Vermont Mutual Ins Co v. Ciccone et al

Filing 57

ORDER (see attached) - granting 37 Defendants' Motion for Summary Judgment on Counts Three and Five of Plaintiff's Complaint for Declaratory Judgment. Signed by Judge Charles S. Haight, Jr. on 10/22/12. (Hornstein, A)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF CONNECTICUT
VERMONT MUTUAL INSURANCE
COMPANY,
Plaintiff,

3:09-CV-00445 (CSH)

v.
PAUL E. CICCONE, ET AL.,
Defendants.

RULING ON DEFENDANTS'
MOTION FOR SUMMARY JUDGMENT
HAIGHT, Senior District Judge:
I.

Introduction and Summary of Facts
As the Court previously discussed in its Order Regarding Supplemental Briefing [Doc. 47],

this action for a declaratory judgment arises out of a commercial liability and business owner's policy
("the Policy" or "the insurance policy") issued by Plaintiff Vermont Mutual Insurance Company
("Vermont Mutual") to Paul E. Ciccone, Karen Ciccone, and Elm Ridge Development, LLC
(collectively "the Ciccones"), with a policy period running from March 1, 2007 through March 1,
2008. Under the Policy, Vermont Mutual agreed to defend the Ciccones against any suit alleging
bodily injuries caused by an occurrence within the coverage territory during the policy period, and
to indemnify the Ciccones with respect to any liability adjudged against them in such a suit.
Vermont Mutual's obligations under the insurance policy were subject to specific policy exclusions
that included workers' compensation, employer's liability, and professional services.
In August of 2007 – i.e., within the policy period – Miguel Martinez fell from a roof upon

1

which he was working during renovations to a building at 171 Garfield Avenue, New London,
Connecticut, which Martinez alleges was either owned or occupied by Paul Ciccone or Elm Ridge
Development, LLC. Martinez claims that the fall caused him serious injuries. In December 2008,
Martinez filed a complaint in Connecticut Superior Court, Judicial District of New London ("the
Underlying Action") to recover for those injuries.1 This 2008 complaint was made against Paul
Ciccone both individually and as the sole owner of a business called "PC Properties," and against
Elm Ridge Development, LLC (hereafter, the "Defendants"). The Underlying Action is advancing
on the Connecticut court's trial calendar. In May of 2010, Martinez filed a revised complaint against
the Defendants in the Underlying Action, again seeking damages for the injuries he claims were
sustained in a fall at 171 Garfield Avenue. That revised complaint ("the Underlying Complaint")
is the operative pleading for purposes of this Ruling.
In March of 2009, Vermont Mutual commenced the captioned action in this Court by filing
a declaratory judgment complaint against the Defendants [Doc. 1] ("the DJA Complaint"). The First
Count of the DJA Complaint begins at ¶¶ 6-17 with a series of factual allegations drawn from a
number of sources outside of the Underlying Action's pleadings which purport to show, in Vermont
Mutual's perception, that at the time of his accident, Martinez was an employee of the Defendants.
The DJA Complaint concludes with prayers for judicial declarations that Vermont Mutual is "not
obligated to defend Paul E. Ciccone individually or d/b/a PC Properties, or Elm Ridge Development
LLC as to the claims asserted against them" in Defendant Martinez's Underlying Action

1

Martinez, Miguel v. Ciccone, Paul et al., Docket No. KNL-CV08-5009800-S, filed on
December 16, 2008 in the Connecticut Superior Court in the Judicial District of New London.
2

"WHEREFORE" prayer at sub-paragraph (a));2 that Vermont Mutual "is not obligated to indemnify"
those DJA Defendants "for any amounts Defendant Martinez recovers against them" in the
Underlying Action, sub-paragraph (b); that Vermont Mutual "is not obligated to defend" the DJA
Defendants "as to Defendant Martinez's workers' compensation claims against them," sub-paragraph
(c); and that Vermont Mutual "is not obligated to indemnify" the DJA Defendants "as to Defendant
Martinez's workers' compensation claims against them," sub-paragraph (d). In the body of the DJA
Complaint, these prayers are preceded by six Counts: two each for the Policy exclusions of workers'
compensation (Counts First and Second); employer's liability (Counts Third and Fourth); and
professional services (Counts Fifth and Sixth).3
The case is presently before the Court on the Defendants' motion pursuant to Rule 56,
Fed.R.Civ.P., for partial summary judgment dismissing Counts Third and Fifth of the DJA
Complaint. The Third Count alleges that at the time of the accident, Martinez "was an employee"
of Defendants, and that therefore "the monetary damages Martinez seeks from [Defendants] in the
State Court action are excluded from coverage by virtue of the Policy's exclusion for Employer's
Liability." [Doc. 1] at ¶20. It follows, the Third Count continues, that "Vermont Mutual is therefore
entitled to a declaration that it does not have a duty to defend [Defendants] as to [Martinez's] claims

2

Vermont Mutual named Martinez as a party defendant in its declaratory judgment
action against the Defendants, but asserts no claims for relief against Martinez directly.
3

Vermont Mutual also avers that it has informed Defendants that it believes that they
have failed to cooperate with Vermont Mutual regarding investigation of the subject incident,
thus prejudicing Vermont Mutual, and that, by entering into a settlement in the OSHA
enforcement action without Vermont Mutual's knowledge or consent, Defendants have further
violated the insurance policy's notice and cooperation provisions. Accordingly, Vermont Mutual
states in the DJA that it "reserves all of its rights to decline coverage for any and all liability
claims arising from the subject incident on these bases as well." [Doc 40-2] at 8.
3

against them in the State Court action." ¶ 21. The Fifth Count likewise alleges that "the monetary
damages Martinez seeks from [Defendants] are excluded from coverage by virtue of the Policy's
exclusion for Professional Services," and, accordingly, that "Vermont Mutual is therefore entitled
to a declaration that it does not have a duty to defend [Defendants] as to [Martinez's] claims against
them in the State Court action." ¶¶ 20-21.4
While Vermont Mutual has thus far paid for the Defendants' legal defense to the Underlying
Action, subject to a reservation of its right to deny coverage under the Policy, Vermont Mutual seeks
to put an end to a continuing duty to defend the Defendants through this declaratory judgment action
("DJA"). In aid of that effort, Vermont Mutual proffers, or expresses a determination to obtain,
evidence from a number of sources, some outside the pleading in the Underlying Action, which
Vermont Mutual claims will tend to show that one or another of the Policy exclusions applies to
Martinez's claims against the Defendants.
Indeed, Vermont Mutual's chief theory of the case in this DJA appears to be that because
facts external to the Underlying Complaint render the damages claimed therein excluded from
coverage under the Policy by one exclusion or another, Vermont Mutual has neither a duty to defend
the Defendants in the Underlying Action nor a duty to indemnify the Defendants from liability found
against them in the Underlying Action. As an alternative theory, Vermont Mutual argues in its
Supplemental briefing that, even if the Underlying Complaint is taken as true, and read entirely
without additional outside facts or information, either the Policy's contractual language concerning
Vermont Mutual's duty to defend, or the Policy's language concerning its employers and professional
services liability exclusions, could serve to preclude Plaintiff's duty to defend Defendants in the
4

The same formula is repeated with respect to workers' compensation.
4

Underlying Action.
In moving for summary judgment on the Third and Fifth Counts of Vermont Mutual's DJA
Complaint, Defendants first contend that allegations contained within this Complaint have the effect
of making the duty of Vermont Mutual to defend the Defendants in the Underlying Action against
the Defendants conditioned upon Vermont Mutual's duty to indemnify the Defendants for any
liability under that action. That proposition, Defendants argue, is contrary to Connecticut case law
governing an insurance company’s duty to defend its insured in circumstances such as those
presented by the case at bar.

Defendants further aver that the allegations contained within the four

corners of the Underlying Complaint require Plaintiff to defend Defendants under the Policy Plaintiff
issued to Defendants.
This Ruling resolves the Defendants' Motion for Summary Judgment on the Third and Fifth
Counts of Plaintiff's DJA.
II.

Standard of Review
A.

Jurisdiction

This Court exercises subject matter jurisdiction over the present action based on diversity of
citizenship under 28 U.S.C. § 1332. There is complete diversity of citizenship between Plaintiff
Vermont Mutual and all Defendants and the amount in controversy exceeds $75,000.5 Accordingly,
this Court has jurisdiction to render declaratory judgment under the Declaratory Judgment Act, 28
5

Plaintiff Vermont Mutual is a mutual insurance company organized under the laws of
the State of Vermont, and with its principal place of business in Montpelier, Vermont.
Defendants Paul E. Ciccone, Paul E. Ciccone d/b/a PC Properties and Miguel Martinez are
citizens of the State of Connecticut. Elm Ridge Development, LLC is a Connecticut limited
liability company with a principal place of business in Connecticut. It appears that no equity
owner of the LLC is a citizen of a state other than Connecticut, and particularly not of Vermont, a
factor which if present would destroy diversity jurisdiction.
5

U.S.C. § 2201.
B.

