Evanston Ins. Co. v. Legacy of Life, Inc.

• Decision Date: 29 June 2012
• Docket Number: No. 11–0519.,11–0519.
• Citation: 55 Tex. Sup. Ct. J. 1102,370 S.W.3d 377
• Parties: EVANSTON INSURANCE COMPANY, Appellant, v. LEGACY OF LIFE, INC., Appellee.
• Court: Texas Supreme Court

370 S.W.3d 377

55 Tex. Sup. Ct. J. 1102

EVANSTON INSURANCE COMPANY, Appellant,

v.LEGACY OF LIFE, INC., Appellee.

No. 11–0519.

Supreme Court of Texas.

Argued Jan. 12, 2012.

Decided June 29, 2012.

Marc J. Wojciechowski, Wojciechowski & Associates, P.C., Spring, TX, for Appellant.

John C. Cave, Miguel Villarreal, Jr., Jason Edwin McKinnie, Gunn Lee & Cave PC, San Antonio, TX, for Appellee.

Justice GUZMAN delivered the opinion of the Court.

This case comes to us on two certified questions from the Fifth Circuit Court of Appeals. The certified questions arise from a suit filed by a daughter against an organ donation charity when she discovered that the charity—contrary to an earlier representation to her—would allegedly profit from harvesting her deceased mother's tissues. The charity requested a defense from its insurer and the insurer denied a defense. The insurer's subsequent suit against the charity resulted in the following certified questions from the Fifth Circuit Court of Appeals:

1. Does the insurance policy provision for coverage of “personal injury,” defined therein as “bodily injury, sickness, or disease including death resulting therefrom sustained by any person,” include coverage for mental anguish, unrelated to physical damage to or disease of the plaintiff's body?

2. Does the insurance policy provision for coverage of “property damage,” defined therein as “physical injury to or destruction of tangible property, including consequential loss of use thereof, or loss of use of tangible property which has not been physically injured or destroyed,” include coverage for the underlying plaintiff's loss of use of her deceased mother's tissues, organs, bones, and body parts?

Evanston Ins. Co. v. Legacy of Life, Inc., 645 F.3d 739, 751 (5th Cir.2011). We answer both questions in the negative.

I. Factual Background

Legacy of Life, Inc. (Legacy) is an organ donation charity. Debra Alvarez consented for Legacy to harvest some of her terminally ill mother's tissues after she died. Alvarez alleges in her suit against Legacy that she only consented because Legacy represented the tissues would be distributed on a nonprofit basis but that Legacy instead transferred them to companies ¹ that sold the tissues for a profit.² Alvarez brought various claims against Legacy, seeking compensatory damages, mental anguish damages, restitution, exemplary damages, and attorney's fees. Importantly, Alvarez did not allege that she or her mother suffered a physical injury. Instead, Alvarez alleged that her mother's estate as the legal and rightful owner of the remains was wrongfully deprived of them, causing restitution damages to the estate and mental anguish damages to Alvarez.

Legacy had a combined medical professional and general liability insurance policy through Evanston Insurance Company (Evanston). Legacy demanded that Evanston defend the Alvarez suit. Evanston, 645 F.3d at 741. Evanston denied the request and filed suit in federal court seeking a declaratory judgment that it had no duty to defend because Alvarez did not claim damages for personal injury or property damage. Id. at 742–43. Legacy counterclaimed, asserting various insurance claims and requesting a declaratory judgment in its favor. Id. at 743.

Evanston and Legacy both moved for summary judgment. Id. The district court granted Legacy's motion for partial summary judgment on the duty to defend and denied Evanston's motion for summary judgment. Id. The court entered a declaratory judgment that Evanston had a duty to defend, holding that personal injury covers extreme mental and emotional distress and that a Texas court could potentially find human tissues to be property. Id. Tellingly, the district court referred to the duty to defend question as “exceedingly close.” Id. at 744. The Fifth Circuit certified the personal injury and property damage questions to this Court and noted that if Alvarez's claims involve either personal injury or property damage under the policy, Evanston has a duty to defend the entire Alvarez suit. Id. at 745, 751.

