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CONNECTICUT INSURANCE GUARANTY
ASSOCIATION v. JOSHUA
DROWN ET AL.
(SC 18975)
Rogers, C. J., and Palmer, Zarella, Eveleigh, McDonald, Espinosa and
Robinson, Js.
Argued January 8—officially released October 21, 2014
Sean K. McElligott, for the appellants (defendants).
Kurt M. Mullen, with whom were Thomas P. O’Con-
nor and, on the brief, Mark D. Robins, pro hac vice,
and Charles W. Pieterse, for the appellee (plaintiff).
Opinion
ROBINSON, J. This certified appeal presents us with
two issues of first impression in Connecticut, specifi-
cally: (1) whether an insurer’s preinsolvency breach of
its duty to defend a claim during an underlying litigation
estops the plaintiff, the Connecticut Insurance Guar-
anty Association (association), from contesting its obli-
gation under the Connecticut Insurance Guaranty
Association Act, General Statutes § 38a-836 et seq.
(guaranty act), to pay a claim made under the insolvent
insurer’s policy; and (2) whether certain vicarious liabil-
ity claims are covered under a professional liability
policy (policy), issued by the now insolvent Medical
Inter-Insurance Exchange (Exchange), which con-
tained a provision, designated in the policy as exclusion
(i), excluding coverage for ‘‘injur[ies] 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 pre-
mium charge is shown on the declarations page.’’ The
defendants, Associated Women’s Health Specialists,
P.C. (Health Specialists), Susan Drown and Rodney
Drown, individually and on behalf of their minor son,
Joshua Drown,1 appeal, upon our grant of their petition
for certification,2 from the judgment of the Appellate
Court reversing the trial court’s award of summary judg-
ment in their favor. Connecticut Ins. Guaranty Assn.
v. Drown, 134 Conn. App. 140, 37 A.3d 820 (2012). On
appeal, the defendants contend that the Appellate Court
improperly concluded that: (1) Exchange’s preinsol-
vency breach of its duty to defend Health Specialists
from certain claims made by the Drowns did not estop
the association from challenging its liability under the
policy; and (2) exclusion (i) plainly and unambiguously
excluded coverage for Health Specialists’ vicarious lia-
bility arising solely from the professional negligence
of one of its physician employees. We disagree and,
accordingly, affirm the judgment of the Appellate Court.
The record reveals the following undisputed facts
and procedural history. In May, 2000, the Drowns filed
a medical malpractice action against Health Specialists,
a professional corporation that provides obstetrical and
perinatal services, and two of its physicians, France
Bourget and Richard Holden, in relation to care ren-
dered to Susan Drown preceding, during and following
her delivery of Joshua Drown. The Drowns alleged,
inter alia, that Bourget and Holden negligently failed
to diagnose a placental abruption, which resulted in
brain damage to Joshua Drown. The Drowns alleged
that Health Specialists is vicariously liable for the physi-
cians’ negligence, but did not plead claims of direct
negligence against Health Specialists. At some point
during the proceedings, the Drowns withdrew the
counts against Holden without any settlement of
those claims.
During the relevant period, Health Specialists was
insured through a professional liability insurance policy
issued by Exchange. For a period of approximately six
years following notice of the claim, Exchange agreed
to provide, and did provide, a legal defense to Health
Specialists, without asserting any reservation of rights
under the insurance policy. In June, 2006, Health Spe-
cialists’ counsel, Thomas Anderson, informed
Exchange’s senior claim representative that, in light of
information gleaned through depositions, he had
reached the conclusion that liability favored the Drowns
and that settlement options should be pursued. In July,
2006, Anderson informed the senior claim representa-
tive that a mediation session had been scheduled for
September 28, 2006, and that Exchange’s presence was
required at that session by order of the court because
it had the authority to settle the action. In derogation
of that order, Exchange failed to send a representative
to the September mediation session, and the mediation
was continued until December 7, 2006.
In October, 2006, Exchange’s general counsel wrote
a letter to Health Specialists for the first time to ‘‘remind
[it] of some important limitations on coverage . . . .’’
The letter went on to state that, ‘‘pursuant to exclusion
(i), there is no coverage for [Health Specialists] for its
vicarious liability for the acts of individual physicians.’’
Thereafter, Exchange failed to send a representative to
the December mediation session, despite having been
specifically alerted again by counsel that the court
required the presence of such a representative. As a
result, the trial court, Hon. Samuel H. Teller, judge trial
referee, rendered a default judgment on the issue of
liability against Health Specialists because Exchange
failed to appear at the mandated mediation sessions on
behalf of its insured. In March, 2007, Health Specialists
and Susan Drown, individually and on behalf of Joshua
Drown, executed a settlement agreement whereby
Health Specialists agreed that it was liable for the full
amount of the policy, $2 million, and that it would assign
to the Drowns its rights to recover against Exchange. In
return, the Drowns agreed that they would not proceed
directly against Health Specialists’ assets. The trial
court, Agati, J., thereafter dismissed the action against
Health Specialists pursuant to Practice Book § 14-19.
In April, 2008, Exchange, domiciled in the state of
New Jersey, was declared insolvent by a judge in the
Superior Court of New Jersey, Chancery Division. As a
result, the association assumed liability for Exchange’s
obligations to the extent that claims under its policies
were covered under the guaranty act, specifically Gen-
eral Statutes § 38a-841.3
In February, 2009, the association commenced the
present declaratory judgment action, seeking a declara-
tion that it had no obligations under the policy, which
Exchange had issued to Health Specialists, for the
Drowns’ claims. The defendants filed counterclaims
seeking declarations that: (1) the association was
estopped from denying coverage by virtue of
Exchange’s breach of its duty to defend, failure to
reserve its rights, and failure to honor its contractual
obligations; (2) the policy provided coverage for the
claims in the underlying action in the amount of $2
million; and (3) those claims are ‘‘ ‘[c]overed claim[s]’ ’’
under the guaranty act as defined by General Statutes
§ 38a-838 (5).4
Thereafter, the association filed a motion for sum-
mary judgment on its declaratory action on the ground
that exclusion (i) of the policy precluded coverage of
the underlying claims and, therefore, the claims were
not ‘‘ ‘[c]overed claim[s]’ ’’ as defined by § 38a-838 (5).5
The defendants filed a cross motion for summary judg-
ment on the ground that the underlying claims were
covered under the policy and that, therefore, the associ-
ation was statutorily obligated to pay three covered
claims to the Drowns in the amount of $1,199,700. The
trial court denied the association’s motion and granted
the defendants’ cross motion. The trial court concluded
that both parties had offered reasonable interpretations
of exclusion (i) and, therefore, the contract should be
construed in accordance with the reasonable expecta-
tions of the insured that the claims would be covered.
The trial court further concluded that Exchange’s
breach of its obligation to provide a defense had
resulted in a default being entered against Health Spe-
cialists, and that the association was, therefore, liable
to the same extent as Exchange would have been for
such a breach. The trial court thereafter rendered sum-
mary judgment in favor of the defendants on both the
association’s complaint and the defendants’ counter-
claims.
The association appealed to the Appellate Court,
which reversed the trial court’s judgment. Connecticut
Ins. Guaranty Assn. v. Drown, supra, 134 Conn. App.
159. In a unanimous decision, the Appellate Court con-
cluded that exclusion (i) unambiguously precluded cov-
erage for the vicarious liability claims asserted against
Health Specialists. Id., 156. The Appellate Court rejected
the defendants’ argument that exclusion (i) barred only
a claim based on the negligence of a physician ‘‘ ‘for
whom a premium charge is shown on the declarations
page,’ ’’ concluding that this construction would contra-
vene rules of grammar and the last antecedent rule of
contractual or statutory construction. Id., 149–52. The
Appellate Court further concluded that the construction
yielded upon application of these rules is supported by
the definitions of persons insured under each coverage
part. Id., 151 n.9. It also disagreed with the defendants’
contention that the association’s construction of exclu-
sion (i) rendered Health Specialists’ coverage under the
policy illusory, noting that there were some circum-
stances in which claims predicated on vicarious liability
would be covered. Id., 152–54. Finally, the Appellate
Court concluded that Exchange’s breach of its duty to
defend Health Specialists did not estop the association
from enforcing the policy exclusion because, under the
act, the association is liable only for ‘‘ ‘[c]overed
claim[s]’ ’’ as defined by § 38a-838 (5). Id., 156–59.
