Opinion
No. CV 02-0079606-S
February 24, 2004
MEMORANDUM OF DECISION RE DEFENDANT, NATIONAL UNION FIRE INSURANCE COMPANY'S, MOTION FOR SUMMARY JUDGMENT — #117
The matter before the Court is the motion for summary judgment filed by the defendant, National Union Fire Ins. Co. (herein, National Union), on June 5, 2003 and bearing to Court's motion#117.
The plaintiffs, Duane England, Joanne England and Troy England, a minor, filed the operative one-count complaint on October 2, 2002. The plaintiffs seek a declaratory judgment to determine whether their liability claim which arises out of an accident that occurred on or about August 9, 1994, and which is the subject of an action pending before a federal district court, is covered under the terms of the policies issued by the three corporate defendants, National Union, Royal Insurance Company of America (Royal) and TIG Insurance Company (TIG).
Troy England appears in this action through his parents, Duane and Joanne England, who are also plaintiffs.
The court notes that the operative complaint names the following defendants: Reliance Insurance Company (Reliance), M. Diane Koken (Koken), Royal Insurance Company of America (Royal), TIG Insurance Company (TIG), National Union Fire Ins. Co. (National Union), John Casciano and M.E. Medaglia. On October 31, 2002, the plaintiffs withdrew their claim against Reliance and Koken.
The plaintiffs filed the underlying action, entitled England v. Hedstrom Corporation et al., Docket No. CV 97 01892, in the United States District Court for the District of Connecticut in 1997.
In that action, the plaintiffs sued Hedstrom Corporation (Hedstrom) and Sears Roebuck Co. (Sears) for damages for the injuries the minor plaintiff allegedly suffered as a result of an accident involving a swing set manufactured by Hedstrom.
The plaintiffs later withdrew their action as to Sears upon learning that Sears had not sold the replacement seat on the swing that Troy England had used.
In the present case, National Union filed an answer to the complaint and special defenses on March 10, 2003, and the present motion for summary judgment and the corresponding memorandum of law on June 5, 2003. In support of its motion, the defendant submitted unauthenticated copies of the following documents: (1) the plaintiffs' complaint in this action; (2) a stipulation and order entered by the United States Bankruptcy Court for the District of Delaware (Bankruptcy Court); (3) the Reliance policy; and (4) the National Union policy. The plaintiffs responded by filing a preliminary objection to these documents. In their objection, the plaintiffs maintain that because National Union did not properly authenticate the documents, they would be inadmissible evidence at trial, and therefore, cannot be used to support a motion for summary judgment. National Union then filed a reply on June 23, 2003, along with an affidavit by its counsel in which he purports to attest to the validity of the unauthenticated documents. The plaintiffs subsequently submitted a memorandum in opposition to the summary judgment motion dated November 2, 2003. In their memorandum, the plaintiffs do not raise an objection to National Union's attempt to authenticate the documents.
It should be noted that generally, "[o]nly evidence that would be admissible at trial may be used to support or oppose a motion for summary judgment." (Internal quotation marks omitted.) Great Country Bank v. Pastore, 241 Conn. 423, 436, 696 A.2d 1254 (1997); see also Practice Book § 17-46. "Uncertified or unauthenticated evidence does not constitute proof or documentary evidence upon which summary judgment may be based." Gordon v. Villegas, Superior Court, Judicial District of Fairfield at Bridgeport, Docket No. CV 90 270839 (March 10, 1994, Freedman, J.). The affidavit submitted by National Union's attorney does not comply with Practice Book § 17-46 and thus does not properly authenticate the documents at issue; "[a]ffidavits containing self-serving and unsubstantiated allegations need not be viewed as persuasive by the court." (Internal quotation marks omitted.) Brennan v. Culligan Water Services, Superior Court, judicial district of Waterbury, Docket No. CV 00 0160170 (June 10, 2002, Wolven, J.). While the court notes the plaintiffs' objection to National Union's submission of unauthenticated documents, the court nonetheless will consider the evidence due to the plaintiffs' failure to renew their objection following National Union's attempt to address it.
