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Connecticut high court clarifies rules for interpreting policy exclusions

April 2009

Overview and Background

 

In its March 24, 2009, decision in Liberty Mutual Ins. Co. v. Lone Star Industries, Inc. et al., 290 Conn. 767 (2009), the Connecticut Supreme Court clarified Connecticut law concerning the interpretation of exclusions in insurance policies.  In Lone Star, the policyholder, a reorganized debtor, sought coverage for a series of silica exposure bodily injury claims from one of its excess carriers.  The insurer disclaimed coverage on the basis of an exclusion that states, in relevant part, as follows:

 

Asbestos Exclusion Endorsement

 

It is hereby understood and agreed that the insurance afforded by this policy shall not apply to:

 

  1. To any liability for property damage, personal injury, sickness, disease, occupational disease, disability, shock, death, mental anguish or mental injury at any time arising out of  . . . exposure to asbestos, asbestos products, asbestos fibers or asbestos dust, silica dust or

(emphasis supplied)

 

Significantly, the exclusionary endorsement contained two additional paragraphs, each of which referenced injury or damage arising from "silica dust" as a category of excluded loss.

 

Decision

 

The trial court granted the insurer summary judgment that the exclusion barred coverage for the policyholder's silica exposure claims.  On appeal, the policyholder raised two alleged errors.  First, it argued that the trial court erred in granting the insurer summary judgment because, while the insurer was able to produce the exclusion, the insurer did not attest that the policy attached to the motion was a complete copy of the policy.  The Lone Star court, however, rejected that argument (on procedural grounds since Lone Star did not raise that argument at the trial level) ruling:

 

We conclude that the trial court properly granted the summary judgment motion on the basis of the content of the exclusion or endorsement, notwithstanding the [insurer's] failure to provide the full policy provisions.  'A rider or endorsement is a writing added or attached to a policy or certificate of insurance which expands or restricts its benefits or excludes certain conditions from coverage . . .  When properly incorporated into the policy, the policy and the rider or endorsement together constitute the contract of insurance, and are to be read together to determine the contract actually intended by the parties.' (citation omitted)

 

Id. at 22.

 

The insured also argued that it was wrong to grant the insurer summary judgment because the exclusion was ambiguous, since "[t]he reference to 'silica dust' is hidden in an 'asbestos exclusion endorsement.'" Id. at 23.  (emphasis supplied)  The Lone Star court also rejected this argument.  To begin with, it noted that the insured is a "sophisticated commercial entity."  Id.  With that in mind, the court rejected the notion that the exclusion at issue was ambiguous and hence inapplicable:

 

[w]e conclude that there is nothing ambiguous about the language of the exclusion endorsement itself, which states three times that it excludes coverage for damage, injury or illness claims 'arising from silica dust.' Although the title of the exclusion doubtless would be clearer and more useful; if it were entitled 'Asbestos and Silica Exclusion Endorsement,' rather than 'Asbestos Exclusion Endorsement,' this does not render the language of the endorsement ambiguous.

 

Id.

 

Continuing, the Connecticut high court noted, "Moreover, the term 'silica dust' is not buried in the endorsement, and indeed appears at the end of the respective paragraphs, rather than in the middle of them."  Id.  In conclusion, the Lone Star court declared, "The parties' briefs and our independent research having failed to yield any authority holding to the contrary, we conclude that the trial court properly granted [the insurer's] motion for summary judgment."  Id.

 

Comment

 

Lone Star teaches two important lessons concerning the interpretation of policy exclusions under Connecticut law.  First, it reaffirms the rule that where an exclusion plainly and unambiguously applies to a given loss, a policyholder will be unable to defeat its applicability.  Second, at least, where as here, the insured is a "sophisticated commercial entity," courts will uphold an exclusionary endorsement that unambiguously applies to a given loss, even if the "title" of the exclusion references only a narrower subset of losses.

 

For more information, please contact Carl J. Pernicone via email at carl.pernicone@wilsonelser.com or 212.490.3000 or Stephen P. Brown via email at stephen.brown@wilsonelser.com or 203.388.9100

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