Declaratory Judgment

Plaintiff Vermont Mutual requests that this Court render declaratory judgment under the
Declaratory Judgment Act, 28 U.S.C. § 2201, under which, in "a case of actual controversy within
its jurisdiction" a federal court "may declare the rights and other legal relations of any interested
party seeking such declaration, whether or not further relief is or could be sought."6 The Declaratory
Judgment Act "created an opportunity, rather than a duty, to grant a new form of relief," and in so
doing has afforded courts "unique and substantial discretion in deciding whether to declare the rights
of litigants." Wilton v. Seven Falls Co., 515 U.S. 277, 286-88 (1995). An action under the
Declaratory Judgment Act "must be sufficiently real and immediate" to allow for "specific and
conclusive relief," as well as be "ripe for adjudication." Colony Ins. Co. v. Jack A. Halprin, Inc.
2012 WL 2859085, at *6 (D. Conn. 2012) (internal quotation marks omitted).
Connecticut law has made clear that "[t]here is no question that a declaratory judgment action
is a suitable vehicle to test the rights and liabilities under an insurance policy." St. Paul Fire &
Marine Ins. Co. v. Shernow, 22 Conn. App. 377, 380 (1990). In determining whether it will exercise
jurisdiction over the action in question, the district court may consider whether "practicality and wise
judicial administration will predominate." Middlesex Ins. Co. v. Mara, 699 F.Supp. 2d 439, 444 (D.
Conn. 2010) (quoting U.S. Underwriters Ins. Co. v. Kum Gang, Inc., 443 F.Supp. 2d 348, 352-3
(E.D.N.Y. 2006)).

6

See also Fed. R. Civ. P. 57, which states that "[t]hese rules govern the procedure for
obtaining a declaratory judgment under 28 U.S.C. § 2201."
6

C.

Summary Judgment

A court may properly address the merits of a declaratory judgment action – the purpose of
which, as discussed supra, "is to secure an adjudication of rights where there is a substantial question
in dispute or a substantial uncertainty of legal relations between the parties," Conn. Ass'n of Health
Care Facilities, Inc. v. Worrell, 199 Conn. 609, 613 (1986); see also, e.g., New London County Mut.
Ins. Co. v. Nantes, 303 Conn. 737 (2012) (citing Bysiewicz v. Dinardo, 298 Conn. 748, 756 (2010))
– through a motion for summary judgment. Middlesex Ins. Co. v. Mara, 699 F.Supp 2d 439, 444
(D. Conn. 2010); Holyoke Mut. Ins. Co. v. Schlechtweg, 2003 WL 22291889 at *2 (Conn. Super.
Sep. 19, 2003); Comty. Action for Greater Middlesex County, Inc. v. American Alliance Ins. Co., 254
Conn. 387, 397-98 (2000).
The standards for summary judgment are familiar. In a motion for summary judgment, the
burden is on the moving party (here, Defendants) to establish that there are no genuine issues of
material fact in dispute and that it is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c);
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986); Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986). A dispute regarding a material fact exists where "a
reasonable jury could return a verdict for the nonmoving party." Aldrich v. Randolph Cent. School
Dist., 963 F.2d 520, 523 (2d Cir 1992) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. at 248);
see also EDO Corp. v. Newark Ins. Co., 898 F.Supp. 952, 954 (D. Conn. 1995). A moving party
may satisfy this burden by demonstrating the lack of evidence to support the nonmoving party's case.
See PepsiCo, Inc. v. Coca-Cola Co., 315 F.3d 101, 105 (2d Cir. 2002) (per curiam). Accordingly,
summary judgment may be granted when the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits show that there is no genuine issue as to any material
7

fact and that the moving party is entitled to judgment as a matter of law. Id; see also Globecon
Group, LLC v. Hartford Fire Ins. Co., 434 F.3d 165, 170 (2d Cir. 2006).
A nonmoving party cannot make a legally sufficient showing on an essential element with
respect to which it has the burden of proof with "merely colorable" evidence. Anderson v. Liberty
Lobby, Inc., 477 U.S. at 249. "The mere existence of a scintilla of evidence in support of the
nonmoving party's position" is similarly "insufficient; there must be evidence on which the jury
could reasonably find for him." Colony Ins. Co. v. Walker, 2010 WL 3257651 at *2 (D. Conn.
August 16, 2010). In addition, "[c]onclusory allegations will not suffice to create a genuine issue."
Delaware & Hudson Railway Co. v. Consolidated Rail Corp., 902 F.2d 174, 178 (2d Cir. 1990).
In ruling upon a motion for summary judgment, a court must resolve "all ambiguities and
draw all influences in favor of the nonmoving party in order to determine how a reasonable jury
would decide," Aldrich v. Randolph Cent. School Dist., 963 F.2d at 523; consequently it is only
"when reasonable minds could not differ as to the import of the evidence" that a ruling of summary
judgment will be deemed appropriate. Bryant v. Maffucci, 923 F.2d 979, 982 (2d Cir. 1991).
Summary judgment is therefore proper when, after drawing all reasonable inferences in favor of the
non-movant, no reasonable trier of fact could find in that party's favor. Matsushita Elec. Indus. Co.
v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986); Bryant v. Maffucci, 923 F.2d at 982.
Connecticut courts have specifically held that summary judgment is an appropriate vehicle
by which to determine whether an insurer owes an insured a duty to defend on the basis of an
insurance policy, on the rationale that the "[c]onstruction of a contract of insurance presents a
question of law for the court." Hansen v. Ohio Cas. Ins. Co., 239 Conn. 537, 543 (1996) (quoting
Aetna Life & Cas. Co. v. Bulaong, 218 Conn. 51, 58 (1991)); see also Middlesex Ins. Co. v. Mara,
8

699 F.Supp 2d at 444 (citing same); American Home Assur. Co. v. Abrams, 69 F.Supp. 2d 339, 348
(D. Conn. 1999). Indeed, the "question of whether an insurer has a duty to defend its insured is
purely a question of law, which is to be determined by comparing the allegations [in the underlying]
complaint with the terms of the insurance policy," Cmty. Action for Greater Middlesex County, Inc.
v. American Alliance Ins. Co., 254 Conn. 387, 395 (2000), and Connecticut courts have long held
that it "is axiomatic that no insurer is bound to provide indemnification or defense beyond the scope
of the coverage described in the insurance contract, the policy." St. Paul Fire and Marine Ins. Co.
v. Shernow, 22 Conn. App. 377, 380-81 (1990) (citation omitted); Allstate Ins. Co. v. Limone, 2009
WL 5302922 at *6 (Conn. Super. Dec. 3, 2009) (quoting same). In an insurance coverage case, it
is consequently "the function of the court to construe the provisions of the insurance contract and,
if no material facts are at issue, the question of whether coverage exists is a question of law that is
appropriate decided on a motion for summary judgment." Peerless Ins. Co. v. Disla, 999 F. Supp.
261, 263 (D. Conn. 1998).
In the present case, it is Defendants' position that no issue of material fact exists as to the
Third and Fifth Counts of Plaintiff's Declaratory Judgment Complaint, which, as discussed supra,
respectively contain claims that Vermont Mutual has no duty to defend defendants under the relevant
insurance policy due to an exclusion for employer's liability; and Vermont Mutual has no duty to
defend defendants under the relevant insurance policy due to an exclusion for professional services.
Defendants thus conclude that as a matter of law that the Court ought to dismiss the Third and Fifth
courts of the Declaratory Judgment Complaint in this summary judgment ruling.

9

D.

Choice of Law
1.

The Court Applies Connecticut Law in Interpreting the Insurance Policy

When a federal court sits in diversity, it will determine which state's substantive law governs
the dispute under the forum state's conflict of law rules. See, e.g., Kalxon Co. v. Stentor Electric
Mfg. Co., 313 U.S. 487, 496 (1941) ("matters of substance ... should be settled by reference to the
law of the appropriate state according to the type of case being tried in the forum."). Connecticut
law has adopted Restatement (Second) of Conflicts of Law ("Restatement") § 188 for issues of
contract interpretation. Section 188 states that, as determined by several factors including: "(a) the
place of contracting, (b) the place of negotiation of the contract, (c) the place of performance, (d) the
location of the subject matter of the contract, and (e) the domicil[e], residence, nationality, place of
incorporation and place of business of the parties,"7 the law of the state with the "most significant
relationship" to the transaction and parties ought to be applied absent a choice of law provision in
the insurance contract. Reichhold Chems., Inc. v. Hartford Accident and Indem. Co., 252 Conn 774,
781n.4 (2000); Restatement (Second) of Conflicts of Law § 188.
In making a determination concerning which state has the most significant relationship to the
transaction in question, Connecticut law specifically recognizes "a rebuttable presumption in favor
of the state where the insured risk is located." Reichhold Chems., Inc. v. Hartford Accident and
Indem. Co., 252 Conn at 782; Restatement (Second) of Conflicts of Law § 193. "The validity of a
contract of fire, surety, or casualty insurance and the rights created thereby are determined by the
local law of the state which the parties understood was to be the principal location of the insured risk
7