The following facts are undisputed and form the basis of this action. At the time of the underlying accident, Hedstrom had, inter alia, two policies of liability insurance. The primary policy was issued by Reliance and contained a $1,000,000 per occurrence limit of liability in excess of Hedstrom's retention of $100,000 per occurrence in self-insurance. Hedstrom also had an umbrella policy that was issued by National Union and contained a $25,000,000 per occurrence limit of liability on the excess of the amount recoverable under the primary policy. The insured on this policy was Arbor International, Inc. (Arbor), the corporate parent of Hedstrom. In 2000, Hedstrom filed a petition for bankruptcy under Chapter 11 of the federal Bankruptcy Code. By a stipulation and order rendered by the Bankruptcy Court on August 14, 2000, the plaintiffs were allowed to proceed with their federal action on the condition that they would collect only from Hedstrom's insurers and would not assert a claim against Hedstrom for any unsatisfied damages. On October 3, 2001, the Commonwealth Court of Pennsylvania placed Reliance in liquidation. Reliance, as Hedstrom's primary insurer, has made no payments toward the underlying claim. National Union argues that it is entitled to summary judgment under both Connecticut and New York law because it is not required to "drop down" to fill the gap in coverage created by the insolvency of the primary insurer, Reliance, and the bankruptcy of the insured, Hedstrom. The plaintiffs respond that under National Union's policy, it is required to provide coverage for the plaintiffs' claim.
A declaratory judgment action is a special proceeding under General Statutes § 52-29. See Echo Four v. Hill, 3 Conn. App. 118, 122, 485 A.2d 926, cert. denied, 195 Conn. 801, 487 A.2d 564 (1985). "The purpose of a declaratory judgment action . . . 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 . . ." (Internal quotation marks omitted.) Mannweiler v. LaFlamme, 232 Conn. 27, 33, 653 A.2d 168 (1995). "There is no question that a declaratory judgment 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, 577 A.2d 1093 (1990), aff'd, 222 Conn. 823, 610 A.2d 1281 (1992). The sole function of a trial court in a declaratory judgment action is to determine the rights of the parties under existing law. See Preston v. Connecticut Siting Council, 21 Conn. App. 85, 89, 571 A.2d 157, cert. denied, 215 Conn. 805, 574 A.2d 221 (1990).
General Statutes § 52-29(a) provides: "The Superior Court in any action or proceeding may declare rights and other legal relations on request for such a declaration, whether or not further relief is or could be claimed. The declaration shall have the force of a final judgment."
"The court may address the merits of a declaratory judgment action upon a motion for summary judgment." (Internal quotation marks omitted.) American Home Assurance Co. v. Stamford Propane, Inc., Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 95 0149399, 19 Conn. L. Rptr. 352, (March 7, 1997, D'Andrea, J.); see also United States Automobile Assn. v. Marbury, 46 Conn. App. 99, 102 n. 3, 698 A.2d 914 (1997). Summary judgment "shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." (Internal quotation marks omitted.) Webster Bank v. Oakley, 265 Conn. 539, 545, 830 A.2d 139 (2003); see also Practice Book § 17-49. The party moving for summary judgment "is required to support its motion with supporting documentation, including affidavits." Heyman Associates No. 1 v. Ins. Co. of Pennsylvania, 231 Conn. 756, 796, 653 A.2d 122 (1995).
"In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party." (Internal quotation marks omitted.) Appleton v. Board of Education, 254 Conn. 205, 209, 757 A.2d 1059 (2000). A "motion for summary judgment is designed to eliminate the delay and expense of litigating an issue when there is no real issue to be tried." Wilson v. New Haven, 213 Conn. 277, 279, 567 A.2d 829 (1989).
At the outset, the court must determine which state's law should govern the interpretation of the insurance contract. National Union contends that New York law should apply because National Union and its broker are located in New York and the policy was negotiated, procured and delivered to Arbor's broker in New York. The plaintiffs counter that National Union has not submitted evidence sufficient to overcome the presumption in favor of applying Connecticut law because there is no evidence in the record from which it can be determined the place the contract was made or negotiated or the domicile, residence, nationality and/or place of incorporation of the parties. Therefore, according to the plaintiffs, the only inferences that can be drawn are that on the policy at issue, Arbor is listed as being located in Connecticut and National Union in New York. Additionally, the plaintiffs contend that the place of performance of the contract is in all states because of its excess coverage. According to the plaintiffs, these inferences, when taken together, compel the conclusion that the court should apply Connecticut law in interpreting National Union's insurance policy.