II. The Duty to Defend

When determining whether an insurer has a duty to defend, we follow the eight corners rule by looking at the four corners of the complaint for alleged facts that could possibly come within the scope of coverage in the four corners of the insurance policy. GuideOne Elite Ins. v. Fielder Rd. Baptist Church, 197 S.W.3d 305, 307 (Tex.2006). Our precedent favors insureds when examining both the complaint and the policy. As to the complaint, if it includes even one covered claim, the insurer must defend the entire suit.³Zurich Am. Ins. Co. v. Nokia, Inc., 268 S.W.3d 487, 491 (Tex.2008). However, we only defer to a complaint's characterization of factual allegations, not legal theories or conclusions. Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. Merchs. Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (Tex.1997) (per curiam). As to the policy, if a term is susceptible to more than one reasonable interpretation, we must resolve that uncertainty in favor of the insured. Fiess v. State Farm Lloyds, 202 S.W.3d 744, 746 (Tex.2006).

III. Personal Injury

With these principles in mind, we first determine whether Alvarez's suit seeks damages for personal injury under Legacy's policy with Evanston. Specifically, the first certified question asks: “Does the insurance policy provision for coverage of ‘personal injury,’ defined therein as ‘bodily injury, sickness, or disease including death resulting therefrom sustained by any person,’ include coverage for mental anguish, unrelated to physical damage to or disease of the plaintiff's body?” Evanston, 645 F.3d at 751. The policy defines “personal injury” as:

(a) bodily injury, sickness or disease including death resulting therefrom sustained by any person; (b) false arrest, detention or imprisonment, wrongful entry or eviction or other invasion of private occupancy, malicious prosecution or humiliation, except when maliciously inflicted by, at the direction of, or with the consent or acquiescence of the insured;

(c) the publication or utterance of libel or slander or other defamatory or disparaging material, or a publication or utterance in violation of an individual's right of privacy except when maliciously published or uttered by, at the direction of, or with the consent or acquiescence of the insured. (emphasis added).

When an insurance policy defines its terms, those definitions control. Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d 819, 823 (Tex.1997). Legacy claims “bodily” only modifies “injury” and that Alvarez's mental anguish qualifies as sickness under the policy. Evanston maintains that “bodily” modifies “injury,” “sickness” and “disease” and that an accompanying physical injury is required.

We agree with Evanston. In Trinity, we examined a homeowner's policy that defined “bodily injury” as “bodily harm, sickness or disease.” Id. at 820. Even though Texas tort law allows recovery of mental anguish without any physical manifestations in some circumstances, we held that the policy in Trinity did not cover purely emotional injuries. Id. at 823. We explained that this interpretation gave effect to the commonly understood meaning of “bodily,” which implies a physical harm. Id.

Legacy argues that the Trinity policy defined “ bodily injury,” which is narrower than the term “ personal injury ” here. Id. at 820 (emphasis added). We disagree that this difference warrants a different outcome from that in Trinity for two reasons. First, the definitions in Trinity and the definition here are virtually identical.⁴ If two policies have two different defined terms but similar definitions, we should afford them similar meanings. See Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 219 (Tex.2003) (deferring to contract definition to determine meaning of defined term that has a different definition in the common law). Second, relevant grammatical rules indicate that an adverb or adjective typically modifies all the words in a string that follow it and are separated by a disjunctive.⁵See McIntyre v. Ramirez, 109 S.W.3d 741, 746 (Tex.2003) (stating that “a straightforward reading of subsection (d) leads to the conclusion that the adverb ‘ordinarily’ modifies both the verb ‘received’ and the verb phrase ‘be entitled to receive’ ”); Osterberg v. Peca, 12 S.W.3d 31, 38–39 (Tex.2000) (holding that “knowingly” applies to “makes” and “accepts” when they were separated by “or”). This rule certainly does not apply in all situations. As Legacy notes, the broader defined term “personal injury” could caution in favor of “bodily” not modifying all three nouns in subsection (a) here. However, subsections (b) and (c) of the definition of personal injury explain here why “bodily”—as in Trinity—modifies the nouns that follow. Subsections (b)-(c) include types of personal injury that require no physical manifestation, such as malicious prosecution, libel and slander. The use of a broader term here (personal injury) than in Trinity (bodily injury) encompasses these additional types of injury, but it does not alter bodily injury, sickness or disease to allow for such injuries even without physical manifestations. In other words, the parties included injuries that require no physical manifestation in subsections (b)-(c), and essentially duplicated the definition from Trinity in subsection (a), which requires a physical manifestation. To encompass both categories, they selected the broader term “personal injury.”

Here, Legacy maintains that Alvarez's injuries qualify as sickness or disease under subsection (a) of the definition of personal injury. Because “bodily” modifies injury, sickness, and disease in subsection (a), a physical manifestation is required for sickness or disease to be covered. Alvarez did not allege a physical injury. Therefore, her claims against Legacy do not trigger Evanston's duty to defend under the personal injury component of its policy. We answer the...