Under the Restatement, "[t]hese contacts are to be evaluated according to their relative
importance with respect to the particular issue." Restatement (Second) of Conflicts of Law §
188.
10

during the term of the policy," unless it is demonstrated that "with respect to the particular issue,
some other state has a more significant relationship ... to the transaction and the parties."
Restatement (Second) of Conflicts of Law § 193. This Court has previously interpreted Restatement
§ 193 and the test it sets forth to mean that, "in the absence of extraordinary circumstances, the law
of the state where the principal insured risk is located will apply." Lumbermens Mut. Cas. Co. v.
Dillon Co. Inc., 2000 WL 1336498, at *2-3 (D. Conn. August 31, 2000) (citation and internal
quotation marks omitted) (emphasis in original).
In the instant case, all Defendant-insureds are citizens or domiciles of Connecticut.
Connecticut is the place in which the insurance contract was entered into (through the Sumner &
Sumner, Inc. agency of Willimantic, CT). It is also the location of the subject matter (i.e., an eightunit apartment dwelling at 171 Garfield Avenue, New London, Connecticut where Mr. Martinez's
alleged injury took place), see [Doc. 37-3] at 3; [Doc. 37-4] at ¶ 1. The Court further notes that,
although thus far the parties have made no mention of "choice of law," both Plaintiff and Defendants
cite Connecticut law throughout their respective briefing in this matter, making evident their
understanding and belief that substantive Connecticut law governs this case.
Taking into consideration this array of facts, the Court finds that Connecticut has the most
significant relationship to the controversy at issue and, accordingly, the Court will apply Connecticut
law to this matter.
2.

Insurance Policy Interpretation under Connecticut Law

Connecticut applies the general rules of contract interpretation to insurance policies, and
enforces them "in accordance with the parties' intent, as derived from the plain and ordinary meaning
of the policy's terms." Allstate Ins. Co. v. Quito, 2007 WL 2221163, at *3 (D. Conn. August 2,
11

2007); Ohio Cas. Ins. Co. v. Dentek, Inc., 283 F.Supp. 2d 655, 659 (D. Conn. 2003); Middlesex Ins.
Co. v. Mara, 699 F. Supp. 2d at 446-47. Under Connecticut law, a court interpreting an insurance
contract must view it "in its entirety" and "consider all relevant portions together, and, if possible,
give operational effect to every provision in order to reach a reasonable overall result." Associated
Comty. Bancorp, Inc. v. The Travelers Companies, Inc., 2010 WL 1416842 at *11 (D. Conn. April
8, 2010) (internal quotation marks omitted). "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 .... Under those circumstances, the policy is to be given effect
according to its terms." Taylor v. Mucci, 288 Conn. 379, 383 (2008); see also Hartford Casualty
Ins. Co. v. Litchfield Mutual Fire Ins. Co, 274 Conn. 457, 463 (2005) ("[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 policy's words] their natural and ordinary meaning.")
In cases in which there is "any ambiguity in the terms" of an insurance policy, such
ambiguous terms ought to be construed in the insured's favor. Hartford Casualty Ins. Co. v.
Litchfield Mutual Fire Ins. Co, 274 Conn. at 463; MH Lipiner & Son, Inc. v. Hanover Ins. Co., 869
F.3d 685, 687 (2d Cir. 1989); see also Clinton v. Aetna Life & Sur. Co., 41 Conn. Super. 560, 563
(Conn. Super. 1991) (any "ambiguous words or phrases in an insurance policy [ought to be]
construed strictly against the insurance company and in favor of coverage."). The court's goal, then,
in construing any policy ambiguities is to examine and apply them as they would be understood by
"a layman, rather than [by] an experienced underwriter." Jurrius v. Maccabees Mut. Life Ins. Co.,
587 F. Supp. 1301, 1305 (D. Conn. 1984). Nonetheless, while the "test of coverage is not what the
insurer intended to cover but what a reasonable person in the position of the insured would
12

understand to be covered," Clinton v. Aetna Life & Sur. Co., 41 Conn. Super. at 563 (citation
omitted), a court should not "torture words to import ambiguity" where none exists. Jurrius v.
Maccabees Mut. Life Ins. Co., 587 F. Supp. at 1305 (citation omitted).
As the Connecticut Supreme Court has recently stated, this general principle of insurance
policy interpretation – i.e., the notion that "when 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" – also "extends to exclusion clauses." Vermont
Mutual Ins. Co. v. Walukiewicz, 290 Conn. 582, 592 (2009) (citation omitted). Thus, "[w]hen an
exclusion clause is relied upon to deny coverage, the insurer has the burden of demonstrating that
the allegations of the [underlying] complaint cast that pleading solely and entirely within the policy
exclusions and, further, that the allegations, in toto, are subject to no other interpretation."
Nationwide Mutual Ins. Co. v. McHugh, 2001 WL 1706752 at *3 (Conn. Super. Dec. 19, 2001)
(citation omitted); see also, e.g., R.E.O., Inc. v. Travelers Companies, 1998 WL 285836 at *5 (Conn.
Super. May 20, 1998); Mikolinski v. Cumberland Mut. Fire Ins. Co., 1997 WL 723429 at *4 (Conn.
Super. Nov. 10, 1997). An insurer therefore bears a "heavy burden," Nationwide Mutual Ins. Co.
v. McHugh, 2001 WL 1706752 at *3, since if the allegations contained within an underlying
complaint fall "even possibly within the coverage" and therefore, even possibly outside of the
relevant insurance policy exclusions, an insurer must defend. Moore v. Continental Cas. Co., 252
Conn. 405, 409 (2000); QSP, Inc. v. Aetna Cas. & Sur. Co., 256 Conn. 343, 376 (2001) (quoting
same).
III.

Plaintiff's Duty to Defend under Connecticut Law
In most liability insurance policies including the Policy in the case at bar, insurers are both
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allowed control over pertinent litigation involving their insureds and are deemed responsible for
defending their insureds against any and all actions based upon allegations that fall within a policy's
coverage. This responsibility is contractual and based upon the specific language of an insurance
policy. Unless such language specifies otherwise, an insurer's duty to defend its insured exists
regardless of a lawsuit's validity or invalidity, its merit or lack thereof.
Plaintiff Vermont Mutual has repeatedly averred in its briefing that Connecticut law
distinguishes between on the one hand what Plaintiff has termed an insurer's "initial duty to defend"
and on the other hand what Plaintiff has termed an insurer's "ongoing duty to defend." This
perceived distinction functions as the linchpin of Plaintiff's arguments in Plaintiff's DJA Complaint,
and also underlies the majority of arguments that Plaintiff makes to support its conception of its duty
to defend Defendants in the Underlying Action. The question arises: Is that distinction sound in
law?
Plaintiff Vermont has stated in its briefing that it "does not seek a declaration of this Court
that Vermont Mutual was not initially obligated to accept tender of the Ciccone defendants' defense
in the underlying Martinez action," nor does it "dispute that under Connecticut law, Vermont
Mutual's defense obligation to the Ciccone defendants initially is determined by reference to the
Martinez complaint's allegations, and whether those allegations state claims that possibly fall within
the subject Vermont Mutual's policy coverage." See Vermont Mutual's Opposition to Motion for
Summary Judgment, [Doc. No. 39] at 2 (emphasis in original). Rather, Vermont Mutual seeks
declarations that (1) the Underlying Action's claims do not trigger the insurance policy's indemnity
coverage; and (2) "a concomitant declaration that due to the lack of indemnity coverage for the
Martinez action claims, Vermont Mutual does not have an ongoing duty to defend the Ciccone
14

defendants as to those claims." Id. at 2-3.
Essentially, Vermont Mutual contends that as a matter of Connecticut law it would have no
duty to continue defending Defendants against claims in the Underlying Action should "this Court
determine[]" through an evidence-based inquiry "that there is no indemnity coverage for those
claims." Id. at 3. (emphasis added). This is because, Plaintiff postulates, "Connecticut law clearly
establishes that" any ongoing duty to defend on Vermont Mutual's part "is contingent upon this Court
finding that indemnity coverage exists for those underlying claims," Id. at 1 – an inquiry that would
involve the consideration of facts external to the Underlying Complaint.
The Court disagrees with Plaintiff Vermont Mutual's analysis of Connecticut law, and
concludes that relevant and governing law recognizes only a single duty to defend regardless of
whether a defense has already been undertaken, which, with narrow exceptions not applicable to the
case at bar, is exclusively based upon the allegations contained in an underlying complaint.
A.