National Union also concedes that Connecticut law might apply and that the result would be the same under the laws of either state.
Generally, if a contract does not contain a choice of law provision, "Connecticut's choice of law approach for contracts is the `most significant relationship' test of the Restatement (Second) . . . § 188." Reichhold Chemicals, Inc. v. Hartford Accident Indemnity Co., 252 Conn. 774, 781, 750 A.2d 1051 (2000). Because National Union's policy does not contain a choice of law provision, this court now analyzes Connecticut's approach to choice of law issues.
Our Supreme Court has determined that, in resolving choice of law issues in insurance coverage cases, Connecticut courts should use the analysis set forth in §§ 193, 188 and 6 of the Restatement (Second) of Conflict of Laws. See Reichhold Chemicals, Inc. v. Hartford Accident Indemnity Co., supra, 252 Conn. 781. "With respect to liability insurance contracts, the starting point is § 193 of the Restatement (Second) . . . which creates a rebuttable presumption in favor of the state where the insured risk is located. In order to overcome this presumption, another state's interest must outweigh those of the state where the insured risk is located and must be sufficiently compelling to trump the § 193 presumption. Section 6(2) of the Restatement (Second) . . . provides the criteria by which that overriding interest should be evaluated. It must be remembered that even if another state has a substantial interest under § 6(2), that interest will not defeat the § 193 presumption unless it is sufficiently compelling." (Emphasis added.) Id., 782.
A review of the relevant provisions of §§ 193, 188 and 6 of the Restatement (Second) of Conflict of Laws (Restatement) is required in the court's resolution of the choice of law issue. First, § 193 provides in part: "The validity of a contract . . . 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 during the term of the policy, unless with respect to the particular issue, some other state has a more significant relationship under the principles stated in § 6 to the transaction and the parties, in which event the local law of the other state will be applied." Second, § 6(2) of the Restatement "sets forth seven overarching considerations in determining which state has the `most significant relationship': `(a) the needs of the interstate and international systems, (b) the relevant policies of the forum, (c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue, (d) the protection of justified expectations, (e) the basic policies underlying the particular field of law, (f) certainty, predictability and uniformity of result, and (g) ease in the determination and application of the law to be applied.'" Reichhold Chemicals, Inc. v. Hartford Accident Indemnity Co., supra, 252 Conn. 783. Lastly, § 188(2) of the Restatement provides five contacts that should be "taken into account in applying the principles of § 6 . . . `(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 domicile, residence, nationality, place of incorporation and place of business of the parties.'" (Internal quotation marks omitted.) Id.
Mindful that § 193 of the Restatement establishes a special presumption in favor of application of the law of the jurisdiction that is the principal location of the insured risk, the court must determine the location of that risk in this case. "An insured risk, namely the object or activity which is the subject matter of the insurance, has its principal location . . . in the state where it will be during at least the major portion of the insurance period . . ." 1 Restatement (Second), supra, § 193, comment (1), p. 611. Here, the risk insured by National Union was for "personal injury, property damage or advertising liability" assumed by the insured. (Policy, § I, Coverage.) Essentially, the insured risk provided for by the policy was for damages resulting from liability. Pursuant to the terms of the policy, it applied to such risks occurring "anywhere in the world." (Policy, § A, Policy Territory.) Because the underlying suit for damages was brought against Hedstrom in Connecticut, that is the state where the insured risk is located. See generally, Lumbermen's Mutual Casualty Co. v. Dillon Co, Inc., Docket No. CV 98-2013, 2000 U.S. Dist. LEXIS 13330 (D.Conn. August 31, 2000) (location of insured risk was Connecticut where suit was brought). The plaintiffs rely on the determination in Lumbermen's to support their contention that Connecticut law applies to this action. This court finds the plaintiffs' reliance on Lumberman's is well founded, and accordingly, follows the reasoning set forth therein. In finding the location of the insured risk to be Connecticut, a rebuttable presumption arises in favor of the application of Connecticut law.