Accordingly, the Appellate Court remanded the case to
the trial court ‘‘with direction to deny the defendants’
cross motion for summary judgment, to grant the asso-
ciation’s motion for summary judgment and to render
judgment thereon for the association.’’ Id., 159. This
certified appeal followed. See footnote 2 of this opinion.
On appeal, the defendants contend that the Appellate
Court improperly determined that: (1) Exchange’s pre-
insolvency breach of its duty to defend did not estop
the association from contesting its obligation to pay
claims under the policy; and (2) exclusion (i) precluded
coverage for the Drowns’ vicarious liability claims
against Health Specialists. We address each claim in
turn.
I
We begin with the defendants’ claim that the Appel-
late Court improperly concluded that Exchange’s
breach of its duty to defend Health Specialists, which
occurred while Exchange was a solvent insurer, did not
estop the association from challenging its obligations
under the policy. The defendants contend that, under
the guaranty act, the association stands in the shoes
of Exchange, an insolvent insurer, and, therefore, is
responsible to pay the remedy for Exchange’s breach
of its duty to defend, namely, the association’s statutory
liability for a portion of the $2 million coverage limits
that formed the basis for the default judgment and set-
tlement agreement between the Drowns and Health
Specialists. See, e.g., Missionaries of Co. of Mary, Inc.
v. Aetna Casualty & Surety Co., 155 Conn. 104, 114,
230 A.2d 21 (1967). The defendants rely on, inter alia,
this court’s recent decision in Connecticut Ins. Guar-
anty Assn. v. Fontaine, 278 Conn. 779, 789, 900 A.2d
18 (2006), which noted that the guaranty act does not
‘‘alter the usual methods of interpreting insurance poli-
cies,’’ and Hall v. MPH Transportation, Inc., 58 Pa.
D. & C.4th 482, 502 (Com. Pl. 2002), which stated that
a guaranty association ‘‘inherits both the feats and sins
committed by the former insurer while solvent and
reaps the benefits of the insurer’s achievements, and
suffers the consequences of its transgressions, during
its solvency.’’ In particular, the defendants cite Hall
in support of their argument that ‘‘principles of basic
fairness’’ preclude the association from ‘‘simply [ignor-
ing Exchange’s] breach of the duty to defend and the
litigants’ reasonable reliance on Judge Teller’s default.’’
In response, the association argues that the Appellate
Court properly concluded that, under the guaranty act,
specifically § 38a-841, it ‘‘cannot be held liable on
account of acts or omissions of the insolvent insurer
where there is no covered claim.’’ (Internal quotation
marks omitted.) Connecticut Ins. Guaranty Assn. v.
Drown, supra, 134 Conn. App. 159. The association then
relies on the guaranty act’s definition of ‘‘ ‘[c]overed
claim’ ’’ in § 38a-838 (5), and this court’s decision in
Potvin v. Lincoln Service & Equipment Co., 298 Conn.
620, 640, 6 A.3d 60 (2010), to support its argument that
it is not a ‘‘full service insurer’’; accordingly, an insolvent
insurer’s ‘‘conduct in handling or mishandling a claim
does not give rise to a covered claim’’ insofar as, under
its statutory mandate, the association ‘‘can only be lia-
ble for a claim which arises out of and is within the
coverage of the insolvent insurer’s policy.’’ The associa-
tion then argues that Connecticut Ins. Guaranty Assn.
v. Fontaine, supra, 278 Conn. 779, is not controlling
because that decision involved only whether the contra
proferentem rule of construction applied in determining
the association’s obligations under a policy issued by
an insolvent insurer, and did not concern the effect of
the insurer’s conduct on the association’s obligations.
It also claims that the Pennsylvania court’s decision in
Hall v. MPH Transportation, Inc., supra, 58 Pa. D. &
C.4th 482, is both unpersuasive and distinguishable. We
agree with the association and, accordingly, conclude
that Exchange’s preinsolvency misconduct during the
underlying litigation does not estop the association
from challenging the existence of a covered claim,
which is the predicate for its liability under the guar-
anty act.
By way of background, we note that the ‘‘association
is a creature of statute, and any basis for liability must
be found within the provisions of the guaranty act,
which define the scope and extent of the association’s
liability.’’ Potvin v. Lincoln Service & Equipment Co.,
supra, 298 Conn. 629. ‘‘ ‘The association was established
for the purpose of providing a limited form of protection
for policyholders and claimants in the event of insurer
insolvency. The protection it provides is limited based
upon its status as a nonprofit entity and the method by
which it is funded. Specifically, the association is a
nonprofit legal entity created by statute to which all
persons licensed to transact insurance in the state must
belong. See General Statutes §§ 38a-838 [7] and 38a-
839. When an insurer is determined to be insolvent
under § 38a-838 [6], the association becomes obligated
pursuant to § 38a-841, to the extent of covered claims
within certain limits.’ ’’6 Esposito v. Simkins Indus-
tries, Inc., 286 Conn. 319, 329, 943 A.2d 456 (2008),
quoting Hunnihan v. Mattatuck Mfg. Co., 243 Conn.
438, 451, 705 A.2d 1012 (1997). ‘‘Pursuant to . . . § 38a-
841, the association is authorized to pay only covered
claims, and must deny all other claims. In order to be
reimbursable by the association, a claim against the
association must be encompassed within the definition
of a covered claim . . . .’’ Hunnihan v. Mattatuck Mfg.
Co., supra, 449. The guaranty act defines the term
‘‘ ‘[c]overed claim,’ ’’ in relevant part, as ‘‘an unpaid
claim, including, but not limited to, one for unearned
premiums, which arises out of and is within the cover-
age and subject to the applicable limits of an insurance
policy to which sections 38a-836 to 38a-853, inclusive,
apply issued by an insurer, if such insurer becomes an
insolvent insurer after October 1, 1971 . . . .’’ (Empha-
sis added.) General Statutes § 38a-838 (5).
Insofar as the association’s liability under the guar-
anty act is limited to ‘‘covered claims,’’ we agree with
the Appellate Court that we must determine whether
an insurer’s preinsolvency conduct in treating a claim as
covered by the policy operates to estop the association
from revisiting that determination and enforcing its own
contrary view of the policy provisions. See Connecticut
Ins. Guaranty Assn. v. Drown, supra, 134 Conn. App.
159. As the Appellate Court noted, this issue presents
a question of law guided by our well established process
of statutory interpretation pursuant to General Statutes
§ 1-2z. See id., 157. We do not, however, write on a
‘‘blank slate’’ in determining whether a potential liability
constitutes a ‘‘ ‘[c]overed claim’ ’’ as defined by § 38a-
838 (5), but instead, are guided by this court’s previous
decisions construing that provision. Esposito v. Sim-
kins Industries, Inc., supra, 286 Conn. 328; see also,
e.g., New England Road, Inc. v. Planning & Zoning
Commission, 308 Conn. 180, 186, 61 A.3d 505 (2013)
(‘‘in interpreting [statutory] language . . . we do not
write on a clean slate, but are bound by our previous
judicial interpretations of this language and the purpose
of the statute’’).
