Policy Definition of “Claim” Applies to Policy Application

A Connecticut federal court, applying Connecticut law, has held that a professional liability policy application imports the policy definition of the term “claim.” Admiral Ins. Co. v. Versailles Med. Spa, LLC, 2022 WL 14813533 (D. Conn. Oct. 25, 2022). While the court denied the insurer’s motion for summary judgment based on claim first made and prior knowledge exclusion issues, the court held as a matter of law that the insurer did not act in bad faith. 

The insured, a medical spa, received an email from a patient describing burns she sustained during a skin care procedure and seeking reimbursement and medical expenses. On the insured’s subsequent application for professional liability insurance, the insured stated that no “Claims” had been made against it. After the policy issued, the patient sued and the medical spa sought coverage. The insurer defended under a reservation of rights and filed a coverage action seeking a declaration that the claim was first made before the policy issued and/or excluded by a prior knowledge exclusion. 

The medical spa first argued that the application did not define the term “Claim.” The court agreed with the insurer that the policy’s definition of “Claim,” including “a written demand for money or services by any Insured resulting from a Professional Incident,” applied to the application. The court also held that the patient’s email constituted a “Claim.” However, the court denied summary judgment, finding fact issues as to whether the insured had in fact received the patient’s email. 

Although the court did not grant summary judgment on coverage, it did grant summary judgment in favor of the insurer on the medical spa’s bad faith claim. The court held that the insurer did not act in bad faith by instituting coverage litigation, noting that the insurer continued to defend the spa under a reservation of rights. The court also rejected the argument that the insurer acted in bad faith in connection with the defense of the underlying action, holding that the insurer did not control the defense.