Section I of the defendant's policy entitled "Coverage" provides in part: "To pay on behalf of the Insured that portion of the ultimate net loss . . . which the Insured shall become legally obligated to pay as damages for liability imposed upon the Insured by law, or liability assumed by the Insured under contract."
In order to overcome this presumption, National Union must show that New York has both a significant relationship to the transaction, and the parties, and a substantial interest that outweighs that of Connecticut, which is sufficiently compelling. Reichhold Chemicals, Inc. v. Hartford Accident Indemnity Co., supra, 252 Conn. 782.
In analyzing the "most significant relationship" test, the court evaluates the seven considerations as delineated in § 6(2) of the Restatement and the five contacts listed in § 188(2) of the Restatement. As to the issue of whether an excess carrier is required to "drop down" to fill a coverage gap created by a primary carrier's insolvency, in Ambassador Associates v. Corcoran, 143 Misc.2d 706, 710, 541 N.Y.S.2d 715 (1989), New York has enunciated that it has a public policy interest in not allowing liability to be created on the part of an excess insurer when a primary insurance carrier becomes insolvent. The court reasoned that, "[w]ere the courts to impose upon excess insurers the risk of an underlying insurer's insolvency, it would, in effect, transmogrify the policy into one guaranteeing the solvency of whatever primary insurer the insured might choose." (Internal quotation marks omitted.) Id. It can be inferred, therefore, that it was not within the commercial or reasonable expectations of the insured that the excess carrier was to be the primary carrier in case of that carrier's insolvency. Because the defendant is located in New York; see Restatement (Second), supra, § 188(5); the application of New York law would further New York's public policy of not imposing liability upon excess insurers due to the insolvency of a primary insurer.
Connecticut, however, has an interest in the application of its law because the location of the insured risk is Connecticut, as previously determined. See 1 Restatement (Second), supra, §§ 188(2)(d) 193. Like New York, Connecticut has relied on the public policy that "the fundamental purposes of excess insurance . . . is . . . to protect the insured against excess liability claims, not to insure against the underlying carrier's insolvency." Dexter Corp. v. National Union Fire Ins. Co. of Pittsburgh, Pa., No. CV 00702, 1997 WL 289677, at *6 (D.Conn. March 12, 1997); but see Republic Ins. Co. v. North American Philips Corp., Superior Court, judicial district of Hartford-New Britain at Hartford, Docket No. 376040 (July 24, 1991, Purtill, J.) ( 4 Conn. L. Rptr. 331) ( 6 C.S.C.R. 753) (according to policyholders' expectations, it was reasonable to assume it was their intent to purchase a comprehensive plan of insurance protection in which excess insurer would drop down to fill a coverage gap). While most of the contacts listed in § 188 are absent in the present case, it is clear that Hedstrom's corporate parent is located in Connecticut and that the underlying action is pending in Connecticut.
On the basis of this comparison of the interests of New York and Connecticut, this court cannot conclude that New York's interests so substantially outweigh Connecticut's interests as to overcome the presumption of § 193 of the Restatement (Second), supra, that Connecticut law should apply. This court, therefore, concludes that Connecticut law should be applied to the "drop down" coverage issue.
Having determined that Connecticut law applies, the court proceeds to determine whether the motion for summary judgment should be granted. The issue presented by the summary judgment motion is whether, under the terms of the policy, National Union, as the umbrella or excess insurer, has a duty to "drop down" and fill a gap in coverage created by the insolvency of the primary insurer, Reliance, and the bankruptcy of Hedstrom, the insured. National Union claims the facts are undisputed and that its policy clearly: (1) states that its liability is in excess of the underlying policies and the $100,000 per occurrence self-insured retention obligation of Hedstrom; (2) requires the insured to maintain unimpaired and collectable primary insurance; (3) provides that its liability shall not be increased by the refusal or inability of an underlying insurer to pay as provided for in the drop down exclusion of the policy; and (4) provides that its liability shall not be increased by the refusal or inability of the insured to pay its self-insured retention.