Our recent decision in Potvin v. Lincoln Service &
Equipment Co., supra, 298 Conn. 620, is particularly
instructive as to whether Exchange’s preinsolvency
conduct during the underlying litigation has the effect of
estopping the association from challenging its liability
under the policy. In Potvin, we first concluded that
the association is statutorily immune, under General
Statutes § 38a-850, from an order by a Workers’ Com-
pensation Commissioner imposing sanctions and attor-
ney’s fees pursuant to General Statutes §§ 31-288 (b)
and 31-300 for its undue delay in processing payment
to a claimant on behalf of an insolvent insurer. See id.,
642. On the basis of that conclusion, we determined
that ‘‘the association can be liable for those sanctions
only if they fall within the meaning of the term ‘covered
claim,’ as defined in § 38a-838 (5), which the association
is required to pay under [General Statutes (Rev. to
2009)] § 38a-841 (1).’’ Id. We then concluded that the
Compensation Review Board improperly determined
‘‘that the definition of ‘[c]overed claim’ and our decision
in [Connecticut Ins. Guaranty Assn. v. Fontaine, supra,
278 Conn. 779] demonstrate that the association is liable
to the same extent as the insolvent insurer would have
been, including for sanctions.’’ Potvin v. Lincoln Ser-
vice & Equipment Co., supra, 643.
In so concluding, we emphasized that the ‘‘relevant
portion’’ of § 38a-838 (5) ‘‘confines the extent of a cov-
ered claim to that ‘which arises out of and is within’
the coverage of the underlying insurance policy. . . .
The text of the definition thus excludes any liabilities
beyond those that arise out of and are within the insol-
vent insurer’s insurance policy. This reading is consis-
tent with our decision in Fontaine, in which we noted
that the association was obligated only ‘to the same
extent that the insolvent insurer would have been liable
under its policy.’ . . . There is no evidence in the
record that the insurance policy in the present case
included an obligation on the part of the insurer to pay
statutory penalties and attorney’s fees in the event that
it caused undue delay in the processing or payment of
a claim. In the absence of such evidence, we conclude
that the obligation to pay the sanctions does not arise
out of the coverage of the policy but, rather, that such
obligation arises out of the association’s conduct in
handling the claim. Thus, we conclude that the defini-
tion of ‘covered claim’ limits the association’s obliga-
tions to those found in the insolvent insurer’s insurance
policy and does not extend to liabilities arising from
conduct in handling the claim if such a provision is not
included in the policy.’’7 (Citations omitted; emphasis
altered.) Id., 643–44, citing Connecticut Ins. Guaranty
Assn. v. Fontaine, supra, 278 Conn. 791. Ultimately,
this court concluded that, ‘‘[i]n the absence of any evi-
dence that the sanctions imposed in this case were
covered under the insolvent insurer’s policy . . . the
sanctions are not part of a covered claim and that the
association, therefore, is not obligated to pay them.’’
Potvin v. Lincoln Service & Equipment Co., supra, 298
Conn. 646.
We conclude that Potvin is highly instructive with
respect to determining the association’s liability to
Health Specialists and the Drowns because the default
judgment and corresponding settlement agreement in
the underlying malpractice action arose from a judi-
cially imposed sanction of Exchange for its conduct in
defending that litigation, namely, the imposition of a
default judgment on Health Specialists as a conse-
quence of Exchange’s violation of two separate court
orders requiring the attendance of a representative with
settlement authority at pretrial mediation sessions
scheduled for September and December of 2006. Potvin
makes clear that the association’s liability is strictly
limited by the guaranty act to claims grounded in the
terms of the policy issued by the insolvent insurer,
in this case Exchange, particularly insofar as Potvin
distinguished this court’s earlier decision in Fontaine
and limited it to matters of policy interpretation. See
footnote 7 of this opinion. Indeed, in Potvin, we held
that the association could not be held liable, either
independently or by means of a covered claim, for a
sanction imposed by a Workers’ Compensation Com-
missioner when the association itself had committed
misconduct in the course of handling a claim on behalf
of an insolvent insurer; Potvin v. Lincoln Service &
Equipment Co., supra, 298 Conn. 646; that fact distin-
guishes it from the present case, where the defendants
seek, in essence, to hold the association vicariously
liable for the misconduct of Exchange, the insolvent
insurer.
Further, our conclusion that an insurer’s preinsol-
vency conduct does not estop the association from chal-
lenging its obligation to pay under the terms of the
policy is consistent with the association’s ‘‘limited pur-
pose of paying only ‘covered’ claims on behalf of insol-
vent insurers to insureds who otherwise would be left
with a limited recovery, if any, following the insolvency
of their insurer. . . . The association does not replace
the insolvent insurer and does not assume all of the
insolvent insurer’s responsibilities and obligations. The
guaranty act limits the extent of the association’s obliga-
tions so that the association remains a limited purpose
entity rather than a full service insurer.’’ (Citation omit-
ted.) Id., 639–40. ‘‘The protection [the association] pro-
vides is limited based [on] its status as a nonprofit
entity and the method by which it is funded. . . . [T]he
association becomes obligated pursuant to § 38a-841,
to the extent of covered claims within certain limits.
. . . Because [General Statutes] § 38a-849 provides that
insurers may pass on the costs of the assessments made
against them by the association, it is in reality policy-
holders who pay for the protections afforded by the
association. Limitations on the association’s obliga-
tions, therefore, provide another form of protection
against increased premiums for policyholders in addi-
tion to the primary protection afforded all claimants
against losses resulting from insurer insolvency. . . .
The result is that policyholders, who in effect fund the
association, pay only for protection for fellow policy-
holders and claimants in the event that an insurer
becomes insolvent.’’ (Citations omitted; internal quota-
tion marks omitted.) Id., 640; see also Esposito v. Sim-
kins Industries, Inc., supra, 286 Conn. 329–31;
Hunnihan v. Mattatuck Mfg. Co., supra, 243 Conn. 450–
52. Thus, we conclude that the association is not
estopped from challenging the existence of a covered
claim, even when the insolvent insurer would otherwise
have been bound to pay that claim because of a breach
of its coverage obligation.8
None of the cases cited by the defendants hold to
the contrary. In particular, their reliance on Connecticut
Ins. Guaranty Assn. v. Fontaine, supra, 278 Conn. 791,
is foreclosed by our treatment of that case in Potvin
v. Lincoln Service & Equipment Co., supra, 298 Conn.
643–44. See footnote 7 of this opinion. We similarly
disagree with their reliance on Hall v. MPH Transporta-
tion, Inc., supra, 58 Pa. D. & C.4th 501, wherein a Penn-
sylvania trial court held that, under the applicable
statute,9 a guaranty association had ‘‘an unconditional
right to set aside a default judgment which occurred
during the insurer’s rehabilitation or insolvency and
while the insurer and defendant were incapable of
defending the claim on the merits. The same should
not be true, however, for default judgments or verdicts
that were entered at a time when the defendant and
then solvent insurer had the ability to defend the claim
and protect their interests.’’10 In that context, the Penn-
sylvania court reasoned that the guaranty association
‘‘inherits both the feats and sins committed by the for-
mer insurer while solvent and reaps the benefits of the
insurer’s achievements, and suffers the consequences
of its transgressions, during its solvency. For example,
if [the insolvent insurer] had succeeded with [the
insured’s] preliminary objections and secured the dis-
missal of certain claims, [the guaranty association]
would have been entitled to enjoy the benefit of that
ruling. Conversely, if [the] plaintiffs have obtained a
default judgment due to the failure of [the insured] and
[the insolvent insurer] to timely answer the complaint
while [the insolvent insurer] was still solvent, [the guar-
anty association] should not be granted the unfettered
right to set aside that judgment at any time it chooses.
If [the guaranty association] is truly deemed to be an
insurer and is placed in the stead of the insolvent
insurer, with all of that insurer’s rights and duties and
obligations . . . it should not be entitled to shirk
responsibility for the insurer’s conduct while it was
solvent. To hold otherwise would defeat the [Pennsylva-
nia’s guaranty act’s] express purpose of avoiding exces-
sive delay in the payment of such claims.’’ (Citation
omitted; internal quotation marks omitted.) Id., 502.
