Smith v. Animal Urgent Care, Inc.

• Decision Date: 03 November 2000
• Docket Number: No. 27058.,27058.
• Citation: 208 W.Va. 664,542 S.E.2d 827
• Parties: Erin SMITH, Plaintiff Below, v. ANIMAL URGENT CARE, INC. and Dr. Karl E. Yurko, Defendants/Third-Party Plaintiffs Below. Animal Urgent Care, Inc., Defendant/Third-Party Plaintiff Below, Appellant, v. American States Insurance Company, Third-Party Defendant Below, Appellee.
• Court: West Virginia Supreme Court

542 S.E.2d 827

208 W.Va. 664

Erin SMITH, Plaintiff Below, v. ANIMAL URGENT CARE, INC. and Dr. Karl E. Yurko, Defendants/Third-Party Plaintiffs Below.

Animal Urgent Care, Inc., Defendant/Third-Party Plaintiff Below, Appellant, v. American States Insurance Company, Third-Party Defendant Below, Appellee.

No. 27058.

Supreme Court of Appeals of West Virginia.

Submitted September 6, 2000.

Decided November 3, 2000.

Jeffrey A. Holmstrand, Esquire, McDermott & Bonenberger, PLLC, Wheeling, for Animal Urgent Care.

Jeffrey M. Wakefield, Esquire, Erica M. Baumgras, Esquire, Flaherty, Sensabaugh & Bonasso, PLLC, Charleston, for American States Insurance Company.

Ancil G. Ramey, Esquire, Karen E. Kahle, Esquire, Steptoe & Johnson, Charleston, for Dr. Yurko.

SCOTT, Justice:

Appellant Animal Urgent Care ("Animal Care") appeals from the May 21, 1999, order of the Circuit Court of Ohio County granting summary judgment to Appellee American States Insurance Company ("American States") on the issue of whether American States was required to indemnify or defend Animal Care in connection with an underlying sexual harassment claim.¹ The lower court relied on two policy exclusions exempting coverage for "bodily injuries" intended from the insured's standpoint ("intentional acts" exclusion) and for those "bodily injuries" sustained by an employee that arose "out of and in the course of employment" ("employee" exclusion). Having examined the policy language in conjunction with the pleadings filed below, we find no error with regard to the circuit court's ruling and accordingly, affirm.

I. Factual and Procedural Background

On October 3, 1997, Erin Smith filed a civil action in the circuit court against both Animal Care and one of its veterinarians, Dr. Karl E. Yurko. In her complaint, Ms. Smith sets forth allegations of sexual harassment, wrongful discharge, and intentional infliction of emotional distress, for which she seeks both compensatory and punitive damages. During the course of the nine-and-a-half-month period that Ms. Smith and Dr. Yurko both worked at Animal Care,² Ms. Smith alleges that Dr. Yurko engaged in various acts for the purpose of harassing, degrading, and embarrassing her through unwelcome sexual advances and exploitation. According to Ms. Smith, these acts included both verbal and physical conduct of a sexual nature.³ Through a declaratory judgment proceeding, American States sought a determination of whether it was required under a general commercial liability policy to provide coverage and/or a defense in connection with the lawsuit filed by Ms. Smith.⁴ After examining the policy provisions against the allegations of the complaint, the lower court determined that both the "intentional acts" and "employee" exclusionary clauses exempted coverage. Citing this Court's decision in Horace Mann Insurance Co. v. Leeber, 180 W.Va. 375, 376 S.E.2d 581 (1988), the lower court concluded that the "intentional acts" exclusion precluded coverage for the sexual harassment based complaint. The circuit court ruled additionally that the allegations of the complaint fell squarely within the parameters of the "employee" exclusion. Animal Care seeks a ruling from this Court that neither exclusion applies and therefore American States has an obligation to indemnify, or alternatively, that Animal Care has a minimal obligation to defend until such time as the facts of the case are further developed to properly permit a determination as to the applicability of the policy exclusionary language.⁵

II. Standard of Review

Our reasons for conducting de novo review of this case are twofold. First, it is well-established that this Court reviews summary judgment rulings pursuant to a plenary standard of review. See Syl. Pt. 1, Painter v. Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994). Second, de novo review of this matter is compelled because issues requiring interpretation of an insurance contract are presented. See Payne v. Weston, 195 W.Va. 502, 506-07, 466 S.E.2d 161, 165-66 (1995)

(recognizing that "interpretation of an insurance contract, including the question of whether the contract is ambiguous, is a legal determination which, like the court's summary judgment, is reviewed de novo on appeal").