Connecticut Law Recognizes Only One Duty to Defend, Which Is Based upon
the Allegations Made in an Underlying Complaint

Plaintiff Vermont Mutual avers that Connecticut law is clear that while an insurer may have
a so-labeled "initial" duty to defend based upon allegations made in an underlying complaint, a solabeled "ongoing" duty to defend is both evidence-based and significantly tailored to a fact-based
inquiry as to whether an insurer has an obligation to indemnify its insured without regard to the
underlying complaint's allegations. For example, in Plaintiff's Opposition to Motion for Summary
Judgment, Plaintiff states that "Connecticut law clearly establishes that the ongoing nature of
[Plaintiff's] defense obligation" of Defendants in the Underlying Action "is contingent upon this
Court finding that indemnity coverage exists for those underlying claims." [Doc. 39] at 1 (emphasis

15

added). Further, Plaintiff contends that "the Court should deny [Defendants' Motion for Summary
Judgment] because Connecticut law clearly authorizes Vermont Mutual to litigate, in this action, the
facts and legal issues pertinent to determining whether defense or indemnity coverage exists for
those underlying claims, and to pursue such coverage litigation while the underlying action is
pending, and while funding [Defendants'] defense in the underlying action under a reservation of
rights." Id. at 1-2. Plaintiff explicates:
Vermont Mutual does not seek a declaration of this Court that Vermont Mutual was not
initially obligated to accept tender of the Ciccone defendants' defense in the underlying
Martinez action. Vermont Mutual does not dispute that under Connecticut law, Vermont
Mutual's defense obligation to the Ciccone defendants initially is determined by reference
to the Martinez complaint's allegations, and whether those allegations state claims that
possibly fall within the subject Vermont Mutual's policy coverage ...
... Vermont Mutual seeks a declaration of the Court that it has no duty to continue defending
the Ciccone defendants as to the claims asserted against them in the underlying Martinez
action when and if this Court determines that there is no indemnity coverage for those claims.
Id. at 2-3. Vermont Mutual therefore avers that its ongoing defense obligation does not extend
beyond claims that actually fall within the Policy's coverage – i.e., which would incur a duty to
indemnify – as determined through this coverage action, and as demonstrated by facts external to
those asserted in the Underlying Complaint.
Despite Plaintiff's assertions that "Connecticut law clearly establishes that" any ongoing duty
to defend "is contingent upon this Court finding that indemnity coverage exists for those underlying
claims," Id. at 1, the Court could locate no instance or precedent in which such an assertion finds
support. While it is without doubt the case that a specific clause contained in an insurance policy
has the ability to limit an insurer's contractual duty to defend its insured – the possibility of which
in the case at bar is discussed infra – Vermont Mutual's contention that any court must confine any

16

finding of an insurer's so-labeled ongoing duty to defend its insureds to those instances in which a
duty to indemnity is also deemed present is, in fact, manifestly inconsistent with Connecticut law
on the subject.
The Court notes that Plaintiff fails to cite even one relevant case that distinguishes or even
alludes to a distinction between what Plaintiff terms an "initial duty to defend" and an "ongoing duty
to defend." The reason for this is simple: such cases simply do not exist within this jurisdiction.
Moreover, while theoretically it could be possible that Plaintiff has merely created a set of terms for
a previously unlabeled phenomenon that has taken place within Connecticut courts for years, even
a brief examination of applicable law demonstrates that this is not the case.
In support of Plaintiff's proposition, Plaintiff makes reference to several cases in its
Supplemental Brief in Opposition to Defendants' Motion for Summary Judgment [Doc. 50], which
Plaintiff subsequently chides Defendants for not addressing in their own Supplemental Brief.
Specifically, Vermont Mutual states:
[T]he Ciccone Defendants fail to address any one of the cases Vermont Mutual cites in its
Supplemental Brief demonstrating that under Second Circuit and Connecticut law, an
insurer's initial duty to defend is determined solely by the allegations of the underlying
complaint, but thereafter, the insurer's ongoing duty to defend is based on facts, not
allegations, establishing the actual circumstances and bases for the claims asserted against
the insured in an underlying action.
Plaintiff's Reply to Defendants' Supplemental Brief in Support of Their Motion for Summary
Judgment [Doc 56] at 3. However, not one of the cases Vermont Mutual cites in its Supplemental
Brief demonstrates or even suggests that an "insurer's ongoing duty to defend is based on facts, not
allegations, establishing the actual circumstances and bases for the claims asserted against the
insured in an underlying action." Id. Specifically, Plaintiff Vermont Mutual cites five cases in its

17

Supplemental Brief,8 [Doc. 50] at 6-8, only two of which could even plausibly be construed to
indicate a very narrow and non-applicable exception to the general Connecticut rule regarding an
insurer's duty to defend: Aetna Casualty & Surety Co. v. Abbott Laboratories, Inc., 636 F. Supp. 546
(D. Conn. 1986) and Lee v. Aetna Casualty & Surety Co., 178 F.2d 750 (2d Cir. 1950).
Aetna Casualty & Surety Co. v. Abbott Laboratories, Inc., a decision issued by this Court
over two-and-a half decades ago, concerned "an interpretation of the trigger-of-coverage provisions
of the standardized insurance policies issued by the insurers to ... pharmaceutical manufacturers."
Aetna Casualty & Surety Co. v. Abbott Laboratories, Inc., 636 F. Supp. at 547. The Court grappled
with how to handle coverage issues when it was unclear whether the underlying injuries or
occurrences (i.e., harm to pregnant women and fetuses in utero due to medication ingested by
pregnant women) had occurred during particular policy periods. The Court held that in such a
circumstance, insurers must "bear the costs of defense of each lawsuit against [their insureds] in
which [underlying] complaint[s] could be read to permit proof, or [do] not exclude the possibility
of proof, that an injury or occurrence in fact took place during the policy period as a result of
exposure to" the harmful drugs. Id. at 551 (emphasis added). The Court indicated that insurers
could be relieved of such a duty to defend their insureds under such circumstances should insurers
be able to "confine a particular claim so as to exclude the possibility of a recovery for which they
have provided insurance." Id.
The Court does not believe that the Aetna Casualty & Surety Co. v. Abbott Laboratories, Inc.
8

Two of these five cases, Firestine v. Poverman et al., 388 F. Supp. 948 (D. Conn. 1975)
and Assurance Co. of America v. Cabelerio, 1999 WL 557957 (Conn. Super. June 16, 1999),
merely make clear the courts' preference that insurers defend their insureds under a reservation of
rights pending a court's determination of insurers' pertinent duties to defend and indemnify.
18

holding is apposite to the case at bar. The language and holding in Aetna Casualty & Surety Co. v.
Abbott Laboratories, Inc. merely stands for the proposition that when there is ambiguity concerning
whether the allegations of an underlying complaint, taken as they are and in their entirety, fall within
the actual coverage period, an insurer may attempt to confine the claims for which it has a duty to
defend to those which actually fall within the coverage as contracted under the contracted insurance
policy. There is no suggestion that any external evidence such confining might involve would in any
way contest or dispute the actual allegations contained in relevant underlying complaints; rather,
such confining would merely seek to provide an overarching coverage context for these undisputed
allegations.
In the case at bar, there is no dispute regarding whether the date of the injury falls within the
coverage provided by the Policy held between Plaintiff and Defendants. Further, nothing in either
this 1986 decision nor in Lee v. Aetna Casualty & Surety Co., 178 F.2d 750, 752 (2d Cir. 1950) –
to which it cites and which is concerned with the application of New York law to the narrow and
inapposite issue of an insurer's duty to defend its insured against an underlying action which involves
a complaint that "allege[s] that an injury happened in one of several [ways]" and therefore "is either
or is not within that class" of "events covered by the policy," Lee v. Aetna Casualty & Surety Co.,
178 F.2d 750, 752 (2d Cir. 1950) – may be read to state that as a general matter under Connecticut
law an insurer may by right contest a so-termed "ongoing duty to defend" by raising facts and
providing evidence to directly challenge the veracity of those allegations contained within an
underlying complaint.
The Court further notes that Philbin Bros. LLC v. Hartford Fire Ins. Co., another of the five
cases Plaintiff cites in its Supplemental Brief, [Doc. 50] at 6, clearly states that the "duty to defend
19

is considerably broader than the duty to indemnify;" that the"question of whether an insurer has a
duty to defend its insured is purely a question of law, which is to be determined by comparing the
allegations of [a] complaint ... with the terms of the insurance policy;" and that in "construing the
duty to defend as expressed in an insurance policy, the obligation of the insurer to defend [depends]
on whether [the] complaint [states] facts which bring the injury within the coverage." 2008 WL
5540428 at *2 (Conn. Super. Dec. 11, 2008) (internal quotations and citations omitted).9 While
presumably Plaintiff would contend that such duty to defend language is solely in reference to an
insurer's so-termed "initial duty to defend," the Court disagrees with such an interpretation, as
addressed infra.
1.

