Lavanant v. General Acc. Ins. Co. of America

• Decision Date: 30 October 1990
• Citation: 561 N.Y.S.2d 164,164 A.D.2d 73
• Parties: , 59 USLW 2319 Suzanne LAVANANT and Brittany Management Corp., Plaintiffs-Respondents, v. GENERAL ACCIDENT INSURANCE COMPANY OF AMERICA, Defendant-Appellant, and Chubb Group of Insurance Companies and Federal Insurance Company, Defendants-Respondents. GENERAL ACCIDENT INSURANCE COMPANY OF AMERICA, Third-Party Plaintiff-Appellant, v. BROWNSTEIN & BROWNSTEIN, Third-Party Defendant-Respondent.
• Court: New York Supreme Court — Appellate Division

Page 164

561 N.Y.S.2d 164

164 A.D.2d 73, 59 USLW 2319

Suzanne LAVANANT and Brittany Management Corp., Plaintiffs-Respondents, v. GENERAL ACCIDENT INSURANCE COMPANY OF AMERICA, Defendant-Appellant, and Chubb Group of Insurance Companies and Federal Insurance

Company, Defendants-Respondents.

GENERAL ACCIDENT INSURANCE COMPANY OF AMERICA, Third-Party Plaintiff-Appellant, v. BROWNSTEIN & BROWNSTEIN, Third-Party Defendant-Respondent.

Supreme Court, Appellate Division,

First Department.

Oct. 30, 1990.

Irwin Brownstein, of counsel (Brownstein & Brownstein, attorneys) for plaintiffs-respondents-appellants.

Terrence P. O'Reilly, of counsel (Foley, Hickey, Gilbert & O'Reilly, attorneys) for defendant-appellant and third-party plaintiff-appellant General Acc.

Peter L. Contini, of counsel (Ronald C. Burke with him on the brief; L'Abbate & Balkan, attorneys) for third-party defendant-respondent.

John Young, for defendants-respondents Chubb Group.

Before MURPHY, P.J., and SULLIVAN, CARRO and MILONAS, JJ.

SULLIVAN, Justice.

This appeal presents the issue of whether a liability insurance policy providing indemnity for damages incurred as a result of "bodily injury"--defined as "bodily injury, sickness or disease"--provides coverage for emotional distress suffered as a result of the insured's negligence but without any physical contact. We hold that it does.

Plaintiffs Lavanant and Brittany Management Corp., the owner and managing agent, respectively, of a brownstone located at 134 East 24th Street in New York City, were, with respect to such premises, insured under two policies, one, a special multi-peril policy with defendant General Accident Insurance Company of America providing $500,000 liability coverage each occurrence for bodily injury and property damage and, the other, a commercial umbrella liability policy with defendants Chubb Group of Insurance Companies and Federal Insurance Company (collectively referred to as Federal) providing excess liability coverage of $10,000,000 over General Accident's $500,000 limit per occurrence.

In January 1985, Emilio Belliti and Victor Rizika, tenants occupying the parlor floor at 134 East 24th Street, commenced an action for damages against Lavanant and Brittany, alleging negligence in the demolition and renovation of the building and asserting four causes of action: negligence, intentional infliction of emotional distress, assault and breach of warranty of habitability. In support of their negligence claim, the plaintiffs alleged that Lavanant and Brittany had the work done in their building "without regard for the safety and comfort of the plaintiffs." General Accident, conceding coverage with respect to the first cause of action and any other claims grounded in negligence but reserving its right as to the intentional tort (second and third) and warranty of habitability (fourth) causes of action and punitive damage claims, undertook the defense of the Belliti action.

Concerned because General Accident's counsel was eager to settle the property aspects of the claim and leave the parties "to do battle over issues which were totally unrelated to [the] liability insurance policy", Lavanant and Brittany moved successfully to have their own counsel, Brownstein and Brownstein, substituted. At about the same time, General Accident, over the objection of Brownstein and Brownstein, settled the property damage portion of the first cause of action for $50,000. The Belliti action thereafter proceeded to trial, during the course of which the intentional tort causes of action were dismissed. The record of that trial reveals that the plaintiffs showed that the conduct complained of made them sick and fearful. There was no proof of a physical injury. In submitting to the jury the first cause of action alleging negligence, the trial court charged that it could consider any emotional distress claimed by the plaintiffs. The jury found in favor of the plaintiffs and awarded them $400,000 on the first cause of action and $5,226.75 as a rent abatement on the fourth cause of action, as well as $2,500,000 in punitive damages, which the trial court set aside. A $410,738.16 judgment entered in the plaintiffs' favor was thereafter affirmed by this court (Belliti v. Lavanant, 151 A.D.2d 1051, 544 N.Y.S.2d 404, lv. den. 75 N.Y.2d 702, 551 N.Y.S.2d 906, 551 N.E.2d 107).

