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Connecticut Supreme Court Holds That Multiple Claims Stemming from the Same Fire Were Not Related “Medical Incidents” Sufficient to Limit the Insurer’s Liability to the Policy’s $500,000 Per Medical Incident Limit

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In January 2014, the Connecticut Supreme Court held that various negligence claims stemming from the same nursing home fire were not sufficiently “related” to constitute a single “medical incident” within the meaning of a professional liability policy. Consequently, the $500,000 per medical incident limit provided in the policy applied to each individual claimant, rather than all the claims as a whole. Lexington Ins. Co. v. Lexington Healthcare Grp. Inc., 311 Conn. 29 (2014).

On February 26, 2003, a Hartford, Connecticut nursing home was set on fire by a resident, resulting in the injury and death of several residents. Thirteen different negligence actions were brought by multiple residents against the Greenwood Health Center, Nationwide Health Properties, Inc., Lexington Healthcare Group, Inc., and Lexington Highgreen Holding, Inc. (collectively, “Defendants”). Subsequently, Plaintiff Lexington Insurance Company (“Lexington”) brought a declaratory judgment action against the Defendants seeking a declaration that its liability under the professional liability policy is issued to Lexington Healthcare, was limited to $500,000 (the per 
medical incident limit) because all of the claims stemmed from a single “medical incident” within the meaning of the policy. Lexington further argued that the self-insured retention provision within the policy required the insured to pay the first $250,000 of damages attributable to anyone medical incident. Thus, Lexington contended that it was only liable for the remaining $250,000, rather than the entire $500,000 provided in the policy. In response, the Defendants argued that the provision was unclear and should be construed in favor of affording more coverage.

Following the filing of cross-motions for summary judgment, the trial court held that, with respect to the policy’s $500,000 per medical incident limit, the underlying allegations of the various claims “did not collectively comprise related medical incidents.” Thus, each claimant was entitled to the $500,000 per medical incident limit. However, the court further held that the self-insured retention per occurrence reduced coverage to $250,000 per medical incident. 

On appeal to the Supreme Court, Lexington argued that the first policy interpretation was improper whereas Defendants took issue with the second interpretation. Like the trial court, the Connecticut Supreme Court found the term “related” to be ambiguous, and thus construed the term in favor of coverage. The Court concluded that “the phrase related medical incidents does not clearly and unambiguously encompass incidents in which multiple losses are suffered by multiple people when each loss has been caused by a unique set of negligent acts, errors or omissions by the insured, even though there may be a common precipitating factor.” It reasoned that the individual claims arose from different medical incidents because the insured “owed each individual defendant a separate duty, committed different acts of negligence as to each and caused each discrete harm.”

The Court then reversed the trial court’s conclusion that, despite Defendants’ insolvency, Lexington’s liability was limited by the self-insured retention. The Court found that the liability limitation imposed by the self-insured retention was unclear in that it “gives no indication as to what should occur in the event the insured cannot fulfill that obligation due to its insolvency.” Thus, the Court construed the limitation on liability in favor of the insured, concluding that the policy provides that Lexington’s limits of liability “will be reduced ‘by the payment of damages and expenses paid within the Self Insured Retentions’ . . . [i.e.] the insured’s actual fulfillment of its obligation to pay the self-insured retention.”