Plaintiff's So-Termed "Initial Duty to Defend"

In general, when faced with the dilemma of whether to defend or refuse to defend a proffered
claim from its insured, an insurer has several options, chiefly: (1) to completely decline to assume
an insured's defense; (2) to seek a declaratory judgment as to the insurer's rights and obligations; (3)
to defend under a reservation of rights or nonwaiver agreement and then adjudicate coverage-related
issues in a separate suit; or (4) to assume an insured's unqualified defense. See. e.g., Lee R. Russ and
Thomas F. Segalla, Couch on Insurance § 202:1 (3d ed. 2005).
Connecticut law is clear that an "insurer may not refuse the tendered defense of an action
9

Nota bene, Philbin Bros. LLC v. Hartford Fire Ins. Co. even goes so far as to state that
if "an allegation of the complaint falls even possibly within the coverage, then the insurance
company must defend the insured;" that the "insurer has the burden of demonstrating that the
allegations of the complaint case that pleading solely and entirely within the policy exclusions
and, further, that the allegations ... are subject to no other interpretation;" and that "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." 2008 WL 5540428 at *2
(emphasis added) (internal quotations and citations omitted).
20

unless a comparison of the policy with the underlying complaint shows on its face that there is no
potential for coverage." EDO Corp. v. Newark Ins. Co., 898 F. Supp. 952, 961 (D. Conn. 1995)
(emphasis added) (citation omitted). Accordingly, in situations in which a complaint even may
allege facts that fall under the insurance policy, insurance companies will often defend their insureds
under a reservation of rights while simultaneously or subsequently seeking a court's declaration that
no duty to defend actually exists. Plaintiff has done exactly this in the case at bar.
It appears that the "initial duty to defend" to which Plaintiff refers is in reality the issue of
whether an insurer immediately tenders a defense of its insured. Plaintiff appears to accept that the
standard for the adoption of such a defense is quite low, agreeing that such a standard has been met
in the case at bar: "Vermont Mutual does not dispute that under Connecticut law, Vermont Mutual's
defense obligation to the Ciccone defendants initially is determined by reference to the Martinez
complaint's allegations, and whether those allegations state claims that possibly fall within the
subject Vermont Mutual's policy coverage." [Doc. 39] at 2.
Plaintiff also mentions the relative pressure placed upon insurance companies to tender
defense of insureds under a reservation of rights. For example, in its Supplemental Brief in
Opposition to Defendants' Motion for Summary Judgment, Plaintiff cites Firestine v. Poverman et
al., 388 F. Supp. 948 (D. Conn. 1975) and Assurance Co. of America v. Cabelerio, 1999 WL 557957
(Conn. Super. June 16, 1999), both of which concern the generally held notion under Connecticut
law that in instances in which there is a question regarding an insurer's duties to defend or indemnify,
it is preferable that the insurer defend its insureds under a reservation of rights rather than decline

21

to defend them at all. See [Doc. 50] at 8.10 However, such cases do not in any way suggest that the
standards by which a so-termed "initial duty to defend" is evaluated or determined vary from those
utilized by a court when evaluating an insurer's so-termed "ongoing duty to defend" in a declaratory
judgment action such as the one before the Court in the case at bar – nor, for that matter, do they
suggest that there is any distinction between such so-termed duties.
2.

Plaintiff's So-Termed "Ongoing Duty to Defend"

It similarly appears that the "ongoing duty to defend" to which Plaintiff refers is the issue of
whether and to what extent an insurer must continue its defense of an insured after the insurer has
initially taken up such a defense under a reservation of rights. It is the legal standard for this latter
category of an insurer's duty to defend, to the extent that it is a distinct category at all – a notion to
which this Court does not subscribe – that a court would presumably utilize in a declaratory
judgment action such as the case at bar. However, although Plaintiff fashions and seeks to apply
distinct terms for two allegedly different categories of an insurer's duty to defend, there is little
question that under the law of Connecticut, the standards and criteria by which a court evaluates
either an insurer's so-termed "initial" or "ongoing" duty to defend are in fact exactly the same.
As stated supra, Plaintiff does not dispute the general rule that an "insurer may not refuse the
tendered defense of an action unless a comparison of the policy with the underlying complaint shows
on its face that there is no potential for coverage." EDO Corp. v. Newark Ins. Co., 898 F. Supp. 952,
961 (D. Conn. 1995) (emphasis added) (citation omitted). However, Plaintiff contends that the

10

See also, e.g., Plaintiff's discussion of United Services Auto. Ass'n v. Marburg, 1995
WL 643163 (Conn. Super. Oct. 25, 1995) and St. Paul Fire and Marine Ins. Co. v. Shernow, 22
Conn. App. 377 (1990), in Plaintiff's Opposition to Motion for Summary Judgment, [Doc. 39] at
4-5.
22

standards of an insurer's duty to continue defending its insured are somehow different and distinct
at a declaratory judgment stage, post-assumption of the defense under a reservation of rights, from
those that are applicable to an insurer's duty to defend its insured at the outset of an underlying
action.
There is simply no basis for Plaintiff's claim, or the distinction that Plaintiff seeks to make,
under Connecticut law. Three recent court rulings, two issued by this Court and one issued by the
Connecticut Superior Court, illustrate this point. For example, in Middlesex Ins. Co. v. Mara, 699
F.Supp.2d 439, decided by this Court in 2010, the Court was presented with a declaratory judgment
action which, as is the case in the case at bar, sought to determine whether an insurer which had
already undertaken a defense of its insured under a reservation of rights had a continuing duty to
defend its insured in light of Connecticut standards of an insurer's duty to defend. In its ruling, the
Court stated without reservation: "[I]t is the allegations of the [underlying] complaint that
[were]determinative" of an insurer's continuing duties to defend its insured, "and not the merits of
those allegations." 699 F. Supp. 2d 439, 449n.12 (D. Conn. 2010) (emphasis added). Contrary to
Plaintiff's contention, this opinion, written only two years ago, contained no special standard for a
so-termed "ongoing duty to defend" that required the examination of facts outside the underlying
complaint; on the contrary, the standard that the Court applied was identical to standards applied in
all other Connecticut law-based judicial determinations of an insurer's duty to defend, regardless of
whether a defense of the insured had already been undertaken by the insurer under a reservation of
rights.
Another decision issued by this Court in 2007, The Burlington Insurance Company v.
DeVesta d/b/a Carpentry Concepts, et al., 511 F.Supp. 2d 231, also illustrates this point. There, a
23

liability insurer brought a declaratory judgment action seeking a determination that it had no duty
to defend or indemnify its insured against the third-party claims for which the insurer was already
providing a defense under a reservation of rights. 511 F.Supp. 2d 231, 232 (D. Conn. 2007). As was
the case in Middlesex Ins. Co. v. Mara, although the Court was seeking to determine the insurer's
ongoing duty to defend its insured in the underlying action, and not its initial duty to take up this
defense, the Court nonetheless looked solely to what was "found within the four corners of the
[underlying] complaint." Id. at 234. Quoting the 1998 Second Circuit decision in Stamford
Wallpaper Co., Inc. v. TIG Ins., 138 F.3d 75, this Court stated that "[u]nder Connecticut law, an
insurer's duty to defend is broader than its duty to indemnify. The general rule is that if an allegation
of the [underlying] complaint falls even possibly within the coverage, then the insurance company
must defend the insured ... [and] it is the contractual duty of the insurer to defend the insured in that
action regardless of the duty of the insurer to indemnify." Id. at 233 (quoting Stanford Wallpaper
Co., Inc. v. TIG Ins., 138 F.3d 75, 79 (2d Cir. 1998) (emphasis added)). Thus the Court neither
considered nor applied any special standard for a so-termed "ongoing duty to defend."
Similarly, in New London County Mut. Ins. Co. v. Buckley, 2010 WL 745415, decided in
2010, the Connecticut Superior Court reviewed and ruled upon a declaratory judgment action
brought by an insurance company which, exactly like Plaintiff Vermont Mutual in the case at bar,
had adopted a defense of its insured under a reservation of rights. The Connecticut Superior Court
stated that the plaintiff "insurer's duty to defend [was to be] measured by the allegations of the
complaint," and accordingly that "if the complaint sets forth a cause of action withing the coverage
of the policy, the insurer must" continue to defend. 2010 WL 745415 at *1 (Conn. Super. January
26, 2010) (emphasis added) (quoting Hartford Cas. Ins. Co. v. Litchfield Mut. Fire. Ins. Co., 274
24