III. Discussion

A. Policy Language

Our examination of whether the lower court correctly ruled below is necessarily linked to the language of the applicable policy exclusions, as well as pertinent definitions. The commercial general liability policy provides that:

We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury", "property damage", "personal injury", or "advertising injury" to which this insurance applies. (emphasis supplied)

The policy indicates that "[t]his insurance applies: (1) To `bodily injury' and `property damage' only if: (a) The `bodily injury' or `property damage' is caused by an `occurrence' that takes place in the `coverage territory';...." (emphasis supplied) The exclusions section of the policy provides that "[t]his insurance does not apply to:

a. `Bodily injury' or `property damage' expected or intended from the standpoint of the insured....

....

e. `Bodily injury' to: (1) An employee of the insured arising out of and in the course of employment by the insured;...." (emphasis supplied)

Both "bodily injury" and "occurrence" are specifically defined as follows:

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

"Occurrence" means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

1. "Bodily Injury"

Given the fundamental restriction of the coverage at issue to claims which assert "bodily injury," we proceed initially to determine whether the complaint at issue contains averments of "bodily injury." See Syl. Pt. 3, Bruceton Bank v. United States Fidelity and Guar. Ins. Co., 199 W.Va. 548, 486 S.E.2d 19 (1997) (holding that insurer's duty to defend is governed by whether allegations of complaint are reasonably susceptible of interpretation that claim is covered by policy terms).⁶ Animal Care posits that the issue of whether sexual harassment constitutes a "bodily injury" is a question of first impression for this Court. More accurately, the issue presented is whether a sexual harassment claim that is limited to emotional harm which lacks any physical manifestation can be said to constitute a "bodily injury" under the policy definition of that term.

In support of its contention that emotional distress without accompanying physical injury is sufficient to constitute "bodily injury" under the policy, Animal Care cites one case.⁷ In Crabtree v. State Farm Insurance Co., 632 So.2d 736 (La.1994), the court ruled that damages limited to emotional distress and mental anguish could come within a separate definition of "bodily injury"⁸ under the theory that "if the definition was intended to cover only external, physical injuries, then `bodily injury' easily could have been defined in a more restrictive fashion ...." Id. at 744.

American States distinguishes Crabtree first, based upon its differing policy definition of "bodily injury;" second, as an aberrational result in light of the clear weight of authority; and third, as an inapposite decision which failed to address whether solely emotional damages constitute "bodily injury" in the context of a sexual harassment claim.⁹ Of these three valid distinctions, we focus on the dearth of authority supporting Animal Care's position. Both commentators and tribunals alike identify the majority view to espouse that "absent physical manifestations or physical contact, purely emotional distress allegations are insufficient to qualify as bodily injury." Kathleen S. Edwards and Molly Nelson Ferrante, Insurance Coverage for Employment-Related Claims, 46 Prac. Law. 35, 36 (July 2000); see O'Dell v. St. Paul Fire & Marine Ins. Co., 223 Ga.App. 578, 478 S.E.2d 418, 420 (1996)

(holding that alleged emotional distress arising from sexual harassment was not "bodily injury" where such distress did not result from physical harm or injury); Greenman v. Michigan Mut. Ins. Co., 173 Mich.App. 88, 433 N.W.2d 346, 348-49 (1988) (finding no coverage for alleged mental distress injuries arising out of sexual harassment and discrimination claim on grounds that injuries lacked any physical manifestation); Garvis v. Employers Mut. Cas. Co., 497 N.W.2d 254, 257 (Minn.1993) (ruling that only emotional distress with appreciable physical injury could qualify as "bodily injury"); Citizens Ins. Co. v. Leiendecker, 962 S.W.2d 446, 450-54 (Mo.Ct.App.1998) (adopting majority position that "bodily injury" encompasses only physical harm and excludes mental suffering or emotional distress and citing numerous state and federal decisions following majority position as well as limited authority espousing minority position); David v. Nationwide Mut. Ins. Co., 106 Ohio App.3d 298, 665 N.E.2d 1171, 1173 (1995) (relying upon national judicial trend and ruling that emotional distress did not come within policy definition of "bodily injury" defining same as "bodily injury, sickness, or disease"); Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d 819, 823 (Tex.1997) (holding that "bodily injury" unambiguously requires injury to physical structure of human body and stating that "commonly understood meaning of `bodily,' ... implies a physical, and not purely mental, emotional, or spiritual harm"); see also Vienna Family Med. Assocs., Inc. v. Allstate Ins. Co., 78 F.3d 580, 1996 WL 93830, at *5 (4th Cir. March 5, 1996) (noting that significant weight of authority holds that "bodily injury" does not encompass nonphysical injuries such as emotional distress).

In discussing the rationale for excluding purely emotional injuries from the category of bodily injury, the court in Leiendecker explained that "in insurance law `bodily injury'...