Springdale Donuts, Inc. v. Aetna Cas. and Sur. Co. of Illinois

• Court: Connecticut Supreme Court
• Writing for the Court: Before CALLAHAN; CALLAHAN; BERDON
• Citation: Springdale Donuts, Inc. v. Aetna Cas. and Sur. Co. of Illinois, 724 A.2d 1117, 247 Conn. 801 (Conn. 1999)
• Decision Date: 02 March 1999
• Docket Number: No. 15918,15918
• Parties: SPRINGDALE DONUTS, INC. v. AETNA CASUALTY AND SURETY COMPANY OF ILLINOIS et al.

Page 1117

724 A.2d 1117

247 Conn. 801

SPRINGDALE DONUTS, INC. v. AETNA CASUALTY AND SURETY COMPANY OF ILLINOIS et al.

No. 15918.

Supreme Court of Connecticut.

Argued Nov. 5, 1998.

Decided March 2, 1999.

Leo Gold, Stamford, for the appellant (plaintiff).

Peter J. Ponziani, with whom, on the brief, were Charles E. Vermette, Jr., Hartford, and Christopher L. Jefford, Boston, MA, for the appellees (defendants).

Before CALLAHAN, C.J., and BORDEN, BERDON, NORCOTT and McDONALD, JJ.

CALLAHAN, C.J.

The sole issue in this appeal is whether contracts of insurance that the plaintiff, Springdale Donuts, Inc., purchased from the defendants, Aetna Casualty and Surety Company of Illinois, Farmington Casualty Company and Aetna Casualty and Surety Company, ¹ required the defendants to defend and to indemnify the plaintiff with respect to claims brought against it by two of its employees, Helen Ritch and her daughter, Tina Ritch (claimants). We conclude that they did not.

The following facts and procedural history are undisputed. The plaintiff is the operator of a Dunkin' Donuts shop (shop) located on Hope Street in Stamford. During parts of 1992 and 1993, the plaintiff employed the claimants as cashier-clerks at the shop. In 1995, the claimants brought separate actions in federal court against the plaintiff, claiming that they had been the victims of sexual harassment and discrimination in the workplace. ² Specifically, the claimants alleged that in the course of their employment at the shop, a fellow employee, Sherif Mohamed, had sexually assaulted them and had made frequent lewd and lascivious remarks, requests and gestures to them. Maintaining that they had suffered mental anxiety and distress, and humiliation as a result of Mohamed's conduct, the claimants sought to recover damages from the plaintiff for negligent failure to remedy sexually harassing conduct in the workplace, for sexual discrimination in violation of General Statutes § 46a-60 (a)(8), and for sexual harassment in violation of the Civil Rights Acts of 1964 and 1991, 42 U.S.C. § 2000e et seq.

Thereafter, the plaintiff sought coverage from the defendants for the claims that had been brought against it by the claimants. The plaintiff relied on the following contracts, or policies, of insurance: (1) a workers' compensation and employer's liability policy (workers' compensation policy) issued by Farmington Casualty Company; (2) a commercial general liability policy issued by Aetna Casualty and Surety Company of Illinois; and (3) a commercial excess liability (umbrella) policy issued by Aetna Casualty and Surety Company. ³ The defendants denied coverage under the policies, and refused to defend or indemnify the plaintiff with respect to the claimants' actions. The plaintiff subsequently reached settlement agreements with the claimants. ⁴ Thereafter, the defendants refused to reimburse the plaintiff for expenses related to those settlements.

In March, 1996, the plaintiff instituted the present action against the defendants, seeking damages under the theories of waiver, breach of contract and violation of the covenant of good faith. The trial court determined that the policies did not provide coverage for the underlying claims and concluded, therefore, that the defendants had no duty to defend or indemnify the plaintiff with respect to the underlying claims. The plaintiff appealed from the judgment of the trial court to the Appellate Court, and we transferred the appeal to this court pursuant to Practice Book § 65-1 and General Statutes § 51-199(c). We affirm the judgment of the trial court.

On appeal, the plaintiff claims that the trial court improperly concluded that the defendants had no duty to defend it in the underlying actions brought by the claimants. ⁵ Specifically, the plaintiff argues that: (1) the workers' compensation policy provides coverage for the underlying actions, although the underlying complaints do not state claims for workers' compensation benefits; (2) the allegations contained in the underlying complaints fall within the slander and invasion of privacy provisions of the commercial general liability policy; and (3) the personal injury and bodily injury provisions of the umbrella policy provide coverage for the underlying claims. We disagree.