The plaintiffs, however, contend that a plain reading of the policy confers coverage for the plaintiffs' claim. The plaintiffs claim the policy language in Republic Ins. Co. v. North American Philips Corp. is identical to the language in the policy in this case and because the court in Republic concluded that the umbrella carriers should drop down to fill a gap created by the insolvency of the carrier, the same result should be reached in the present case.
Under Connecticut law, "[a]n insurance policy is to be interpreted by the same general rules that govern the construction of any written contract and enforced in accordance with the real intent of the parties as expressed in the language employed in the policy . . . The determinative question 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 words in the policy are plain and unambiguous the established rules for the construction of contracts apply, the language, from which the intention of the parties is to be deduced, must be accorded its natural and ordinary meaning, and courts cannot indulge in a forced construction ignoring provisions or so distorting them as to accord a meaning other than that evidently intended by the parties." (Internal quotation marks omitted.) Peerless Ins. Co. v. Gonzalez, 241 Conn. 476, 481-82, 697 A.2d 680 (1997).
"Under well established rules of construction, any ambiguity in the terms of an insurance policy must be construed in favor of the insured because the insurance company drafted the policy . . . This rule of construction may not be applied, however, unless the policy terms are indeed ambiguous . . . Moreover, the mere fact that the parties advance different interpretations of the language in question does not necessitate a conclusion that the language is ambiguous." (Internal quotation marks omitted.) Pacific Indemnity Ins. Co. v. Aetna Casualty Surety Co., 240 Conn. 26, 30, 688 A.2d 319 (1997). "Although ordinarily the question of contract interpretation being a question of the parties' intent, is a question of fact . . . [w]here there is definitive contract language, the determination of what the parties intended by their contractual commitments is a question of law." (Internal quotation marks omitted.) Tallmadge Bros., Inc. v. Iroquois Gas Transmission System, L.P., 252 Conn. 479, 495, 746 A.2d 1277 (2000).
Applying the foregoing principles to the policy terms at issue in this case, there is no question that the express terms of the policy are unambiguous. Thus, the provisions must be given effect according to their ordinary meaning and may be reconciled by reasonable construction. The first relevant provision is Item 3 entitled "Limit of Liability" under the heading "Declarations," which states: "The limit of the Company's liability shall be as states herein subject to all the terms of this policy having reference thereto: (a) $25,000,000 Single Limit any one occurrence Personal Injury or Property or Advertising Liability or any combination thereof in Excess of (1) the amount recoverable under the underlying insurance as set out in the attached Schedule A or (2) $25,000 ultimate net loss in respect to each occurrence not covered by said underlying insurance." (Emphasis added.)
The second relevant provision is under the heading "Insuring Agreement," which provides in part: "I. COVERAGE. [The Company will] pay on behalf of the Insured that portion of the ultimate net loss in excess of the retained limit as hereinafter defined, which the Insured shall become legally obligated to pay as damages for liability imposed upon the Insured by law . . . because of (1) personal injury . . . as defined herein caused by an occurrence." (Emphasis added.)
The third relevant provision is the following: "LIMIT OF LIABILITY — RETAINED LIMIT. At all times during the policy period the insured shall maintain an unimpaired and collectable primary insurance. (A) The Company shall be liable only for that portion of the ultimate net loss excess of the Insured's retained limit defined as . . . (1) the total of the applicable limits of the underlying policies listed in the Schedule of Underlying Insurance hereof, and the applicable limits of any other underlying insurance providing coverage to the insured . . . and then up to an amount not exceeding the amount as stated in Item 3 (A) of the Declarations [$25,000,000] as the result of any one occurrence." (Emphasis added.)