Conn. 457, 464 (2005)). Just as with the District Court's decisions issued in Middlesex Ins. Co. v.
Mara and The Burlington Insurance Company v. DeVesta d/b/a Carpentry Concepts, et al., despite
the fact that an insurer had already adopted a defense of its insured prior to the bringing of the
declaratory judgment action and was subsequently seeking a determination of whether it was
required to continue defending its insured, the Connecticut Superior Court in New London County
Mut. Ins. Co. v. Buckley made no mention of an alternative standard for the insurer's duty to defend
and, on the contrary, restated the standard Connecticut duty to defend language, which rests solely
upon the allegations found in the underlying complaint.
Notably, while there certainly have been situations in which insurers did agree to tender
defenses of their insureds under a reservation of rights, as Plaintiff has done in the case at bar, and
were subsequently declared by a court not to have any such duty to defend, such judicial conclusions
were based on the allegations contained in the underlying complaints as read in conjunction with
the language contained in the relevant insurance policies, not on outside evidence or information.
In such cases, the courts were essentially reasoning that since the insurers had never had a duty to
defend their insureds in the relevant matters, these insurers ought to be relieved of any ongoing
burden of defending, which had been adopted unnecessarily at the outset.
For example, this Court held that the plaintiff insurer in The Burlington Insurance Company
v. DeVesta d/b/a Carpentry Concepts, et al. had no duty to defend its insured against an underlying
third-party complaint which did "not allege an injury that [fell] within the coverage" of the relevant
insurance policy. The Burlington Insurance Company v. DeVesta d/b/a Carpentry Concepts, et al.,
511 F.Supp. 2d at 234 (emphasis added). Similarly, in Middlesex Ins. Co. v. Mara, this Court found
that a plaintiff insurance company had no duty to defend its insured due to the fact that all of the
25

allegations made in the underlying complaint fell under exclusions that were contained within the
relevant insurance policy. Middlesex v. Mara, 699 F. Supp. 2d at 461-62. In each of these cases,
the Court was essentially ruling at a declaratory judgment stage that the plaintiff-insurers had never
had a duty to defend their insureds because the allegations made in the third-party complaints did
not fall under the applicable insurance policies.
Indeed, as discussed in greater detail infra, under Connecticut law, for any determination of
a duty to defend, "[t]he relevant question is whether the party claiming coverage is an insured party
in the capacity in which he was sued" – i.e., with narrow exceptions addressed infra, whether the
allegations of the underlying complaint fall within the four corners of the insurance policy. Hartford
Casualty Ins. Co. v. Litchfield Mutual Fire Ins. Co, 274 Conn. 457, 464 (2005). This is the proper
question regardless of whether a defense has been adopted by an insurer under a reservation of rights.
Thus, contrary to Plaintiff's assertions that a fact-based inquiry is appropriate when determining an
insurer's so-termed "ongoing" duty to defend (i.e., a duty to defend its insured subsequent to the
insurer's assumption of that defense under a reservation of rights), part of the very distinction that
Connecticut courts have always made between the duty to defend and the duty to indemnify with
narrow exceptions not applicable here is that "while the duty to defend depends only on the
allegations made against the insured, the duty to indemnify depends upon the facts established at trial
and the theory under which judgment is actually entered in the case." DaCruz v. State Farm Fire
and Casualty Company, 268 Conn. 675, 688 (2004) (quoting Board of Education of City of
Bridgeport v. St. Paul Fire & Marine Ins. Co., 261 Conn. 37, 48-49 (2002)).

26

B.

Under Connecticut Law an Insurer's Duty to Defend Cannot be Defeated by
Facts or Allegations External to those Contained within the Underlying
Complaint

Connecticut courts have consistently held that, with narrow and non-applicable exceptions
addressed infra, the "duty to defend an insured arises if the complaint states a cause of action which
appears on its face to be within the terms of the policy coverage. Because the duty to defend has a
broader aspect than the duty to indemnify ..., [if] an action ... falls even possibly within the coverage,
then the insurance company must defend the insured." Imperial Casualty and Indemnity Company
v. State, 246 Conn. 313, 323-24 (1998) (emphasis added) (citations and internal quotation marks
omitted); see also Comty. Action for Greater Middlesex County, Inc. v. American Alliance Insurance
Company, 254 Conn. 387, 399 (2000) (Should "an allegation of the complaint fall[] even possibly
within the coverage, then the insurance company must defend the insured.").
The existence of a duty to defend is therefore based solely upon the information and
allegations contained "within the four corners of the [underlying] complaint." Stamford Wallpaper
Company v. TIG Ins., 138 F.3d 75, 79 (2d Cir. 1998) (applying Connecticut law). This obligation
"does not depend on whether the injured party will successfully maintain a cause of action against
the insured but [instead] on whether he has, in his complaint, stated facts which bring the injury
within coverage." Flint v. Universal Machine Company, 238 Conn. 637, 646 (1996). "In construing
the duty to defend as expressed in an insurance policy, [t]he obligation of the insurer to defend" rests
on whether the underlying complaint "stated facts which bring the injury within the coverage."
Hartford Cas. Ins. Co. v. Litchfield Mutual Fire Ins., 274 Conn. 457, 463 (2005) (citations and
internal quotation marks omitted). "It necessarily follows that the insurer's duty to defend is
measured by the allegations of the complaint .... Hence, if the complaint sets forth a cause of action
27

within the coverage of the policy, the insurer must defend." Id. (citations and internal quotation
marks omitted).
Under Connecticut law an insurer is obligated to defend its insured against such a complaint
even when it is privy to information that suggest that those allegations in the complaint that bring
the injury within coverage are false. "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." QSP, Inc. v. Aetna Casualty & Surety Co., 256 Conn. 343, 352 (2001); American States
Insurance Company v. Allstate Insurance Company, 2003 WL 22960369 at *4 (Conn. Super. Nov.
13, 2003) (same).
It is therefore "irrelevant that the insurer may get information from the insured, or from any
one else, which indicates, or even demonstrates, that the injury is in fact not covered." Hartford Cas.
Ins. Co. v. Litchfield Mut. Fire. Ins. Co, 274 Conn. at 463. Even when outside facts suggest that an
injury or occurrence does not fall within the coverage provided by the relevant insurance policy, it
is solely an injured party's "claim which determines the insurer's duty to defend; and it is irrelevant
that the insurer may get information from the insured, or from any one else, which indicates, or even
demonstrates, that the injury is not in fact covered." Missionaries of the Company of Mary, Inc. v.
The Aetna Casualty and Surety Company, 155 Conn. 104, 112 (1967) (quoting Lee v. Aetna Casualty
& Surety Co., 178 F.2d 750 (2d Cir. 1950) (emphasis added) (internal quotation marks removed)).
"The seriousness with which the courts take this duty is exemplified by the fact that the duty
to defend must be exercised regardless of whether the original suit is totally groundless or regardless
of whether, after full investigation, the insurer got information which categorically demonstrates that
28

the alleged injury is not in fact covered." Krevolin v. Dimmick, 39 Conn. Supp. 44, 48 (Conn. Super.
1983). The only "relevant question is whether the party claiming coverage is an insured party in the
capacity in which he was sued." Hartford Cas. Ins. Company v. Litchfield Mut. Fire. Ins. Co., 274
Conn. at 464. An insurance company's "contractual duty to defend its insured must be exercised by
the insurer irrespective of the insurer's ultimate liability to pay a judgment under its policy, so long
as the allegations of the complaint fall within its coverage." Krevolin v. Dimmick, 39 Conn. Supp.
at 48.
To be sure, Connecticut law does occasionally allow an insurer to look outside the
allegations made in an underlying complaint in order to establish a duty to defend. But such
"[e]xtrinsic evidence may be considered" solely "in determining whether the duty to defend exists
under the circumstances of a particular case" – not in determining that this duty does not exist – and
therefore is not relevant in the case at bar, in which Plaintiff Vermont Mutual seeks to narrow, rather
than broaden, the scope of its potential duty to defend. Fortin v. Hartford Underwriters Insurance
Company, 2005 WL 1083800 at *3 (Conn. Super. April 6, 2005). Thus while there may be cases
in which an insurer has access to additional facts that supplement the complaint so as to trigger a
duty to defend, "an insurer may not use extrinsic evidence to defeat its duty to defend if the claim is
potentially covered when reference is made to the underlying complaint and insurance policy alone."
Id. (emphasis added). This distinction was forcefully made by District Judge Droney (as he then
was) in Nationwide Mutual Insurance Co. v. Mortensen, 222 F.Supp. 2d 173, 181 (D. Conn. 2002).
Judge Droney there observed:
[I]n certain circumstances, a court may consider known or
discoverable facts and other extrinsic evidence in determining
whether the insurer has a duty to defend. This exception to the "four
29

corners" rule is applied when the allegations of a complaint indicate
a lack of coverage, but the insurer possesses extrinsic information,
obtained through its own investigation, that the claims are in fact
covered.
(citations and some internal quotation marks omitted). The case at bar presents the converse: the
allegations of Martinez's complaint indicate coverage, not its lack, and the extrinsic information
Plaintiff professes to have is offered to show that Martinez's claims are not covered, rather than that
they are.
Accordingly, the Court finds that Plaintiff Vermont Mutual's argument that it ought to be
permitted to bring facts outside the four corners of the Underlying Complaint before this Court in
order to defeat its contractual duty to defend does not and cannot succeed unless there is specific
language present in the Policy between Plaintiff and Defendants that serves to preclude coverage of
the allegations contained in the Underlying Complaint.
C.

The Insurance Policy as Construed under Connecticut Law

Given Connecticut law regarding an insurer's duty to defend its insured – i.e., that such a duty
is with narrow and inapplicable exceptions based upon allegations as made in an underlying
complaint as read in conjunction with the relevant insurance policy – what remains to be determined
in this DJA is whether there is either: (1) any specific contractual language in the Policy that either
limits the scope of Plaintiff's duty to defend Defendants to solely those occurrences for which
Plaintiff would also be required to indemnify them; or (2) any specific Policy exclusion that applies
to the facts as alleged in the Underlying Complaint and has the effect of precluding Plaintiff's duty
to defend Defendants.

