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ED CONSTRUCTION, INC. v. CNA INSURANCE COMPANY ET AL. (AC 31476)
Lavine, Beach and Robinson, Js. Argued March 21--officially released July 26, 2011

(Appeal from Superior Court, judicial district of Stamford-Norwalk, Pavia, J.) Robert J. Sciglimpaglia, Jr., for the appellant (plaintiff). Sean M. Nourie, for the appellee (named defendant). Marisa F. Schafer, with whom, on the brief, was James T. Baldwin, for the appellee (defendant Ramiro Rodriguez).

Opinion

LAVINE, J. The plaintiff, ED Construction, Inc., appeals from the judgment of the trial court, rendered after a trial to the court, denying its claim for a declaratory judgment against the defendants, CNA Insurance Company (CNA) and Ramiro Rodriguez. The plaintiff sought a declaratory judgment concerning the interpretation of a workers' compensation insurance policy (policy) that it purchased from CNA.1 On appeal, the plaintiff makes a number of claims concerning the court's judgment.2 These claims fairly can be summarized as follows: (1) the court improperly determined that the policy permitted CNA to calculate and collect the final premium prior to the end of the policy period and that CNA could cancel the policy so long as it provided notice to the plaintiff at least ten days prior to the date of cancellation, (2) the court made an erroneous factual finding when it concluded that CNA did not breach the insurance policy and (3) the court erred in determining that CNA properly responded to the plaintiff's March 3, 2003 letter concerning the increased premium and that the plaintiff failed to appeal the premium increase and the audit of its policy by CNA. We disagree with the plaintiff, and, accordingly, affirm the judgment of the trial court. The following facts were stipulated to by the parties and accepted by the court. Ed Devingo is the owner and president of the plaintiff. On August 26, 2002, Devingo met with Diane H. Silfen of the Haehl Agency, Inc., for the purpose of applying for workers' compensation insurance coverage for the plaintiff through the assigned risk market.3 During this meeting, Devingo and Silfen completed and signed an ``ACORD 130 worker's compensation application form'' and ``ACORD 133 worker's compensation insurance plan/assigned risk section form.'' Devingo indicated on the application that the plaintiff had one employee and that it provided carpentry services. Silfen estimated the premium for the plaintiff's policy to be $750, which was immediately paid by the plaintiff. The National Council on Compensation Insurance, Inc. (council),4 assigned coverage of the plaintiff to CNA via a randomized assignment process from a pool of participating insurance companies. On September 20, 2002, the council issued a workers' compensation and employer's liability policy binder to the plaintiff, which had an effective date of August 27, 2002. On October 28, 2002, after the policy period had commenced, CNA requested a detailed list of the plaintiff's business operations and current certificates of insurance for all of its subcontractors. On December 18, 2002, CNA ordered a preliminary audit of the plaintiff's policy because the plaintiff's certificates of insurance failed to indicate current workers' compensation cover-

age for the listed subcontractors and because the plaintiff submitted ``forms for exclusion of coverage by workers' compensation law'' for individuals who appeared to be employees. On January 6, 2003, the preliminary audit was assigned to Suzanne Delvento, an employee in CNA's audit department. On February 10, 2003, Delvento completed the audit survey and found that all of the workers whom the plaintiff had paid during the policy period had signed a sole proprietor exclusion form and were all carrying only general liability insurance. Delvento also found that the plaintiff performed roofing services rather than carpentry services. On February 15, 2003, Delvento completed a premium audit analyst notification, which noted that the plaintiff's estimated exposure of $1500 within the carpentry class was incorrect. The plaintiff's exposure was increased to $114,802 pursuant to the roofing rate class. CNA also notified the plaintiff that its payroll was underestimated on its application and that the premium now reflected the new annualized payroll.5 On February 21, 2003, CNA issued a bill to the Haehl Agency that reflected a premium due of $51,718 by March 23, 2003. On March 3, 2003, Silfen faxed a letter to CNA, stating that ``[t]his letter is to appeal the enclosed $51,718 bill. The insured has no employees at all, how can he have a payroll of $114,802?'' Stephanie Spellman, one of CNA's employees, responded to Silfen's letter on March 10, 2003, and explained the procedures that needed to be followed in order to place the audit in dispute. Specifically, Spellman wrote to Silfen that ``[i]f insured wishes to dispute they need to provide proper documentation to show subs are independent. They need to fax [documentation] to audit dispute unit . . . .'' She further stated that if ``audit put in dispute, then billing will be suspended.'' On March 27, 2003, CNA issued a notice of cancellation for nonpayment of premium and notified the plaintiff that the policy cancellation would take effect on April 11, 2003, and that the plaintiff still owed the additional premium of $51,718. CNA did not receive any additional payments from the plaintiff and cancelled the policy on April 11, 2003. On June 13, 2003, CNA received a letter from Robert Vogler on behalf of the plaintiff, disputing the audit and requesting an abatement of the additional audit billing. On June 14, 2003, Rodriguez sustained ``catastrophic injuries'' while performing roofing services on behalf of the plaintiff and filed a claim for workers' compensation benefits.6 During the pendency of Rodriguez' claim, on January 23, 2006, the plaintiff initiated this action, seeking a judgment declaring that the policy covered the injuries sustained by Rodriguez, and that CNA either defend the plaintiff against Rodriguez' claim or pay the plaintiff for all future costs and attorney's fees in defending itself against the claim and award payment to the plaintiff

for any costs and attorney's fees already expended in defending itself against the claim. In its memorandum of decision, the court addressed the plaintiff's complaint in three parts. In part one, the court noted that ``[t]he gravamen of this action is whether the insurance policy entered into between the plaintiff and [CNA] was in effect at the time of the alleged injury such that coverage was mandatory.'' The court concluded that the unambiguous language of the policy contemplates cancellation of the contract by either party prior to the end of the policy term. The court further concluded that pursuant to part five of the policy, the plaintiff was required to pay all premiums when due and that CNA properly could increase the premium prior to the completion of the policy period. In the second part of its decision, the court addressed the plaintiff's claim that CNA failed to act on its appeal regarding the increased premium pursuant to the policy. The court noted that the plaintiff sent CNA a letter in response to the premium increase resulting from the audit. The court, however, also noted that CNA explained to the plaintiff the procedures that needed to be followed in order to place the audit in dispute but that the plaintiff did not even attempt to comply with those procedures.7 Finally, the court addressed the plaintiff's claim that public policy dictates that cancellation of an assigned risk workers' compensation policy during the period of the policy defies the humanitarian purposes of the Workers' Compensation Act (act), General Statutes

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