For its part, National Union contended that:

(1) the commercial umbrella insurance policy it had issued to Bluewater excluded coverage for “any liability arising out of any project insured under a 'wrap-up' or any similar rating plan”; and

(2) the power plant project was insured under such a “wrap-up” plan – namely, a contractor controlled insurance program.

The plaintiffs responded that the term “wrap-up,” not defined by the policy, was ambiguous and should be construed in favor of Bluewater.

Both sides moved for summary judgment.

The National Union Policy

Endorsement 7 to National Union's commercial umbrella insurance policy provided:

This insurance does not apply to … any liability arising out of any project insured under a “wrap-up” or similar rating plan[.] 

The district court, applying Georgia law, granted summary judgment in favor of the plaintiffs.

In its decision, the district court observed that the policy did not define “wrap-up” or “similar rating plan.”

The district court ruled that, considering the insurance policy as a whole, National Union's exclusion for “liability arising out of any project insured under a 'wrap-up' or similar rating plan” was ambiguous.

Moreover, the district court continued, the ambiguity was not resolved by extrinsic evidence of intent, as National Union's intent in drafting the language reflected “neither the mutual intent of the parties nor the insured's reasonable expectations of coverage.” It added that although “insurance experts and attorneys” might debate the contours of a “wrap-up or similar rating plan,” it could “not find that a reasonable layperson in the insured's position would have understood and expected – based on the language of the contract – that liability was excluded under the instant circumstances.”

According to the district court, if National Union wanted to exclude coverage for any project that “involve[d]” a wrap-up or was “in any way” affiliated with a consolidated insurance program, “it should have explicitly included such limitations and defined the term 'wrap-up.'”

Interestingly, the district court also declared that even if National Union's interpretation of the wrap-up language was the correct one, it “had a duty to explain its definition to the insured so that the insured could understand the significant coverage limitation.”

The district court concluded that, construing the wrap-up provision most favorably to the insured and against the insurer, Endorsement 7 was ambiguous and did not act to exclude coverage.

The case is Thompson v. National Union Fire Ins. Co. of Pittsburgh, P.A., No. 3:14–CV–00259–WWE (D. Conn. April 6, 2017). Attorneys involved include: James John Healy, Cowdery & Murphy, LLC, Hartford, CT, Jason Kenneth Gamsby, Joel Thomas Faxon, Faxon Law Group, LLC, New Haven, CT, for Plaintiff. John Bonnie, Weinberg, Wheeler, Hudgins, Gunn & Dial, LLC, Atlanta, GA, Dennis O. Brown, Joseph James Blyskal, III, Regen O'Malley, Gordon & Rees LLP, Glastonbury, CT, for Defendant.