30

1.

The Specific Duty to Defend Language Contained within the Policy

To the extent that Plaintiff is arguing that its duty to defend is limited by the language of the
insurance policy to solely those occurrences for which Plaintiff would also be required to indemnify
Defendants (which would necessitate an examination of facts outside the language of the Underlying
Complaint as such an inquiry is necessary in order to determine Plaintiff's duty to indemnify), the
Court disagrees. The Court finds nothing within the Policy that confines Plaintiff's duty to defend
in such a way.
Under its Policy with Defendants, Vermont Mutual agrees that while it "will have the right
and duty to defend the insured against any 'suit' seeking ... damages,"Vermont Mutual "will have no
duty to defend the insured against any 'suit' seeking damages for 'bodily injury' ... to which this
insurance does not apply." [Doc 37-3] at 59. Vermont Mutual quotes this language in a seeming
attempt to demonstrate that, under the specific contractual language and terms of the Policy, its
"ongoing defense obligation does not extend beyond claims that actually fall within the Policy's
coverage, as determined through this coverage action." Vermont Mutual's Opposition to Motion for
Summary Judgment, [Doc. No. 39] at 3-4.
Reading the insurance policy contract in its entirety, as it must do under Connecticut law, see,
e.g., Philbin Bros., LLC v. Hartford Fire Ins. Co., 2008 WL 5540428 (Conn. Super. Dec. 11, 2008),
the Court does not agree with Plaintiff's analysis of the Policy language, which the Court finds to be
clear and unambiguous. The Policy explicitly defines the term "suit" to mean: "a civil proceeding
in which damages because of 'bodily injury' ... to which this insurance applies are alleged." [Doc.
37-3] at 72 (emphasis added). In light of this definition, the Court finds that the Policy's bodily
injury-related statement that Plaintiff has "no duty to defend the insured against any 'suit' seeking
31

damages for 'bodily injury' ... to which this insurance does not apply" is most readily and
appropriately understood to mean that Plaintiff has no duty to defend its insured against suits that
do not allege, in their complaints, facts that would fall under the insurance policy – and which
therefore by definition do not seek damages that are covered under the Policy. That common sense
interpretation does not apply to the case at bar, since Martinez fell from the roof on a date within the
policy period, and he alleges bodily injuries suffered in consequence.
Accordingly, the Court finds that there is no language in the insurance policy that in any way
alters the general application of the duty to defend under Connecticut law, under which a liability
insurer has a duty to defend its insured in a pending lawsuit if the underlying 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." QSP, Inc. v. Aetna Casualty & Surety Co., 256 Conn. 343,
352 (2001).
On their face, the facts alleged in the Underlying Complaint do place the Underlying Action
squarely within the insurance policy's coverage unless, as discussed infra, one of the Policy
exclusions to which Plaintiff points in Counts Three and Five of Plaintiff's DJA does in fact preclude
coverage when read in conjunction with the facts Martinez alleges in the Underlying Complaint.
Plaintiff Vermont Mutual claims that two separate Policy exclusion provisions, one for employer's
liability and one for professional services liability, both separately and apart serve to preclude
coverage for Defendants in the Underlying Action. The Court addresses each of these Policy
exclusions in turn.

32

2.

Employer's Liability Exclusion

The Third Count of Plaintiff's Motion for Declaratory Judgment contends that Vermont
Mutual has no duty to defend Defendants in the Underlying Action because bodily injury involving
an "employee" of the insured is excluded from the insured's business liability coverage under the
insurance policy. See Motion for Declaratory Judgement, [Doc. No. 1] at 7-8. Plaintiff avers that,
upon information and belief based upon facts external to the DJA Complaint, Mr. Martinez was in
fact an employee of Defendant Ciccone and, therefore, that the damages that he seeks in his
underlying action are "excluded from coverage by virtue of the Policy's exclusion for Employer's
Liability." Id. at 7. However, as discussed supra, the Court does not consider these claims and
alleged facts, as under Connecticut law they are immaterial to the Court's inquiry of whether Plaintiff
owes Defendants a duty to defend in the Underlying Action. Rather, the Court solely applies the
facts as alleged in the Underlying Complaint to the terms and language of the insurance Policy's
employer's liability exclusion.
As a preliminary matter, nothing in the Underlying Complaint directly states that Defendants
were Martinez's employers. On the contrary, Count Two of the Underlying Complaint, entitled
"Negligent Selection of Independent Contractor," states that "[if Martinez was] an employee of an
independent contractor named Javier Rivera, [Defendants were] negligent in the selection of the
independent contractor." [Doc. 55] at 140. The Underlying Complaint alleges immediately
thereafter that Defendants' "decision to utilize Javier Rivera for the construction [in which Martinez
was allegedly injured] was without adequate thought, investigation and exploration of the ability of
the persons employed by him to carry out the varied functions of the task with due regard to safety
and familiarity with ... work place safety standards." Id. It also alleges that "neither Javier Rivera
33

nor the workers under his employ possessed the minimum skill levels to conduct the work in a safe
manner," and that the "Defendants also failed to reconsider their selection of Javier Rivera
notwithstanding his regular absence, as well as multiple visible safety hazards." Id. at 141. The
Court finds that on the surface and giving the Underlying Complaint a plain reading, it appears that
the Underlying Complaint assumes that Martinez was Rivera's employee. The Court further notes
that, if Martinez were not alleging in the Underlying Complaint that he was Rivera's employee, rather
than Defendants' employee, Count Two of the Underlying Complaint would have no purpose and,
indeed, be moot.
In order to demonstrate that Defendant Ciccone was Martinez's employer despite the most
clear and obvious reading of the Underlying Complaint, Plaintiff Vermont Mutual raises issues
concerning a series of allegations in the Underlying Complaint that, in Plaintiff's reasoning, suggest
that an argument could be made that Defendants were in fact Martinez's employers. Such allegations
include statements claiming that Defendant Ciccone "would personally exert direct or concurrent
supervisory control of the work site and construction premises" and that Defendants "exercised
possession and control of the work site ... including providing some [fall protection] harnesses."
Plaintiff's Supplemental Brief [Doc. 50] at 4. From this, Plaintiff concludes that the allegations in
the Underlying Complaint "taken as a whole ... describe the Ciccone defendants as having total
control over the site, workers, and work conditions at the site." Id. at 6. Without citing any
applicable Connecticut law regarding what evidence of supervision or control over a worker is
necessary to establish or demonstrate an employer-employee relationship, Vermont Mutual instead
claims that the allegations in the Underlying Complaint "raise the likelihood that [external] facts
(not allegations) will show that one or more of the Ciccone defendants was Martinez's employer."
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Id. (emphasis added). The Court again notes, however, that as discussed at length supra, the Court
may not take facts external to those presented in the Underlying Complaint into consideration in its
evaluation of Plaintiff's duty to defend. Rather, the Court is limited to the facts as alleged in the
Underlying Complaint as read in conjunction with the Policy and potentially relevant exclusions
therein.
Further, Plaintiff Vermont Mutual must meet a higher burden of proof than merely
demonstrating that, in Plaintiff's own words, there is a "likelihood that facts" external to the
Underlying Complaint "will show that" a Policy exclusion applies and therefore obviates Plaintiff's
duty to defend Defendants in the Underlying Action. Id. (emphasis added). Under Connecticut
law, "when an exclusion clause is relied upon to deny coverage, the insurer has the burden of
demonstrating that the allegations of the [underlying] complaint cast that pleading solely and entirely
within the policy exclusions, and, further, that the allegations, in toto, are subject to no other
interpretation." Nationwide Mut. Ins. Co. v. McHugh, 2001 WL 1706752 at *3 (Conn. Super. 2001
Dec. 19, 2001) (emphasis added) (citation omitted); see also, e.g., R.E.O., Inc. v. Travelers
Companies, 1998 WL 285836 at *5 (Conn. Super. May 20, 1998); Mikolinski v. Cumberland Mut.
Fire Ins. Co., 1997 WL 723429 at *4 (Conn. Super. Nov. 10, 1997). Simply put, an insurer therefore
"bears the 'burden of establishing that the [allegations of the] underlying complaint' demonstrate that
an exclusion applies." Nationwide Mut. Ins. Co. v. Pools by Design, Inc., 2009 WL 1663934 at *3
(Conn. Super. May 26, 2009) (quoting Buell Industries, Inc. v. Greater New York Mutual Ins. Co.,
259 Conn. 527, 552 (2002) and citing Liberty Mut. Ins. Co. v. Lone Star Indus., Inc., 290 Conn. 767,
807 (2009)). Courts have readily acknowledged that this is a "heavy burden" for an insurer to meet,
EDO Corp. v. Newark Ins. Co., 878 F. Supp. 366, 372 (D. Conn. 1995), as if the allegations
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contained within an underlying complaint fall "even possibly within the coverage" – i.e., and
therefore even possibly outside of the relevant insurance policy exclusions – an insurer must defend.
Nationwide Mut. Ins. Co. Pools by Design, Inc., 2009 WL 1663934 at *3 (citation omitted).
In the case at bar, the Court finds that the allegations contained in the Underlying Complaint
are more than sufficient to support the interpretation that Martinez was solely an employee of the
subcontractor Rivera's, and not Defendant Ciccone's employee. Because this reading of the
Underlying Complaint is reasonable – and, if anything, the most obvious interpretation of the
allegations contained therein – the Court need not and does not apply relevant law on what degree
of control is necessary to constitute an employer-employee relationship to the facts as presented in
the Underlying Complaint. The reason for this is simple: even if relevant law provided an excellent
argument for the conclusion that, under the allegations of the Underlying Complaint, Martinez was
Defendants' employee in addition to or instead of being Rivera's employee – and the Court takes no
position on whether an examination of the law would render such a result – nonetheless this would
still be insufficient to meet Plaintiff's burden, which may only be met should the allegations not
possibly be "subject to [any] other interpretation." Id. (citation omitted). Regardless of any facts
external to the Underlying Complaint (which the Court does not and cannot consider for this
purpose), the Court finds that Plaintiff has not met its burden in demonstrating that the Policy's
employer's liability exclusion clause when read in conjunction with the Underlying Complaint
precludes Plaintiff's duty to defend Defendants in the Underlying Action.
The Court further notes that Plaintiff Vermont Mutual appears to agree that the Underlying
Complaint may be reasonably read to state that Martinez was not an employee of the Defendants,
but rather of Rivera. Plaintiff acknowledges in its briefing that the Underlying Complaint had been
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"artfully drafted to avoid the Policy's Employer's Liability exclusion." [Doc. 50] at 6. Moreover,
when applying the universal standard for an insurer's duty to defend under Connecticut law (which
Plaintiff mistakenly claims only applies to an insurer's so-termed "initial duty to defend," as
addressed supra), Plaintiff readily and repeatedly admits that it "is uncontested" that such a standard
has been met in the case at bar, Id. at 7, going so far as to state that the Underlying Complaint has
not only "been artfully drafted to trigger" this duty, Id. at 2, but does in fact "trigger" it. Id. at 1. The
Court, Plaintiff, and Defendants are thus in agreement that the allegations contained in the
Underlying Complaint can be read in such a way as to state that Martinez was Rivera's employee and
not Defendant's employee – a fact that under Connecticut law in and of itself precludes any
application of the Policy's employer's liability exclusion.
3.