Even assuming, without deciding, that the default
and ultimate settlement agreement between the Drowns
and Health Specialists constitute a ‘‘judgment’’ subject
to reopening under General Statutes § 38a-851 (a),11
which is Connecticut’s counterpart of the statute at
issue in Hall; see footnote 9 of this opinion; we agree
with the association that Hall is not persuasive in this
context. Rather, Hall is simply limited to the procedure
by which judgments may be reopened, and is of minimal
persuasive value because it does not address the thresh-
old question whether an insolvent insurer’s litigation
´
conduct vis-a-vis its insured, including breaching its
duty to defend or not timely reserving its rights under
the policy, operates as an estoppel that creates a ‘‘cov-
ered claim’’ as a matter of law—regardless of the policy
language involved. Indeed, we agree with the associa-
tion that there is nothing in § 38a-851 (a) that alters the
guaranty act’s definition of ‘‘covered claim’’ in § 38a-
838 (5), which moors the association’s liability to claims
that require ‘‘a set of facts and a right of recovery that
arises out of and is within the coverage of the insolvent
insurer’s policy.’’
Thus, like the Appellate Court; see Connecticut Ins.
Guaranty Assn. v. Drown, supra, 134 Conn. App. 158
n.12; we find more persuasive those sister state deci-
sions12 holding squarely that the conduct of an insolvent
insurer does not bind an insurance guaranty association
to pay an otherwise ‘‘uncovered claim.’’ See Illinois
Ins. Guaranty Fund v. Santucci, 384 Ill. App. 3d 927,
934, 894 N.E.2d 801 (2008) (‘‘[The defendant] ignores
[the fact] that the [guaranty fund] is not an insurance
company and that [the insurer’s] decision to defend
without a reservation of rights does not bind the [guar-
anty fund]. Rather, by statute, the [guaranty fund]
assumed the policy obligations of [the insurer] only to
the extent that those obligations were statutorily
defined ‘covered claims.’ ’’); Valentin-Rivera v. New
Jersey Property-Liability Ins. Guaranty Assn., Docket
No. A-1925-09T1, 2011 WL 1085559, *6 (N.J. Super. App.
Div. March 25, 2011) (insolvent insurer’s defense with-
out reserving rights did not estop guaranty association
from challenging existence of ‘‘covered claim’’ because,
inter alia, ‘‘conservation of [guaranty fund’s] resources
is necessary to achieve the [state guaranty act’s] stated
goals’’ [internal quotation marks omitted]); Lopez v.
Texas Property & Casualty Ins. Guaranty Assn., 990
S.W.2d 504, 506 (Tex. App. 1999) (‘‘Because [the] appel-
lants’ claim is for a loss outside policy coverage, [the]
appellants’ claim for recovery of the judgment against
[the insured] is not a covered claim under the terms
and conditions of the policy. Therefore, the [g]uaranty
[a]ssociation is [statutorily] prohibited from paying
[the] appellants’ claim,’’ despite the fact that the insol-
vent insurer had defended the insured during the under-
lying action without reserving its rights.); accord
Property & Casualty Ins. Guaranty Corp. v. Beebe-
Lee, 431 Md. 474, 487, 66 A.3d 615 (2013) (that claim
is not covered by insolvent insurer’s policy provides
‘‘sound reason’’ for guaranty association to contest set-
tlement).13
Like these sister state courts, we view expanding the
definition of ‘‘covered claim’’ to bind the association,
by estoppel, to make payments occasioned by the
default of an insolvent insurer, when no coverage
existed under the underlying policy issued by the insol-
vent insurer, as inconsistent with the association’s lim-
ited purpose under the guaranty act. We conclude,
therefore, that the Appellate Court properly determined
that the ‘‘association is not estopped from enforcing the
policy provisions.’’ Connecticut Ins. Guaranty Assn. v.
Drown, supra, 134 Conn. App. 159.
II
We now turn to the defendants’ claim that the Appel-
late Court improperly concluded that exclusion (i),
which excludes vicarious liability coverage ‘‘with
respect to injury arising solely out of acts or omissions
in the rendering or failure to render professional ser-
vices by individual physicians or nurse anesthetists,
or by any paramedical for whom a premium charge
is shown on the declarations page,’’ plainly and unam-
biguously precludes coverage for the Drowns’ claims
against Health Specialists. (Emphasis added.) Noting
that the Drowns’ claims arise from Health Specialists’
vicarious liability for the malpractice of Bourget, who
is a physician not named on the declarations page, the
defendants argue that exclusion (i) is ambiguous with
respect to whether it applies to all claims arising solely
from the negligence of physicians, or merely those phy-
sicians who are not named on the declarations page;
thus, they contend that the policy, in accordance with
the reasonable expectation of the insured under the
contra proferentem rule, should be construed in favor
of coverage. In demonstrating ambiguity, the defen-
dants rely on condition (g) set forth in § VIII of the
policy, which requires that individual physicians have
their own personal coverage as a precondition to corpo-
rate coverage, to indicate that the policy contemplates
coverage for vicarious liability arising from the acts
of individual physicians who are not named on the
declarations page. They argue that a contrary reading
of the policy, and particularly exclusion (i), renders the
coverage afforded by the policy illusory because ‘‘it
does not make sense for an obstetrical medical group to
buy a policy with no coverage for doctor malpractice,’’
asking rhetorically why ‘‘such a group [would] leave
itself completely exposed to vicarious liability claims
based on its main liability (that of its physicians).’’ The
defendants further argue that the association’s con-
struction of exclusion (i) does not satisfy Johnson v.
Connecticut Ins. Guaranty Assn., 302 Conn. 639, 31
A.3d 1004 (2011), which, they contend, stands for the
proposition that, ‘‘where the interpretation offered by
an insurer creates ‘bizarre’ and ‘counterintuitive’ results
from the perspective of the insured, such an interpreta-
tion should only prevail where the language ‘unambigu-
ously and inexorably’ leads to such a conclusion.’’
In response, the association, relying on sister state
cases from New Jersey and Massachusetts, argues that
the Appellate Court properly concluded that exclusion
(i) plainly and unambiguous precludes coverage in this
case. The association contends that there is nothing in
the language, grammar, or syntax of exclusion (i) that
suggests any ambiguity, and argues that the Appellate
Court properly applied the last antecedent rule of con-
struction to conclude that exclusion (i) plainly and
unambiguously precludes coverage for claims arising
‘‘solely’’ from the malpractice of individual physicians,
regardless of whether they are named on the declara-
tions page of the policy. The association argues that
the Appellate Court properly construed the policy as
a whole to avoid conflicts between exclusion (i) and
conditions of coverage, and also that coverage under
the policy is not illusory because there are numerous
situations wherein the exclusion would not apply.
Largely for the reasons well stated by the Appellate
Court, we agree with the association that the policy
purchased by Health Specialists plainly and unambigu-
ously excluded vicarious liability coverage ‘‘with
respect to injury arising solely out of acts or omissions
in the rendering or failure to render professional ser-
vices by individual physicians,’’ insofar as it is undis-
puted that the claims at issue herein against Health
Specialists arose solely from the actions of Bourget, its
employee who is an individual physician, whose name
is not recited on the policy’s declaration page. See Con-
necticut Ins. Guaranty Assn. v. Drown, supra, 134
Conn. App. 152–54.
To provide context for our analysis of the contract
interpretation issues in this appeal, we set forth the
relevant provisions of the ‘‘Physicians’ & Surgeons’ Pro-
fessional Liability Insurance Claims—Made’’ policy that
Exchange issued to Health Specialists. The declarations
page provides in relevant part:
‘‘I. COVERAGE AGREEMENTS
‘‘[Exchange] will pay on behalf of [Health Specialists]
all sums that [Health Specialists] shall become legally
obligated to pay as damages because of:
***
‘‘Coverage B—Corporate/Partnership Liability
‘‘Injury arising out of the rendering of or failure to
render, on or after the retroactive date, professional
services by any person for whose acts or omissions the
corporation/partnership insured is legally responsible.’’
