counsel to represent Children's Hospital and Dr. Ong. St. Paul Stmt. at para. 15.
As the Lee litigation wended its way through a tortured course of discovery and pre-trial proceedings, Lee demanded, on March 21, 1985, $7 million to settle the claims against all defendants. Counterclaim at para. 17(h). On April 9, 1985, Dr. Ong, by letter, demanded that St. Paul settle within the limits of the primary and the two St. Paul excess policies. Counterclaim at para. 17(k). Lee renewed the $7 million settlement demand on January 2, 1986. Id. On February 7, 1986, Children's Hospital also demanded that St. Paul settle within the limits of the primary and the excess policies. Id. The Lee trial began on February 12, 1986.
Two days later, on February 14, 1986, St. Paul sent Children's Hospital a letter requesting the basis for Children's assertion that the 1971 Excess Policy provided coverage for Lee's claim. Counterclaim at para. 17(m). Children's Hospital responded by letter on February 24, 1986. Id. On March 20, 1986, St. Paul formally notified Children's Hospital, by letter, of possible noncoverage under both the 1970 and the 1971 Excess Policies. Id. at P 17(n). Trial was continuing in Lee.
On April 28, 1986, the jury returned a verdict against Dr. Ong, finding Ong liable for malpractice and awarding Lee $5.75 million in compensatory damages. The jury found that Dr. Eng was not liable. On the basis of this verdict, Judge Penn directed a verdict against Children's Hospital and against Dr. Ong's partners, Drs. Daisley and Howard. Order of May 1, 1986, Lee v. Children's Hospital.7 A week later, on May 8, 1986, St. Paul notified Children's Hospital that neither the 1970 nor the 1971 Excess Policy provided coverage for any portion of the Lee judgment. Counterclaim at para. 20. On July 2, 1986, Judge Penn denied the defendants' motion for a judgment notwithstanding the verdict.
The issues presented by the cross-motions for summary judgment fall into two broad groups. First, we must determine whether coverage for the Lee judgment has been "triggered" under the St. Paul 1970 and 1971 Excess Policies.
Second, if we find that the St. Paul excess policies do not, by their terms, provide coverage for the Lee judgment, we must decide whether St. Paul is estopped from denying coverage because of its conduct of the Lee defense. Both parties agree that the law of the District of Columbia governs this diversity action.
I. Coverage Under St. Paul's Excess Policies
Both of the St. Paul excess policies present identical issues of insurance policy interpretation. At the core of the dispute here is the question of what event triggers coverage under these policies. In its motion for summary judgment, Children's Hospital and Dr. Ong assert that coverage under the St. Paul Primary Liability Policy triggers coverage under the excess policies. St. Paul, on the other hand, contends that the excess policies are only triggered if the first injury resulting from malpractice occurs during the period that the particular excess policy was in effect. In the main, we agree with the interpretation of the trigger of coverage proffered by St. Paul.
The St. Paul 1970 Excess Policy and the St. Paul 1971 Excess Policy are virtually identical, except for the effective dates, policy numbers and limits of liability. The coverage clauses are worded identically.
In addition, both excess policies contain the same endorsement governing professional claims, which states:
Except insofar as coverage is provided by an underlying policy or policies as listed in Schedule A, it is agreed that this policy does not apply to Personal Injury claims arising out of any error or omission, malpractice or mistake of a professional nature committed or alleged to have been committed by or on behalf of the Insured in the conduct of any of the Insured business activities.