Professional Services Exclusion in the Policy

In the Fifth Count of its Motion for Declaratory Judgment, Vermont Mutual contends that
it is "entitled to a declaration that it does not have a duty to indemnify" Defendants because the
monetary damages sought by Mr. Martinez are excluded from coverage by virtue of the insurance
policy's exclusion for Professional Services. [Doc. 1] at 8-9. Under the insurance policy's business
liability coverage exclusion, damages for bodily injury "due to rendering or failure to render any
professional service," including "[s]upervisory, inspection or engineering services" are exempted
from coverage. [Doc. 37-3] at 63.
The same principles of law cited supra with regard to insurance policy exclusions precluding
an insurer's duty to defend its insured are applicable here – which is to say, "when an exclusion
clause is relied upon to deny coverage, the insurer has the burden of demonstrating that the
allegations of the [underlying] complaint cast that pleading solely and entirely within the policy
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exclusions, and, further, that the allegations, in toto, are subject to no other interpretation."
Nationwide Mut. Ins. Co. v. McHugh, 2001 WL 1706752 at *3 (Conn. Super. 2001 December 19,
2001) (emphasis added) (citation omitted); see also, e.g., R.E.O., Inc. v. Travelers Companies, 1998
WL 285836 at *5 (Conn. Super. May 20, 1998); Mikolinski v. Cumberland Mut. Fire Ins. Co., 1997
WL 723429 at *4 (Conn. Super. November 10, 1997).
Plaintiff cites no applicable law regarding Connecticut interpretations of professional liability
exclusions or their relevance to the allegations made in the Underlying Complaint. Rather, Plaintiff
states that "[i]n short, the Policy's Professional Services ... exclusion[] potentially bar[s] coverage
for each count of Martinez's Revised Complaint." [Doc. 50] at 7 (emphasis added) – and,
specifically, that "the Policy's Professional Services exclusion potentially bars coverage for
Martinez's claims in full." Id. at 5. As with the application of the employer's liability exclusion
above, Plaintiff is using an inapposite standard – Vermont Mutual's burden is not to demonstrate that
the Professional Services exclusion could bar a duty to defend; Vermont Mutual's burden is to
unequivocally demonstrate that there is no way to read the allegations in the Underlying Complaint
without reaching such a conclusion.
Plaintiff does not and cannot meet this high burden with regard to the Professional Services
Policy exclusion. While allegations in the Underlying Complaint do suggest that Defendant Ciccone
was playing a supervisory role at the worksite at which Martinez claims he was injured (e.g.,
"Ciccone ... would personally exert direct or concurrent supervisory control of the worksite and
construction premises ..." [Doc. 55] at 34), and while consequently the Underlying Complaint may
be read to state that Defendant Ciccone, a property owner with some alleged degree of construction
knowledge, was participating in the supervision of work on his property, the Court notes that the
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Policy's language concerning the Professional Services exclusion concerns damages or injuries that
are the result of an insured Defendant's "rendering or failing to render" any Professional Service.
[Doc. 37-3] at 63 (emphasis added). The word "render" as used in the English language and as
generally understood clearly implies a second party to whom something (in this case a service) is
"rendered."
The legal "standard with respect to a policy's professional services exclusion is less explicitly
stated under Connecticut law" than the standards applicable to some other insurance policy
exclusions. Berardino v. Hartford Underwriters Ins. Co., 2012 WL 1222356 at *6 (Conn. Super.
March 13, 2012). However, it appears that the "determinative question" in interpreting the
professional services exclusion in an insurance policy "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." National Grange Mutual Ins. Co. v. Santaniello, 290 Conn. 81, 88
(2009); see also Berardino v. Hartford Underwriters Ins. Co., 2012 WL 1222356 at *6-7 (quoting
and analyzing same). As discussed supra, Connecticut law holds that in cases in which there is "any
ambiguity in the terms" of an insurance policy, such ambiguous terms ought to be construed in the
insured's favor. Hartford Casualty Ins. Co. v. Litchfield Mutual Fire Ins. Co, 274 Conn. 457, 463
(2005); MH Lipiner & Son, Inc. v. Hanover Ins. Co., 869 F.3d 685, 687 (2d Cir. 1989); see also
Clinton v. Aetna Life & Sur. Co., 41 Conn. Super. 560, 563 (Conn. Sup. 1991) (any "ambiguous
words or phrases in an insurance policy [ought to be] construed against the insurance company and
in favor of coverage."). Accordingly, the Court's goal here is to interpret the use of the language of
the Professional Services exclusion as included within the Policy, including its use of the word
"render," as would "a layman, rather than [as by] an experienced underwriter." Jurrius v. Maccabees
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Mut. Life Ins. Co., 587 F. Supp. 1301, 1305 (D. Conn. 1984). In other words, the Court must apply
a "test of coverage" that seeks to determine "not what the insurer intended to cover but what a
reasonable person in the position of the insured would understand to be covered." Clinton v. Aetna
Life & Sur. Co., 41 Conn. Supp. at 563.
As a preliminary matter, Court finds that the word "render" is too readily and clearly
understood to mean that services ought to be rendered to a party other than the insured to apply it
to the vague supervisory allegations made within the Underlying Complaint, which in a light most
favorable to Plaintiff in this regard would be read as Defendant Ciccone rendering supervisory
construction services to himself. The Court does not find it at all convincing that a property owner
could render his professional services to individuals working on his property for him, either directly
or as employees of a subcontractor, and Plaintiff has cited no case or precedent to indicate that the
Court should find otherwise. Thus, due to the laws governing contract interpretation and due to the
possibility of an interpretation of the Underlying Complaint that does not understand Defendant
Ciccone to have been rendering "professional services" in the circumstances surrounding Martinez's
alleged injury, the Court holds that Plaintiff Vermont Mutual does not and cannot demonstrate that
the Professional Services exclusion in its Policy with Defendants defeats Plaintiff's duty to defend
Defendants in the Underlying Action.
IV.

Conclusion
For the forgoing reasons, Defendants' Motion for Summary Judgment [Doc. 37] on Counts

Three and Five of Plaintiff's Complaint for Declaratory Judgment [Doc. 1] is GRANTED in all
respects.

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The Clerk is directed to enter judgment in favor of the Defendants and each of them, and
against the Plaintiff, dismissing Counts Three and Five of the Complaint with prejudice.
It is SO ORDERED.

Dated: New Haven, Connecticut
October 22, 2012
/s/ Charles S. Haight, Jr.
_
Charles S. Haight, Jr.
Senior United States District Judge

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