The ‘‘Exclusions’’ section of the policy provides in
relevant part:
‘‘II. EXCLUSIONS
‘‘This insurance does not apply to liability of
[Health Specialists]:
***
‘‘(i) corporation/partnership under Coverage
Agreement B 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.’’
(Emphasis added.)
Section VIII of the policy, entitled ‘‘CONDITIONS OF
INSURANCE,’’ further provides:
‘‘(g) Insurance for Others Required. The coverage
provided under this policy shall not apply to any individ-
ual, partnership or corporation insured with respect
to claims arising out of the acts or omissions of: (a)
physician or nurse anesthetist employees of an individ-
ual, partnership or corporation insured, or (b) members
of an insured partnership or officers, directors or share-
holders of an insured corporation, unless such persons
have individual coverage for such claims at the time
they are made under a physicians’ and surgeons’ or
similar professional liability insurance policy with limits
of liability equal to or greater than the limits of liability
of the insured under this policy.’’
‘‘Under our law, the terms of an insurance policy
are to be construed according to the general rules of
contract construction. . . . The determinative ques-
tion is the intent of the parties, that is, what coverage
the . . . [insured] expected to receive and what the
[insurer] was to provide, as disclosed by the provisions
of the policy. . . . If the terms of the policy are clear
and unambiguous, then the language, from which the
intention of the parties is to be deduced, must be
accorded its natural and ordinary meaning. . . . How-
ever, [w]hen the words of an insurance contract are,
without violence, susceptible of two [equally reason-
able] 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. . . .
‘‘Put differently, [a]lthough policy exclusions are
strictly construed in favor of the insured . . . the mere
fact that the parties advance different interpretations
of the language in question does not necessitate a con-
clusion that the language is ambiguous. . . . The inter-
pretation of an insurance policy is based on the intent
of the parties, that is, the coverage that the insured
expected to receive coupled with the coverage that
the insurer expected to provide, as expressed by the
language of the entire policy. . . . The words of the
policy are given their natural and ordinary meaning,
and any ambiguity is resolved in favor of the insured.
. . . The court must conclude that the language should
be construed in favor of the insured unless it has a high
degree of certainty that the policy language clearly and
unambiguously excludes the claim.’’ (Citations omitted;
internal quotation marks omitted.) Liberty Mutual Ins.
Co. v. Lone Star Industries, Inc., 290 Conn. 767, 795–96,
967 A.2d 1 (2009). These principles of policy construc-
tion, which embody the rule of contra proferentem,
continue to apply even when the association is challeng-
ing a coverage obligation under a policy that had been
written and issued by a now insolvent insurer. Connect-
icut Ins. Guaranty Assn. v. Fontaine, supra, 278
Conn. 789–91.
We agree with the Appellate Court’s well reasoned
conclusion that exclusion (i) applied, despite the fact
that Bourget’s name was not shown on the declarations
page, because the qualifying phrase, ‘‘ ‘for whom a pre-
mium charge is shown on the declarations page’ in
exclusion (i) does not apply to individual physicians
. . . .’’ Connecticut Ins. Guaranty Assn. v. Drown,
supra, 134 Conn. App. 152. The Appellate Court, inter
alia, properly applied the last antecedent rule of con-
tractual and statutory construction, which provides that
‘‘qualifying phrases, absent a contrary intention, refer
solely to the last antecedent in a sentence’’; id., 151;
and observed that ‘‘the phrase ‘for whom a premium
charge is shown on the declarations page’ is not gram-
matically or logically separated from the last antecedent
phrase ‘any paramedical,’ ’’ and ‘‘interpret[ed] the
phrase to apply only to the last antecedent, ‘any para-
medical.’ ’’ Id.
As the Appellate Court aptly observed, the ‘‘use of a
comma, the repeated use of the disjunctive conjunction
‘or’ and the repeated use of the word ‘by’ grammatically
separates the portion of exclusion (i) referring to indi-
vidual physicians and nurse anesthetists from the por-
tion of exclusion (i) referring to paramedicals. In light
of this separation, we read the phrase ‘for whom a
premium charge is shown on the declarations page’
to modify only the ‘paramedical’ category. ‘It is well
recognized that, whenever possible, a modifier should
be placed next to the word it modifies.’ . . . Moreover,
‘the use of the disjunctive conjunction ‘‘or’’ unambigu-
ously requires that either of the exclusions separated
by the conjunction, if applicable, excludes coverage.’ ’’
(Citations omitted; emphasis omitted.) Id., 150–51; see
also Harris Data Communications, Inc. v. Heffernan,
183 Conn. 194, 197, 438 A.2d 1178 (1981); Horak v.
Middlesex Mutual Assurance Co., 181 Conn. 614, 616–
17, 436 A.2d 783 (1980).
We agree with the dissent that, as a general matter,
principles such as the last antecedent rule, as well as
considerations such as the placement of punctuation;
see, e.g., Chandler-McPhail v. Duffey, 194 P.3d 434,
440–41 (Colo. App. 2008); Liebovich v. Minnesota Ins.
Co., 310 Wis. 2d 751, 771–72, 751 N.W.2d 764 (2008);
are merely means to an ultimate end, which is to deter-
mine the intent of the parties to the insurance contract,
with the understanding that the ‘‘[t]he provisions of the
policy issued by the defendant cannot be construed in
a vacuum. . . . They should be construed from the
perspective of a reasonable layperson in the position of
the purchaser of the policy.’’ (Internal quotation marks
omitted.) Community Action for Greater Middlesex
County, Inc. v. American Alliance Ins. Co., 254 Conn.
387, 400, 757 A.2d 1074 (2000). The Appellate Court’s
application of the last antecedent rule in this case was
not, as the dissent suggests, an improperly hypertechni-
cal approach to contract interpretation that superseded
a reasonable, contextual reading of an insurance con-
tract. Rather, the Appellate Court properly applied the
last antecedent rule to yield a construction that is con-
sistent with a broader, contextual reading of the insur-
ance contract.
Thus, we disagree with the dissent’s argument that
the Appellate Court’s construction of the policy ‘‘seems
counterintuitive in its real world application,’’ given
that ‘‘[n]either [we], nor the Appellate Court, nor the
association has offered a reasonable explanation as to
why Health Specialists, or any other obstetrical practice
for that matter, would purchase a corporate liability
policy that would exclude from coverage for the most
obvious source of its potential liability, the negligence
of its physicians, under most circumstances.’’14 To this
end, the defendants and the dissent contend that condi-
tion (g) renders the Appellate Court’s reading of exclu-
sion (i) improper because, when the condition and the
exclusion are read together, they suggest that vicarious
liability coverage under the policy is illusory. We
respectfully disagree with this reading of the policy
language.
As noted previously, condition (g) requires the main-
tenance of individual professional liability coverage for
physician or nurse anesthetist employees as a condition
for vicarious liability coverage. Read in conjunction
with exclusion (i), condition (g) does not, however,
render illusory the vicarious liability coverage provided
by coverage B on the declarations page of the policy
(coverage B). First, condition (g) is written more
broadly than exclusion (i)—it requires individual cover-
age as a condition precedent for corporate coverage
for all ‘‘claims arising out of the acts or omissions of:
(a) physician or nurse anesthetist employees of an indi-
vidual, partnership or corporation insured . . . .’’ In
contrast, exclusion (i) excludes only those vicarious
liability claims for ‘‘injury arising solely out of acts or
omissions in the rendering or failure to render profes-
sional services by individual physicians or nurse anes-
thetists, or by any paramedical for whom a premium
charge is shown on the declarations page.’’ (Emphasis
added.) Given the differences in their wording, these
sections can be harmonized in a coherent manner ren-
dering coverage nonillusory because the wording of
exclusion (i) is narrower than that of condition (g) and
the general grant of coverage in coverage B.
