CONNECTICUT INSURANCE GUARANTY ASSOCIATION v. JOSHUA DROWN, PPA SUSAN DROWN AND RODNEY DROWN, et al., SC 18975

Judicial District of Waterbury

 Insurance; Medical Malpractice; Whether Coverage of Medical Malpractice Claims was Precluded by Policy’s Exclusion Provision; Whether Connecticut Insurance Guaranty Association was Estopped from Enforcing Exclusion Provision due to Insurer’s Breach of Duty to Defend Insured.  Susan and Rodney Drown brought a medical malpractice action on behalf of their minor son, Joshua, alleging that Associated Women’s Health Specialists, P.C. (Health Specialists), and one of its physicians, Frances Bourget, engaged in malpractice in connection with Joshua’s birth.  At that time, Health Specialists was covered by a professional liability insurance policy issued by Medical Inter-Insurance Exchange (MIIX).  MIIX later became insolvent, and, consequently, the Connecticut Insurance Guaranty Association (association) became obligated to pay certain claims on behalf of MIIX pursuant to the Connecticut Insurance Guaranty Association Act (guaranty act).  The association brought this declaratory judgment action, seeking a determination of the rights of the parties to the policy.  It argued that coverage of the underlying malpractice claims was precluded by “exclusion (i),” which excluded coverage “with respect to injury arising solely out of acts or omissions in the rendering or failure to render professional services by individual physicians or nurse anesthetists, or by any paramedical for whom a premium charge is shown on the declarations page.”  The trial court rejected the association’s claim and concluded that the policy covered the underlying claims.  On appeal, the association challenged the trial court’s determination that the phrase “for whom a premium charge is shown on the declarations page” modified the phrase “individual physicians.”  It maintained that, as a result of this misguided interpretation, the court improperly concluded that because Bourget’s name did not appear on the declarations page, exclusion (i) did not apply to the underlying claims.  It further challenged the court’s conclusion that it was estopped from enforcing exclusion (i) due to the fact that, before MIIX became insolvent, it breached its duty to defend Health Specialists in the malpractice action.  The Appellate Court (134 Conn. App. 140) reversed the trial court’s judgment, finding that the use of the disjunctive “or” and the word “by” created a grammatical separation between the portion of exclusion (i) that referred to individual physicians and nurse anesthetists and the portion that referred to “any paramedical.”  In light of this finding, the court determined that the phrase “for whom a premium charge is shown on the declarations page” only modified the phrase “any paramedical” and that exclusion (i) was therefore applicable in this case.  The Appellate Court further opined that MIIX’s conduct did not estop the association from enforcing exclusion (i) because, under the guaranty act, the association can only be held liable for claims that are covered by the policy.  In this appeal, the Supreme Court will determine whether exclusion (i) is applicable in this case and whether the association was estopped from enforcing the exclusion.