.) dismissing their complaint that sought a declaratory judgment directing Allied World Surplus Lines Insurance Company and Steadfast Insurance Company to indemnify plaintiffs pursuant to their respective insurance policies in connection with an underlying medical malpractice lawsuit. We assume the parties’ familiarity with the underlying facts, procedural history, and specification of issues for review.

Day Kimball is the hospital where Kesselman practices obstetrics. Day Kimball has a primary insurance policy through Lexington Insurance Company that covers a variety of liabilities, including professional liability coverage for medical malpractice claims and employee benefit claims (the “Lexington Policy”). Plaintiffs also contracted for excess coverage from both Allied World and Steadfast. Both plaintiffs were sued in Connecticut state court for medical malpractice, and Lexington is providing a defense in that action. See Day Kimball Healthcare, Inc. v. Allied World Surplus Lines Ins. Co., 493 F. Supp. 3d 20, 22 (D. Conn. 2020) (citing Corona v. Day Kimball Healthcare, Inc., Docket No. X07-HHD-CV-15-6075511 (Conn. Super. Ct.)).

The Allied World policy is made up of three insurance agreements (“Insuring Agreements”): A, B, and C. As relevant here, Insuring Agreement A provides excess coverage to the Lexington Policy for professional liability claims. It is a “claims-made and reported policy,” and the parties agree that plaintiffs failed to provide Allied World with timely notice of the Corona claims. Allied World refused to provide excess coverage on the ground that the claim was untimely, and Steadfast, which follows form with the Allied World policy, denied coverage on the same basis. Because they were not able to access coverage through Insuring Agreement A, plaintiffs now seek coverage under Insuring Agreement C, which provides excess coverage for claims related to employee benefit programs.

Under Connecticut law, which applies here, “[a]n insurance policy is to be interpreted by the same general rules that govern the construction of any written contract and enforced in accordance with the real intent of the parties as expressed in the language employed in the policy [and] [t]he policy words must be accorded their natural and ordinary meaning[.]” Pac. Indem. Ins. Co. v. Aetna Cas. & Sur. Co., 240 Conn. 26, 29-30, 688 A.2d 319 (1997) (citation omitted). The court “must look at the contract as a whole, consider all relevant portions together and, if possible, give operative effect to every provision in order to reach a reasonable overall result[.]” Arrowood Indem. Co. v. King, 304 Conn. 179, 193, 39 A.3d 712 (2012).

The district court correctly dismissed the complaint. Insuring Agreement C unambiguously provides excess coverage to the Lexington Policy only for claims related to employee benefit programs. The Schedule of Underlying Insurance set out in the relevant agreement details the five different types of insurance coverage issued to the insured, and for each category identifies the underlying insurers, policy number, policy period and liability limit. Insuring Agreement C states plainly that it is “in excess of the Applicable Underlying Limit for the insurance identified in Items 3 and 4,” and that the “terms and conditions of such Scheduled Underlying Insurance are, with respect to this Insuring Agreement C., made a part of this Policy.” App'x at 78, § I.C. The underlying policy's employee benefits coverage provides coverage for alleged wrongful acts committed “while acting solely within the administration of your employee benefit programs.” App'x at 187. Such programs include “[g]roup life insurance, group accident or health insurance, profit sharing plans, pension plans, employee stock subscription plans, workers compensation, unemployment insurance, social security benefits, disability benefits ․” App'x at 189. The underlying litigation is a medical malpractice action that clearly implicates only the professional liability coverage.

We are unpersuaded by plaintiffs’ argument that Insuring Agreement C's use of the word “insurance” instead of “coverage” translates into Insuring Agreement C providing excess coverage for all claims covered by the underlying Lexington policy, rather than just claims arising out of employee benefit matters. The district court correctly rejected this argument, aptly noting that:

The use of two largely interchangeable words does not create ambiguity nor upend the clear structure set-up by the relationship between the Schedule of Underlying Insurance and the individual Insuring Agreements. The Insuring Agreements specifically identify the item or items within the Schedule of Underlying Insurance to which they provide excess coverage. The Schedule of Underlying Insurance then specifically and unambiguously identifies, among other attributes, the type of coverage and the underlying policy to which each item refers.

Day Kimball, 493 F. Supp. 3d at 26.

Plaintiffs also seek coverage under the Steadfast policy, which is excess to both the Lexington and Allied World policies, and follows form with those policies. Plaintiffs argue that because they are entitled to coverage under the Allied World policy pursuant to Insuring Agreement C, they are entitled to coverage under the Steadfast Policy. As explained above, plaintiffs are wrong about their right to coverage under Insuring Agreement C, and thus are also incorrect about their entitlement to coverage under the Steadfast policy.

Finally, on appeal plaintiffs argue that Steadfast's maintenance provision preserves coverage under Allied World's Insuring Agreement A. At oral argument before the district court, however, plaintiffs asserted that the maintenance provision left Steadfast liable under Insuring Agreement C, not Insuring Agreement A, affirmatively agreeing that Insuring Agreement A was “no longer in play.” Supp. App'x at 28, 33. We therefore conclude that the plaintiffs’ argument relating to the maintenance provision and Insuring Agreement A was forfeited.

We have considered the remainder of plaintiffs’ arguments and find them to be without merit. Accordingly, the order of the district court hereby is AFFIRMED.