Specifically, the term ‘‘solely’’ in exclusion (i) makes
clear that the involvement of a physician or nurse anes-
thetist in the events giving rise to a claim arising in
whole or in part from the actions of an unscheduled
paramedical would not preclude corporate coverage,
while the remainder of the exclusion makes clear that
coverage B cannot be used as a means to avoid the
purchase of adequate individual professional liability
coverage for those named in the exclusion, namely,
physicians, nurse anesthetists, or scheduled paramedi-
cal personnel. This means that, viewing these provisions
together, the corporate protection in coverage B is not
rendered illusory because it encompasses claims
wherein an unscheduled paramedical acted, with or
without the participation of a physician or nurse anes-
thetist, to cause injury in the course of rendering or
failing to render professional service. It plainly and
unambiguously covers a certain risk for Health Special-
ists, namely, its vicarious liability for the acts and omis-
sions of unscheduled paramedical personnel such as
nonanesthetist nurses and physician’s assistants, who
have liability exposure or legal obligations that puts
them beyond the realm of those providers who are
required to carry malpractice coverage. See General
Statutes § 20-11b (a) (requiring licensed physicians and
surgeons who provide ‘‘direct patient care services’’
to ‘‘maintain professional liability insurance or other
indemnity against liability for professional malpractice’’
for at least $500,000 ‘‘for one person, per occurrence,
with an aggregate of not less than one million five hun-
dred thousand dollars’’); General Statutes § 20-94c (a)
(same requirement for advanced practice registered
nurses, except for certified nurse anesthetists who pro-
vide ‘‘such services under the direction of a licensed
physician’’); see also footnote 11 of the dissenting opin-
ion. Thus, we do not read the relationship between
exclusion (i) and condition (g) as having the counterin-
tuitive effect—namely, creating illusory coverage—
claimed by the defendants.15
We further disagree with the dissent’s conclusion that
our construction of the policy ‘‘appears to render the
term ‘individual’ superfluous.’’ If correct, such a reading
would, of course, contravene the well established
method of reading insurance policies. See, e.g., R.T.
Vanderbilt Co. v. Continental Casualty Co., 273 Conn.
448, 468, 870 A.2d 1048 (2005). We view the word ‘‘indi-
vidual’’ as used in exclusion (i) to modify the words
‘‘physicians and nurse anesthetists,’’ as needing to be
read consistently with condition (g), which requires
‘‘individual coverage’’ for such providers as a condition
of coverage for Health Specialists’ vicarious liability
arising from their negligence, which was available
through the purchase from Exchange of coverage A
on the declarations page (coverage A) for ‘‘[i]ndividual
[p]rofessional [l]iability.’’16 It also makes clear the differ-
ence between the coverage in coverage A, and that in
coverage B, which specifically protects ‘‘a partnership
. . . and any member thereof with respect to acts or
omissions of others.’’ Put differently, the word ‘‘individ-
ual’’ operates in the policy to emphasize the difference
between a physician’s liability for services rendered in
his or her capacity as a health care provider, and a
physician’s vicarious liability as a member of a part-
nership.
Finally, the defendants’ reliance on Johnson v. Con-
necticut Ins. Guaranty Assn., supra, 302 Conn. 639, is
misplaced. Although that case also involved language
identical to exclusion (i), it is distinguishable. In John-
son, we concluded that the language of exclusion (i)
was ambiguous as applied in that case, which involved
whether coverage existed for claims arising solely from
the negligence of a paramedical employee; the issue
therein was whether she was a ‘‘ ‘paramedical for whom
a premium charge is shown on the declarations page.’ ’’
(Emphasis omitted.) Id., 644–45. We construed the pol-
icy in favor of coverage because the declarations page
simply noted ‘‘ ‘included’ ’’ with respect to a premium
for coverage for paramedical employees as a class; we
stated the use of that term ‘‘does not ambiguously show
a premium charge for that class on the declarations
page.’’ Id., 651–52. Because of differences in the lan-
guage at issue, Johnson does not control or significantly
inform our decision in the present case.
Accordingly, we conclude that the Appellate Court
properly determined that the policy is not illusory, and
plainly and unambiguously does not cover Health Spe-
cialists for its vicarious liability arising solely from the
acts or omissions of its physicians.
The judgment of the Appellate Court is affirmed.
In this opinion ROGERS, C. J., and PALMER, ZARE-
LLA and ESPINOSA, Js., concurred.
1
We refer in this opinion to Joshua Drown, Susan Drown and Rodney
Drown collectively as the Drowns and individually by name.
2
We granted the defendants’ petition for certification to appeal to this
court limited to the following issues: (1) ‘‘Did the Appellate Court properly
determine that exclusion (i) . . . unambiguously excluded coverage in this
case?’’; and (2) ‘‘Did the Appellate Court properly determine that the [associa-
tion] had immunity for the actions of [Exchange] committed prior to
[Exchange’s] insolvency?’’ Connecticut Ins. Guaranty Assn. v. Drown, 305
Conn. 908, 44 A.3d 183 (2012).
3
General Statutes § 38a-841 (a) provides in relevant part: ‘‘Said association
shall: (1) Be obligated to the extent of the covered claims existing prior to
the determination of insolvency and arising within thirty days after the
determination of insolvency, or before the policy expiration date if less than
thirty days after the determination, or before the insured replaces the policy
or causes its cancellation, if he does so within thirty days of such determina-
tion, provided such obligation shall be limited as follows: (A) With respect
to covered claims for unearned premiums, to one-half of the unearned
premium on any policy, subject to a maximum of two thousand dollars per
policy; (B) with respect to covered claims other than for unearned premiums,
such obligation shall include only that amount of each such claim which is
in excess of one hundred dollars and is less than three hundred thousand
dollars for claims arising under policies of insurers determined to be insol-
vent prior to October 1, 2007, and four hundred thousand dollars for claims
arising under policies of insurers determined to be insolvent on or after
October 1, 2007, except that said association shall pay the full amount of
any such claim arising out of a workers’ compensation policy, provided in
no event shall said association be obligated (i) to any claimant in an amount
in excess of the obligation of the insolvent insurer under the policy form
or coverage from which the claim arises, or (ii) for any claim filed with the
association after the expiration of two years from the date of the declaration
of insolvency unless such claim arose out of a workers’ compensation policy
and was timely filed in accordance with section 31-294c; (2) be deemed the
insurer to the extent of its obligations on the covered claims and to such
extent shall have all rights, duties, and obligations of the insolvent insurer
as if the insurer had not become insolvent . . . (4) investigate claims
brought against said association and adjust, compromise, settle, and pay
covered claims to the extent of said association’s obligations, and deny all
other claims. The association shall pay claims in any order it deems reason-
able including, but not limited to, payment in the order of receipt or by
classification. It may review settlements, releases and judgments to which
the insolvent insurer or its insureds were parties to determine the extent
to which such settlements, releases and judgments may be properly con-
tested . . . .’’
Although § 38a-841 has been the subject of recent amendments by our
legislature; see, e.g., Public Acts 2010, No. 10-5, § 40; those amendments
have no bearing on the merits of this appeal. In the interest of simplicity,
unless otherwise noted, we refer to the current revision of the statute.
4
General Statutes § 38a-838 (5) provides in relevant part: ‘‘ ‘Covered claim’
means an unpaid claim, including, but not limited to, one for unearned
premiums, which arises out of and is within the coverage and subject to
the applicable limits of an insurance policy to which sections 38a-836 to
38a-853, inclusive, apply issued by an insurer, if such insurer becomes an
insolvent insurer after October 1, 1971, and (A) the claimant or insured is
a resident of this state at the time of the insured event; or (B) the claim is
a first party claim for damage to property with a permanent location in this
state . . . .’’