The fourth relevant provision provides the following conditions: "6. Maintenance of Underlying Insurance. The policy or policies referred to in the attached `Schedule of Underlying Insurances,' and any renewal or replacement thereof not more restrictive, shall be maintained by the Insured in full effect during the currency of this policy without alteration of terms or conditions except for any reduction of the aggregate limit or limits contained therein solely by payment of claims. Failure of the Insured to comply with the foregoing shall not invalidate this policy but in the event of such failure, the Company shall only be liable to the same extent as it would have been had the Insured so maintained such policy or policies . . . 9. Other Insurance. If other valid and collectible insurance with any other insurance is available to the Insured covering a loss also hereunder, this insurance shall be in excess of, and shall not contribute with such other insurance."
Lastly, the fifth and largely dispositive provision is the "Drop Down Exclusion" found in Endorsement #6 of the policy, which provides: "The liability of the Company shall not be increased by the refusal or inability of the insured to pay its self-insured retention (or retained limit) or by the refusal or inability of any underlying insurer to pay, whether by reason of insolvency, bankruptcy or otherwise." (Emphasis added.)
The language of the policy, when read in its entirety, is clear and unambiguous. Liability on the part of the defendant attaches only when the limits of the underlying insurance have been exceeded. The phrases "in excess of the amount recoverable" and "in excess of the retained limit" contemplate that excess coverage is activated only when the loss exceeds the amount specified in the underlying policy. As stated earlier, Reliance's listed limit is $1,000,000 per occurrence and Hedstrom's listed limit is $100,000 per occurrence. (Policy, Schedule of Underlying Insurance.) Likewise, the language that the insured shall maintain unimpaired and collectable primary insurance dictates the same result and manifests the defendant's intent not to provide coverage beyond the excess coverage contracted for in the policy.
In further support of the defendant's intent not to step into the shoes of the underlying insurer to provide coverage when an underlying insurer becomes insolvent is the drop down exclusion. The drop down exclusion expressly states that the insolvency of the underlying insurer or the inability of the insured to pay its self-insured retention would not operate to increase the defendant's liability. The plain language of this exclusion indicates that the defendant did not intend or expect to provide "drop down" coverage due to an underlying insurer's insolvency, contemplated a situation like the one at hand and for this reason, specifically included this exclusion in its policy.
There is no appellate authority in Connecticut on the issue of whether an excess carrier must provide drop down coverage in the event of the insolvency of the underlying insurer. The Connecticut Superior Court case of Republic Ins. Co. v. North American Philips Corp., supra, 6 C.S.C.R. 753, relied upon by the plaintiffs, is distinguishable from the present case. In Republic, the court held that the policy language that stated that an excess insurer provided coverage in excess of the "amount recoverable under the underlying insurance" and in excess of the "underlying insurance collectible by the Insured," meant that the excess insurer intended to provide "drop down" coverage in the event the underlying insurer became insolvent. Id. This reasonable expectation of coverage, the court stated, "is reinforced by the fact that [the excess insurers] did not include in their policies language which specifically precluded drop down." Id. The policy in the present case, however, contains a drop down exclusion. Because the defendant specifically included a drop down exclusion in its policy that provided for a situation where the underlying insurer becomes insolvent, the plaintiffs cannot reasonably have expected that National Union intended to provide coverage for this claim.
This interpretation is supported by decisions in other states involving similar policy language where the courts have held that the excess carrier's coverage did not "drop down" when the underlying insurer became insolvent. In Linares v. Louisiana Dept. of Transportation and Development, 582 So.2d 879, 883-84 (La.App. 4thCir. 1991), for example, the court made this determination based upon the policy's express language that the insolvency of the insured or any insurer would not operate to increase the excess insurer's liability or share of liability under the policy and that in no event would the excess carrier assume the obligations of the insured or any insurer. In J. Kinderman Sons, Inc. v. United National Ins. Co., 406 Pa.Super. 37, 41-42, 593 A.2d 857 (1991), aff'd, 533 Pa. 87, 619 A.2d 1058 (1993), the court relied on the policy's language requiring the insured to maintain underlying insurance and providing that its failure to do so would result in application of policy in the same manner as if the underlying policies had been maintained, to conclude that the excess insurer did not intend to provide coverage until after the underlying insurance carrier's amount had been fulfilled. And in Southeast Atlantic Cargo Operators v. First State Ins. Co., 197 Ga. App. 371, 372-73, 398 S.E.2d 264 (1990), cert. denied, 1995 Ga. LEXIS 765, the court determined that a statement in the excess insurance policy limiting the excess insurer's liability to a specified amount in excess of "the amount recoverable under the underlying insurance," did not indicate an intent by the excess insurer to "drop down" and did not negate the specific provisions limiting its liability coverage to amounts in excess of the "retained limit."
