Bodily Injury Liability Insurance: It Can Be an Emotional Issue

ISO defines bodily injury in the CGL form as follows:

“Bodily injury” means bodily injury, sickness, or disease sustained by a person, including death resulting from any of these at any time.

In response to a posting on RiskList1 questioning the application of the definition, Bill Wilson, insurance maven and Dean of IIABA’s Virtual University, expressed his frustration with a definition that defines a word with the same word. I agree. The ISO definition tells us that some other things are included in the term “bodily injury,” but it doesn’t tell us exactly what bodily injury means.

This is more than an academic question. A key question is emotional injury. There’s little dispute that pain and suffering as a result of physical injury is included in the term “bodily injury.” But what about emotional or mental injury where there is no physical injury?

The answer often turns on whether the word “bodily” modifies sickness and disease or if it just modifies injury. In one case, DeRousse v. State Farm Mut. Auto. Ins. Co., 298 S.W.3d 891 (Mo. banc 2009), a passenger was ejected from a vehicle during an accident. He hit the windshield of Debra DeRousse’s car as she drove down the highway, and then rolled off the hood, and fell under her car.

Once she was able to stop, she saw the body and realized she knew the victim. Although DeRousse was not physically injured and sought no medical treatment at the time of the accident, she experienced emotional and mental upset in the weeks following the accident, including vomiting, nightmares, migraines, nausea, and anxiety. She was prescribed medication for anxiety and depression and eventually received counseling.2 In the DeRousse case, the Missouri Supreme Court decided that the definition of bodily injury was ambiguous. This case involved an auto policy, but the definition of bodily injury was the same as the one used in the CGL and many other policies.

Because the court said that a possible reading of the definition is that all sickness is encompassed in the definition of bodily injury not just bodily sickness, it ruled that DeRouse was entitled to coverage for the mental and emotional harm she suffered.3 New York courts have held the same way. In Lavanant v. General Accident Insurance Company of America,4 the NY Court of Appeals, our highest court, ruled that a claim for emotional distress sustained by tenants when a portion of the ceiling in their apartment collapsed, qualified as “bodily injury” under a general liability policy issued to the landlord even though the tenants were not physically injured. Like the Missouri court, New York’s court concluded that the term “bodily injury” was ambiguous. It wrote, “We decline General Accident’s invitation to rewrite the contract to add ‘bodily sickness’ and ‘bodily disease,’ and a requirement of prior physical contact for compensable mental injury. General Accident could itself have specified such limitations in drafting its policy, but it did not do so.”

I’ve spoken to several attorneys about this and they all agree that Lavanant is the governing case in New York. However, it’s not the law in most other states. For example, see the California case, Employers Cas. Ins. Co. v. Foust.5 In that case, David Foust was struck by an auto as his mother looked on. However, Mrs. Foust was not physically injured. The California court ruled that the driver’s policy did not provide coverage for her emotional injury.  Some insurers have developed wording that may put emotional injury claims within the coverage for bodily injury, but others use wording that’s more restrictive than ISO’s. It is difficult for the average small or mid-size business to get a CGL policy modified. Larger insureds may have some success, but the best place to look for coverage is in an umbrella/excess policy. Here are some examples of revised definitions of bodily injury from one excess/umbrella policy: “Bodily injury” means bodily injury, shock, fright, mental injury, disability, mental anguish, humiliation, sickness or disease sustained by a person, including death resulting from any of these at any time.”

Another excess/umbrella policy uses the following wording: “Bodily injury” means bodily injury, sickness or disease sustained by a person. This includes mental anguish, mental injury, shock, fright or death resulting from bodily injury, sickness or disease.”

The first clause is preferable. It clearly provides emotional injury coverage. The second may be ambiguous. Once again it might turn on whether the word “bodily” modifies sickness or disease as well injury. You might also argue that unless the coverage for emotional injury applies where there is no physical injury, the wording is redundant and insurance policies shouldn’t be interpreted to make some part redundant. Whatever the case, while the insured is entitled to the benefit of an ambiguity, if I see one, I try to resolve an ambiguity before the loss…

Remember, just because a court holds that emotional injury is not insured doesn’t mean that the plaintiff can’t collect a judgment against your client. What it means is that the insured will have to defend itself and pay defense costs and any judgment out of its own funds.

Once again, you’ve got to read the policy. Another insurance textbook author has created the acronym “RTFP” modeled on the once common computer-geek retort to a request for assistance of “RTFM.” It’s good advice.