5
For a complete recitation of the language of relevant policy provisions,
see part II of this opinion.
6
Because this case does not involve a workers’ compensation insurance
policy, the association’s maximum payment obligation is $400,000 for each
claim. See General Statutes § 38a-841 (a) (1); see also footnote 3 of this
opinion. In the present case, the Drowns asserted claims of $399,900 payable
each to Susan Drown, Rodney Drown, and Joshua Drown, leading to a total
obligation for the association of $1,199,700 should those claims be ‘‘covered.’’
Had Exchange not become insolvent, the settlement agreement would have
entitled the Drowns to the total $2 million policy limits.
7
In Potvin, we distinguished and limited Connecticut Ins. Guaranty Assn.
v. Fontaine, supra, 278 Conn. 791, rejecting the association’s reliance on
the language presently set forth in § 38a-841 (a) (2); see footnote 3 of this
opinion; in support of the broad proposition ‘‘that the association is liable
to the same extent as any insolvent insurer would be if that insurer had
not become insolvent.’’ Potvin v. Lincoln Service & Equipment Co., supra,
298 Conn. 644. We held instead that ‘‘[t]he statute . . . deems the associa-
tion to be the insurer only ‘to the extent of its obligations on the covered
claims . . . .’ ’’ (Emphasis added.) Id., 645; see also id. (‘‘because we already
have determined that the sanctions in the present case do not fall within
the definition of ‘covered claim’ in § 38a-838 [5], the association is not
‘deemed the insurer’ for purposes of any sanctions imposed by the commis-
sioner’’).
By way of background, we note that, in Fontaine, we rejected the associa-
tion’s claim that the contra proferentem rule, which generally requires con-
struing ambiguous insurance contracts against the drafter, was inapplicable
because the association itself did not draft the policy issued by the insolvent
insurer. Connecticut Ins. Guaranty Assn. v. Fontaine, supra, 278 Conn.
789. This court observed that the ‘‘association does not point to any provision
of the act purporting to alter the usual methods of interpreting insurance
policies’’ and rejected its reliance on the history and limited purpose of the
association stated in Hunnihan v. Mattatuck Mfg. Co., supra, 243 Conn.
451, emphasizing that the association ‘‘was established for the benefit of
consumers.’’ (Internal quotation marks omitted.) Connecticut Ins. Guaranty
Assn. v. Fontaine, supra, 789–90; see also id., 791–92, citing Connecticut
Ins. Guaranty Assn. v. Union Carbide Corp., 217 Conn. 371, 390, 585 A.2d
1216 (1991) (‘‘ ‘the legislative objective was to make the [association] liable
to the same extent that the insolvent insurer would have been liable under
its policy’ ’’ [emphasis added]).
8
We recognize the defendants’ policy based argument—framed by this
court’s statement in Connecticut Ins. Guaranty Assn. v. Fontaine, supra,
278 Conn. 791, that the association is obligated only ‘‘ ‘to the same extent
that the insolvent insurer would have been liable under its policy’ ’’—that
upholding the Appellate Court’s decision ‘‘would mean that [the association]
is immune from the legal principles that ordinarily govern determination of
insurance coverage. Instead, [the association] would be the one entity in
the legal system who could always defend on policy interpretation grounds,
regardless of the prior conduct of a solvent insurance company. For example,
even where a solvent insurance company had previously adjusted and settled
a claim, so long as the check was not yet cashed, [the association] could step
in and defend on policy interpretation grounds. In this case, [the association]
simply wants to ignore the six year history of [Exchange’s] conduct during
the underlying litigation and the Appellate Court’s grant of immunity to [the
association] allows it to do precisely that.’’ The defendants further contend
that this conclusion ‘‘can upset the reasonable expectations of litigants, as
it did in this case. Since any insurance company could conceivably become
insolvent at any time, any contract or default judgment involving an insur-
ance company would be useless until the settlement check cleared. [The
association] could always come in, turn back the clock, and deny coverage on
policy interpretation grounds. Under this system, litigants cannot effectively
plan, and lawyers cannot protect their clients’ interests, because the rules
could change at any moment. There needs to be some continuity between
an insurance company and [the association] if the system is to function
properly.’’
First, we conclude that the defendants’ arguments, including that the
Appellate Court ‘‘invented its own questionable policy assumption—that the
[guaranty act] was designed primarily to benefit consumers of insurance,
i.e., policyholders,’’ are inconsistent with the association’s limited statutory
purpose, which has been well established in our case law. See, e.g., Esposito
v. Simkins Industries, Inc., supra, 286 Conn. 329–31; Hunnihan v. Matta-
tuck Mfg. Co., supra, 243 Conn. 450–52.
Second, the legislature, in enacting the guaranty act, contemplated some
degree of instability in the expectations of parties following the default or
failure to defend by an insolvent insurer, as General Statutes § 38a-851 (a)
expressly permits the association to ask a court to set aside the resulting
‘‘judgment, order, decision, verdict or finding’’ to allow it to ‘‘defend against
any such claim on the merits of the case.’’ Section 38a-851 (a) limits this
authority, however, to ‘‘covered claims.’’ It would be wholly inconsistent
with the purpose of the guaranty act, and an absurd result, to permit the
association to move for the reopening of ‘‘covered claims,’’ yet bind it
to pay those claims outside the coverage of the policies issued by the
insolvent insurer.
Finally, we note that this case simply does not present the factual scenario
posited by the defendants, where the ‘‘rules . . . change at any moment,’’
inhibiting attorneys from ‘‘protect[ing] their clients’ interests . . . .’’ The
record demonstrates that the Drowns were aware of the coverage issues
prior to entering into the settlement agreement with Health Specialists,
which allowed them to proceed directly against Exchange, and ultimately
the association given the insolvency of Exchange, while giving up their right
to proceed against Health Specialists’ assets. See Connecticut Ins. Guaranty
Assn. v. Drown, supra, 134 Conn. App. 145 and n.4.
9
The statute at issue in Hall ‘‘addresses default judgments which have
been entered against the insolvent insurer and provides:
‘‘ ‘As to any covered claims arising from a judgment under any decision,
verdict or finding based on the default of the insolvent insurer or its failure
to defend an insured, the association, either on its own behalf or on behalf
of such insured, may apply to have such judgment, order, decision, verdict
or finding set aside by the same court that made such judgment, order,
decision, verdict or finding and shall be permitted to defend against such
claim on the merits.’ ’’ Hall v. MPH Transportation, Inc., supra, 58 Pa. D. &
C.4th 495, quoting 40 Pa. Stat. Ann. § 991.1819 (b) (West 2002).
10
The Pennsylvania court deemed that interpretation consistent with statu-
tory language; see footnote 9 of this opinion; that ‘‘refers to judgments ‘based
on the default of the insolvent insurer’ and implies that the default took
place while the insurer was ‘insolvent’ and unable ‘to defend an insured,’
rather than when it was solvent and simply unwilling to do so.’’ (Emphasis
omitted.) Hall v. MPH Transportation, Inc., supra, 58 Pa. D. & C.4th 501.
11
General Statutes § 38a-851 (a) provides in relevant part: ‘‘Whenever any
covered claims arise from a judgment under any decision, verdict or finding
based on the default of an insolvent insurer or based on such insolvent
insurer’s failure to defend an insured, said association, either on its own
behalf or on behalf of such insured, may apply to have such judgment, order,
decision, verdict or finding set aside by the same court or administrator
that made such judgment, order, decision, verdict or finding and said associa-
tion may defend against any such claim on the merits of the case.’’
12
‘‘Sister state decisions are helpful in construing and applying the guar-
anty act because it is based on a model statute drafted by the National
Association of Insurance Commissioners that has been adopted in substan-
tial part by the legislatures of many of our sister states . . . .’’ (Internal
quotation marks omitted.) Connecticut Ins. Guaranty Assn. v. Fontaine,
supra, 278 Conn. 792 n.8.