As noted by a Connecticut trial court, "[o]n the national level . . . the only type of policy language which has been found to trigger `drop-down' coverage involves policies where the excess insurer provided that it would cover the loss where the primary insurance policy was `inapplicable,' but not when it was `uncollectible' or `unrecoverable' as in the case of an insolvency. See Mission National Insurance Company v. Duke Transportation Company, 792 F.2d 550, 598 (5th Cir. 1986); see also Sifers v. General Marine Catering Company et al., 892 F.2d 386 (5th Cir. 1990)." Veteran's Memorial Medical Center v. Connecticut Ins. Guaranty Assn., Superior Court, judicial district of New Haven at Meriden, Docket No. CV 94 0246878 (October 23, 1996, Silbert, J.), 18 Conn. L. Rptr. 39. "For example, in a well-reasoned decision North Carolina Insurance Guaranty Association [NCIGA] v. Century Indemnity Company, 444 S.E.2d 464 (N.C.App. 1994), the court held that the language of the commercial umbrella insurance policy in question was not ambiguous and did not require the excess liability insurer to `drop down' and provide primary coverage after the primary insurer became insolvent." Veteran's Memorial Medical Center v. Connecticut Ins. Guaranty Assn., supra, 18 Conn. L. Rptr. 39.
"Indeed, many Federal as well as State Supreme and Appellate Courts, have concluded that similarly worded policies do not require drop down coverage. Washington Insurance Guaranty Association [WIGA] v. Guaranty National Insurance Company, 685 F. Sup. 1160 (W.D.Wash. 1988); Transco Exploration Company v. Pacific Employers Insurance Company, 869 F.2d 862 (5th Cir. 1989); Hoffman Construction Company of Alaska v. Fred S. James Co., [ 313 Or. 464], 836 P.2d 703 (Or. 1992); Alaska Rural Electric Cooperative Association v. INSCO Ltd., 785 P.2d 1193 (Alaska 1990); Morbark Industries v. Western Employers Insurance Company, [ 170 Mich. App. 603], 429 N.W.2d 213 (Mich.App. 1988), [appeal denied, 432 Mich. 896 (1989)]. See also Platex F.P, Inc. v. Columbia Casualty Company, 622 A.2d 1074, 1078 (Del.Super. 1992), noting that `[a]bsent policy language indicating that the parties intended to provide for insolvency drop down, the Court would be adding coverage which was not provided by the contract if it were to require insolvency drop down.'" Veteran's Memorial Medical Center v. Connecticut Ins. Guaranty Assn., supra, 18 Conn. L. Rptr. 39. Accordingly, in the case before it, the trial court concluded that a secondary insurer was not required to drop down and provide coverage to fill a void left by the insolvency of the primary insurer. Id.
This court's interpretation is further bolstered by the fundamental purposes of excess insurance, which is "to protect the insured against excess liability claims, not to insure against the underlying carrier's insolvency." Dexter Corp. v. National Union Fire Ins. Co. of Pittsburgh, Pa., supra, at *6. Because this court finds that the terms of National Union's policy are unambiguous, the policy must be interpreted according to its plain meaning. Simply stated, National Union did not contract to provide "drop down" coverage where the underlying insurance fails. Rather, National Union's excess liability coverage is invoked only after the underlying limits have been exceeded. As indicated by the drop down exclusion, National Union's coverage did not extend to provide coverage as a result of the insolvency of an underlying insurer. Because Reliance and Hedstrom, have not paid their underlying limits of $1,000,000 and $100,000, respectively, National Union's policy does not drop down to cover the gap due to their insolvency and bankruptcy.
For the foregoing reasons, National Union's motion for summary judgment is accordingly granted.
BY THE COURT
CARROLL, J.