Before reaching the merits of the dispute between the parties, we set forth the standard of review. "It is the function of the court to construe the provisions of the contract of insurance." Gottesman v. Aetna Ins. Co., 177 Conn. 631, 634, 418 A.2d 944 (1979). The "[i]nterpretation of an insurance policy, like the interpretation of other written contracts, involves a determination of the intent of the parties as expressed by the language of the policy." Aetna Life & Casualty Co. v. Bulaong, 218 Conn. 51, 58, 588 A.2d 138 (1991). "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.... It is axiomatic that 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.... The policy words must be accorded their natural and ordinary meaning ... [and] any ambiguity in the terms of an insurance policy must be construed in favor of the insured because the insurance company drafted the policy." (Citations omitted; internal quotation marks omitted.) Imperial Casualty & Indemnity Co. v. State, 246 Conn. 313, 324-25, 714 A.2d 1230 (1998). "A necessary predicate to this rule of construction, however, is a determination that the terms of the insurance policy are indeed ambiguous.... The fact that the parties advocate different meanings of the [insurance policy] does not necessitate a conclusion that the language is ambiguous." (Citation omitted; internal quotation marks omitted.) Kelly v. Figueiredo, 223 Conn. 31, 37, 610 A.2d 1296 (1992). "[B]ecause the proper construction of a policy of insurance presents a question of law, the trial court's interpretation of the policy is subject to de novo review on appeal." Peerless Ins. Co. v. Gonzalez, 241 Conn. 476, 483, 697 A.2d 680 (1997).

I

The plaintiff first contends that the trial court improperly concluded that, under its workers' compensation policy, the defendants had no duty to defend the plaintiff against the claimants' underlying claims. ⁶ Specifically, the plaintiff contends that: (1) the coverage provisions of the workers' compensation policy are ambiguous and, therefore, must be construed against the defendants; and (2) so construed, the coverage provisions of the policy encompass not only claims for workers' compensation benefits, but also actions, such as the underlying claims, that are based upon allegations possibly capable of supporting claims for workers' compensation benefits. ⁷ We are unpersuaded.

We note at the outset that it is well settled that "an insurer's duty to defend, being much broader in scope and application than its duty to indemnify, is determined by reference to the allegations contained in the [underlying] complaint. See, e.g., Keithan v. Massachusetts Bonding & Ins. Co., 159 Conn. 128, 138, 267 A.2d 660 (1970). The obligation of the insurer to defend does not depend on whether the injured party will successfully maintain a cause of action against the insured but on whether he has, in his complaint, stated facts which bring the injury within the coverage. If the latter situation prevails, the policy requires the insurer to defend, irrespective of the insured's ultimate liability.... 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 within the coverage of the policy, the insurer must defend.... On the other hand, if the complaint alleges a liability which the policy does not cover, the insurer is not required to defend. Smedley Co. v. Employers Mutual Liability Ins. Co., [143 Conn. 510, 517, 123 A.2d 755 (1956) ]." (Citations omitted; internal quotation marks omitted.) Flint v. Universal Machine Co., 238 Conn 637, 646-47, 679 A.2d 929 (1996). Thus, only if the underlying complaints set forth a cause of action within the coverage of the plaintiff's workers' compensation policy did the policy obligate the defendants to defend the plaintiff in those actions. We turn our attention, therefore, to the terms of the plaintiff's workers' compensation policy.

The plaintiff maintains that the language of the coverage provisions of the workers' compensation policy is ambiguous. Part 1(C) of the plaintiff's policy provides that the insurer has "the right and duty to defend at [its] expense any claim, proceeding or suit against [the plaintiff] for benefits payable by this insurance.... [The insurer has] no duty to defend a claim, proceeding or suit that is not covered by this insurance." Part 1(B), pertaining to benefits payable by the workers' compensation policy, provides that the insurer "will pay promptly when due the benefits required of [the plaintiff] by the workers compensation law." Thus, the policy unambiguously states that the defendants are obligated to defend any claim, proceeding or suit against the plaintiff for benefits payable by the workers' compensation policy. The benefits payable by the workers' compensation policy are limited to only those required of the plaintiff by workers' compensation law. Consequently, the defendants are obligated to defend any claim, proceeding or suit against the plaintiff for benefits payable by the plaintiff pursuant to the workers' compensation law. Thus, if the plaintiff is not required to pay benefits under the workers' compensation law, the coverage of the policy clearly is not invoked and, therefore, the defendants' duty to defend is not triggered. See Plainville v. Travelers Indemnity Co., 178 Conn. 664, 425 A.2d 131 (1979) (...