In Northeast Utilities Service Co., et al. v. St. Paul Fire and Marine Ins. Co., et al., No. 3:08–CV–01673 (CSH) (D. Conn.,  July 12, 2012), the United States District Court for the District of Connecticut (Haight, J.) held that the defendant-insurers did not owe a duty to defend or indemnify the plaintiffs, Northeast Utilities Service Company (“NUSCO”) and Connecticut Light and Power Company (“CL&P”), under a commercial general liability policy issued by Utica Mutual Insurance Company (“Utica”) and an excess policy issued by St. Paul Fire and Marine Insurance Company (“St. Paul”).
The Court found the following facts to be undisputed: The plaintiffs “entered into a Master Services Agreement (the “Contract”) with American Electrical Testing Company (“AET”), under which AET agreed to furnish supervision, labor, material, and equipment to perform network protector maintenance” in Waterbury, Connecticut.  Id. at 2.  Pursuant to this Contract, AET was required to obtain Comprehensive or General Liability Coverage for bodily injury and property damage claims and to name the plaintiffs as additional insureds under these policies.  Id.  AET subsequently obtained two insurance policies, both of which named the plaintiffs as additional insureds.  “The primary policy, issued by Utica to AET, …included coverage for certain bodily injury or property damage up to $1 million per occurrence.”  Id.  The Utica policy provided coverage for additional insureds, but only “to the extent that such additional insured is held liable for AET’s acts or omissions arising out of its work for the additional insured.”  Id. at 3.  In addition, the Utica policy excluded coverage for the “independent acts or omissions of such additional insured.”  Id.
St. Paul issued an excess insurance policy, which provided coverage for “certain bodily injury and property damage…in excess of the Retained Limit (i.e. the coverage limit of the Utica policy) up to $5 million per occurrence.”  Id.  The St. Paul policy provided that coverage is only available “if the primary policy applies.”  Id.  The St. Paul policy further provided that its duty to defend was not triggered until the “Retained Limit has been exhausted by payment of covered judgments or settlements.”  Id.
While these policies were in effect, on February 21, 2007, a tragic explosion occurred while two of AET’s employees were doing work in an electrical vault in Waterbury, Connecticut.  One of the employees was killed in this explosion, while the other sustained injuries.  As a result, a lawsuit was filed in federal court in the Eastern District of New York against NUSCO and CL&P, while another lawsuit was filed in the Connecticut Superior Court.  See Anchundia v. N.E. Utils. Serv. Co., No. 2:07-cv-0446 (E.D.N.Y.) and Schmukler v. N.E. Utils., No. HHB-CV-09-5011836.  Importantly, neither action alleged any negligence by AET; rather, they alleged that the explosion was caused by the acts and omissions of NUSCO and CL&P.  Id. at 4.  In their answers, NUSCO and CL&P alleged, inter alia, that the explosion was caused by the negligence of others, including the two AET employees.  Id.
Both Utica and St. Paul refused to defend NUSCO and CL&P in response to these complaints.  Thereafter, the Anchundia action was settled for $8,000,000 and the Schmukler action was settled for $55,000.  Id.  Upon moving for summary judgment in the declaratory judgment action, the plaintiffs asserted that due to Utica’s and St. Paul’s breach of the duty to defend and indemnify, they are entitled to recover the legal expenses they incurred in the defense of the underlying actions, as well as the amounts they paid to settle those actions.  Id. at 5.  The defendants, in turn, argued that there was no coverage under either the Utica or the St. Paul policy.  Id.  The Court, Haight, J., agreed with Utica and St. Paul entering judgment in their favor. 
First, the Court held that the Utica policy unambiguously did not provide coverage for acts of negligence by the additional insureds, here, NUSCO and CL&P.  In so ruling, the Court rejected the plaintiffs’ claims that any liability they had necessarily flowed from AET’s “acts or omissions arising out of and in the course of AET’s work for them.”  Id. at 11.  The Court stated that “[t]he fact that the accident arose when AET workers were performing work under the Contract does not ‘necessarily’ mean that Plaintiffs’ liability must be for AET’s acts or omissions.”  Id.  Further, the Court pointed out that the plaintiffs provided no other explanation for settling the underlying actions other than that the settlements were entered into based upon the liabilities alleged in those complaints, to wit, negligent acts and omissions by NUSCO and CL&P.  Id. at 12.  On this basis, the Court held that there was no coverage for the plaintiffs’ claims under the Utica policy as the Utica policy provided coverage for additional insureds only “to the extent that such additional insured is held liable for AET’s acts or omissions.”  Id. at 6, 15.