13
Our independent research has revealed some authority that provides
limited support for the proposition that an insolvent insurer’s conduct may
operate to estop a guaranty association from challenging its coverage obliga-
tion under the policy, even under statutes requiring the existence of a
‘‘covered claim’’ to bind the association. See California Ins. Guarantee
Assn. v. Workers’ Compensation Appeals Board, 10 Cal. App. 4th 988, 998,
12 Cal. Rptr. 2d 848 (1992) (workers’ compensation coverage obligation for
insolvent insurer, created by estoppel because of agent’s conduct represent-
ing that coverage existed creating oral binder of insurance, operated to bind
guaranty association because obligations of insolvent insurer included those
created by law as well as policy). The Delaware Court of Chancery subse-
quently followed this California decision by estopping that state’s guaranty
association from refusing to defend an insured who had relied on the conduct
of his insolvent insurer in defending him for more than four years without
a reservation of rights or disclaiming coverage. See Delaware Ins. Guaranty
Assn. v. Sezna, Docket No. Civ. A. 13070, 1994 WL 476166, *4 (Del. Ch.
August 25, 1994) (holding ‘‘claim by estoppel is not expressly excluded
from coverage’’ by statute defining ‘‘covered claim,’’ and, ‘‘moreover, is
encompassed within the meaning of and purpose behind the [state’s guaranty
act]’’), aff’d, 659 A.2d 227 (Del. 1995).
In our view, these decisions are unpersuasive. The Delaware decision
does not square its estoppel reasoning with the statutory definition of ‘‘cov-
ered claim,’’ which has the same limitation as Connecticut’s definition under
§ 38a-838 (5), ‘‘which arises out of and is within the coverage’’; Del. Code
Ann. tit. 18, § 4205 (6) (West 1994); but lacks the arguably broader language
of California’s definition, which refers to obligations ‘‘imposed by law and
within the coverage of an insurance policy of the insolvent insurer . . . .’’
(Emphasis added.) Cal. Ins. Code § 1063.1 (c) (Deering 2009). Indeed, the
1992 California decision has been significantly narrowed by a subsequent
decision, and held to apply only to workers’ compensation policies, rather
than other forms of insurance. See Aloha Pacific, Inc. v. California Ins.
Guarantee Assn., 79 Cal. App. 4th 297, 314, 93 Cal. Rptr. 2d 148 (2000)
(noting that 1992 decision ‘‘does not hold that every estoppel affixed to an
insolvent insurer will also be imposed upon [guaranty association]’’ [empha-
sis omitted]). Thus, we decline to follow these decisions.
We also note that a very recent decision from Maryland’s highest court,
Property & Casualty Ins. Guaranty Corp. v. Beebe-Lee, supra, 431 Md.
483–85, concerns when a guaranty association may ‘‘properly contest’’ a
personal injury settlement entered into by an insurer prior to insolvency,
as opposed to remaining obligated to continue to defend and pay. In dis-
cussing the lack of coverage under the policy as a ground for contesting a
settlement, the Maryland court distinguished Lopez v. Texas Property &
Casualty Ins. Guaranty Assn., supra, 990 S.W.2d 504, and Illinois Ins.
Guaranty Fund v. Santucci, supra, 384 Ill. App. 3d 927, as involving either
a stipulation or a judicial finding that the claims at issue were not ‘‘covered
claims’’ under the policy and guaranty association statute, although it
described that as a ‘‘sound reason’’ to contest the settlement. See Property &
Casualty Ins. Guaranty Corp. v. Beebe-Lee, supra, 487 and n.15. The court
held that the state’s guaranty act permitted the guaranty association ‘‘to
review and properly contest settlements to the extent that the insolvent
insurer could have had it not become insolvent. In addition, [the guaranty
association] may contest settlements on limited grounds that would not
have been available to the insurer. Once a claimant demonstrates that there
has been a valid settlement, [the guaranty association] bears the burden of
showing why the claim is excluded from coverage. These reasons include,
but are not necessarily limited to, fraud, collusion, duress, mutual mistake,
or the failure of the insurer to use reasonable care in investigating or settling
the claim.’’ Id., 493–94. Although this holding strongly suggests that lack of
coverage is a reason for a guaranty association to contest a settlement, the
Maryland court acknowledged, but did not address, the guaranty associa-
tion’s claim that the go-kart accident at issue was not covered under the
applicable policies, concluding only that the facts demonstrated that the
insolvent insurer had used ‘‘reasonable care’’ in evaluating the merits of the
underlying case prior to settling it. See id., 493 (‘‘[j]ust because [the guaranty
association] might have been able to negotiate a better settlement or success-
fully defend the case at trial does not mean it can re-open the settlement
agreement now’’).
14
We specifically disagree with the dissent’s reliance on the title of the
policy, namely, ‘‘Physicians and Surgeons Professional Liability Claims Made
Insurance,’’ in support of its argument that the policy is ambiguous. The
dissent contends that this title, along with the broad grant of coverage in
coverage B for ‘‘[i]njury arising out of the rendering of . . . professional
services by any person for whose acts or omissions the corporation/partner-
ship [Health Specialists] is legally responsible,’’ ‘‘seem[s] to suggest that
coverage for such persons is precisely the policy’s main purpose.’’ (Emphasis
omitted.) The title of an insurance policy cannot, however, be used to create
ambiguity within the plain and unambiguous terms of the contract. See
Liberty Mutual Ins. Co. v. Lone Star Industries, Inc., supra, 290 Conn. 808
(exclusion for damage, injury, or illness claims ‘‘ ‘aris[ing] from . . . silica
dust’ ’’ not rendered ambiguous by fact that title of that exclusion was
‘‘Asbestos Exclusion Endorsement,’’ with no mention of silica).
15
Indeed, as the association argues and the Appellate Court noted; see
Connecticut Ins. Guaranty Assn. v. Drown, supra, 134 Conn. App. 154; this
conclusion is consistent with that of those limited sister state courts that
have considered the question presented in the present appeal in interpreting
insurance policies with identical language. See Massachusetts Insurers
Insolvency Fund v. Mountzuris, Docket No. 081962B, 2009 WL 1663932, *3
n.9 (Mass. Super. April 21, 2009) (The court concluded that language identical
to exclusion [i] did ‘‘not eliminate all coverage based on vicarious liability
. . . but rather eliminates such coverage only where an injury arises solely
out of acts or omissions by the persons identified in the provision. Con-
versely, then, the exclusion does not bar coverage for [the insured] in
situations where an injury does not arise solely out of acts or omissions by
the identified persons. The [c]ourt need not speculate as to what those
situations might be; it is satisfied that the exclusion does not by its terms
render . . . coverage under the policy illusory.’’ [Emphasis omitted.]);
Valentin-Rivera v. New Jersey Property-Liability Ins. Guaranty Assn.,
supra, 2011 WL 1085559, *5 (concluding that ‘‘the grant of coverage . . . is
broader than the exclusion since it provides coverage for the acts or omis-
sions of, for example, a nurse or physician’s assistant employed by [the
insured]’’ and that ‘‘the coverage provided, when read in conjunction with the
plain language of the exclusion and the policy as a whole, was not illusory’’).
16
Coverage A defines ‘‘[i]ndividual [p]rofessional [l]iability’’ coverage as
encompassing ‘‘[i]njury arising out of the rendering of or failure to render
. . . professional services by the individual insured, or by any person for
whose acts or omissions such insured is legally responsible, except as a
member of a partnership . . . .’’ Read in context with the definitions of
‘‘[i]nsured’’ in § VI and ‘‘PERSONS INSURED’’ set forth in § III, an ‘‘individ-
ual’’ under coverage A is a human being who provides professional services,
but is not a ‘‘paramedical employee,’’ as compared to coverage B, which
protects business entities such as corporations or partnerships.