In the interim, Lavanant and Brittany commenced this action, seeking, inter alia, a declaration that General Accident is obligated to indemnify them for the amount of the Belliti judgment and the counsel fees and disbursements incurred as a result of the retention of private counsel to defend the action as well as an award in damages for the amount of the judgment and legal expenditures. They sought similar relief against Federal with respect to the judgment only, subject to an allowance for "applicable exclusions." After joinder of issue, Lavanant and Brittany moved for partial summary judgment so declaring. In opposing the motion, General Accident argued that the $400,000 verdict on the first cause of action for emotional distress was tantamount to a finding of intentional conduct and therefore outside the scope of coverage. It also argued that, whether accidentally or intentionally caused, emotional distress or mental anguish is not, under its policy's definition of that term, a "bodily injury" and thus is not covered.

In granting the motion to the extent of so declaring as against General Accident, the IAS court found that the $400,000 verdict on the first cause of action was based on negligent, not intentional, conduct. It, however, ignored General Accident's argument that a damage award for emotional distress is outside the scope of its coverage inasmuch as emotional distress without physical injury does not meet the policy definition of "bodily injury". The court also granted Federal's cross-motion to dismiss the complaint on the ground that its obligation to pay had not been triggered since the net loss for which Lavanant and Brittany were liable fell within General Accident's primary policy limits. Finally, the court granted a motion to dismiss General Accident's third-party complaint against Brownstein and Brownstein on the ground that, absent privity of contract, express or implied, between General Accident and the Brownstein firm, the latter is not liable to third parties for negligence in performing services for its client. General Accident appeals. We affirm.

On appeal, General Accident renews its argument that the $400,000 verdict on the first cause of action was premised on intentional, not negligent, conduct and thus the incident giving rise to the verdict is not covered as an "occurrence", as that term is defined in the policy. It also reasserts the claim that even if the liability of its insureds, Lavanant and Brittany, is based on negligent conduct, in the absence of resulting physical or bodily injury, its policy does not provide coverage for the emotional distress which is the basis of the Belliti plaintiffs' $400,000 verdict.

With respect to General Accident's claim that liability in the underlying action was premised on intentional rather than negligent conduct, it is undisputed that negligence was the only theory of liability submitted to the jury on the first cause of action and that the intentional tort causes of action, the second and third, were dismissed. Thus, the jury's determination that its insureds were negligent is conclusive on that issue.

Having taken the intentional tort aspect of the pleadings out of the case before submitting the matter to the jury, the Belliti trial court effectively eliminated any argument General Accident might have for avoiding coverage on the ground that liability was premised on intentional conduct. Notwithstanding, General Accident attempts to recast its insureds' liability for the $400,000 damage award on the first cause of action as based on intentional conduct by suggesting that Lavanant and Brittany had to know that their actions in renovating and demolishing the building "would surely drive the tenants from the building." This argument, even if available given the nature of the verdict, is without merit since the General Accident policy, which provides liability coverage for bodily injury "caused by an occurrence," follows well-settled judicial doctrine used in determining whether certain conduct falls within the "accident" language of an insurance policy. "[I]n construing whether or not a certain result is accidental, it is customary to look at the [casualty] from the point of view of the insured, to see whether or not, from his point of view, it was unexpected, unusual and unforeseen". (Miller v. Continental Ins. Co., 40 N.Y.2d 675, 677, 389 N.Y.S.2d 565, 358 N.E.2d 258, quoting treatise.) As Judge Cardozo noted, "Injuries are accidental or the opposite for the purpose of indemnity according to the quality of the results rather than the quality of the causes." (Messersmith v. American Fid. Co., 232 N.Y. 161, 165, 133 N.E. 432.) General Accident's policy defines an occurrence as "an accident ... which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured." While General Accident's insureds may have intended a constructive eviction of their tenants, the results that ensued, the Belliti plaintiffs'...