In reaching this decision, the Court also distinguished the Connecticut Supreme Court’s decision in Royal Indem. Co. v. Terra Firma, 287 Conn. 183 (2008).  The Court explained that “[t]he coverage in the Royal Indemnity policy extended to ‘liability arising out of…[the insured’s] work”; therefore, “as long as the liability arose out of the insured’s work for the additional insured, it did not matter whose acts or omissions caused the accident.”  Id. at 13.  By contrast, the Utica policy provided that “coverage extends only to liability arising out of AET’s acts or omissions.  Royal Indemnity did not deal with language limiting coverage to liability for the insured’s acts or omissions.”  Id. at 13-14.  Simply put, the Court explained that AET included additional-insured coverage in the Utica policy to meet its undertaking in the Contract to protect the Plaintiffs, but AET was not obliged to purchase insurance to protect Plaintiffs against their own conduct.”  (emphasis added).  Id.  Such language does not violate public policy and, in fact, has been held to be enforceable by numerous courts.  Id. at 14-15 (citing Smurfit-Stone Container Enters., Inc. v. Nat’l Interstate Ins. Co., No. 3:08CV093, 2008 WL 4153762, at *3-5 (E.D. Va. Sept. 5, 2008) (Missouri law); Cleveland v. Vandra Bros. Constr., Inc., 948 N.E.2d 1027, 1032-33 (Ohio App. Ct. 2011) (Ohio law)).
Based upon the foregoing, the Court held that Utica did not have a duty to indemnify the plaintiffs for their liability in the underlying actions. 
Likewise, the Court held that Utica did not have a duty to defend the plaintiffs.  “[A]n insurer’s duty to defend may arise either from the pleadings in the underlying action or from other facts known to [the insurer.]”  Id. Since neither underlying complaint alleged “any causes of action that might have fallen within the coverage of the Utica policy” and both “were based entirely upon Plaintiffs’ own acts rather than AET’s[,]” Utica did not have a duty to defend.  Id. at 18.  In so holding, the Court rejected the plaintiffs’ argument that a duty to defend was created by its affirmative defenses, which alleged the negligence of the two AET employees.  “Utica’s obligation was not to determine if some other party was negligent, but to determine if there was a possibility that Plaintiffs would be held liable for AET’s acts or omissions.  Plaintiffs could not create otherwise nonexistent claims against themselves by pleading affirmative defenses.”  Id. at 19.  Consequently, Utica did not have a duty to defend the plaintiffs in the underlying actions.  Id. at 20.
Although this conclusion alone closed the door on the plaintiffs’ claims under the Utica policy, the Court nevertheless embarked upon an analysis of coverage in light of the exclusion contained in the Utica policy for the “independent acts or omissions” but the additional insured.  The Court noted that cases in other jurisdictions have held that “the ‘independent acts’ exclusion limits coverage to instances in which the additional insured’s alleged liability is based on vicarious liability for the insured’s acts, excluding instances in which the additional insured’s liability is based solely on its own conduct.”  (emphasis added).  Id. (citing Edwards v. Brambles Equip. Servs., Inc., 75 Fed. Appx. 929, 932 (5th Cir. 2003) (Louisiana law); United Constr. Ent. Co. of St. Louis v. Am. Contractors Ins. Grp., Inc., No. 10-CV-81, 2011 WL 1258557, at *5-7 (S.D.Ill. Mar. 21, 2011) (Illinois law); St. Paul Fire & Marine Ins. Co. v. Hanover Ins. Co., 187 F. Supp.2d 584, 594-95 (E.D.N.C. 2000) (North Carolina law)).
With these decisions in mind, the Court once again emphasized that the underlying actions sought only to impose liability on the plaintiffs for their independent acts and omissions.  Thus, “[n]one of the causes of action in the Anchundia or Schmukler complaints could have resulted in Plaintiffs being held vicariously liable for AET’s acts or omissions…”  Id. at 16.  Consequently, the Court held that “even if liability in the Underlying Actions was covered by the insuring agreement, it would have been excluded by the independent acts exclusion.”  Id. at 16-17.
Finally, the Court reached the question of whether St. Paul, as the excess insurer, breached its duties to defend and indemnify the plaintiffs. The Court began its analysis by citing the following provision from the St. Paul policy:  “There is no coverage under this policy for Bodily Injury…unless a Retained Limit applies.”  Id. at 17.  Since the “Retained Limit” was the limit of Utica’s primary insurance coverage, the Court held that “the absence of coverage under the Utica Policy establishes the absence of coverage under the St. Paul Policy.”  Id.
The inquiry did not, however, end there.  The St. Paul policy further provided that coverage could still exist if “such coverage is specifically provided by endorsement to this policy.”  Id.  There was no specific endorsement in the St. Paul policy that would provide coverage for the plaintiffs in the underlying actions; therefore, the Court held that St. Paul did not have a duty to indemnify the plaintiffs.  Id.
Furthermore, since St. Paul was the excess insurer, the Court explained that “any duty to defend that St. Paul might have would arise only if the $1 million limit in the Utica Policy was exhausted.”  (emphasis added).  Id. at 21.  Relying upon Connecticut Superior Court cases, as well as extra-jurisdictional cases, the Court noted that, in general, an obligation to defend is not imposed upon excess carriers prior to the exhaustion of the underlying policy limit.  Id. at 21-22.  “Thus, both because of the absence of coverage under the St. Paul Policy, and because St. Paul’s status as an excess carrier, St. Paul did not breach a duty to defend.”  Id. at 23.  Accordingly, the Court entered summary judgment in Utica and St. Paul’s favor and denied the plaintiff’s motion.