State Farm Mut. Auto. Ins. v. Connolly

• Decision Date: 04 May 2006
• Docket Number: No. 1 CA-CV 05-0400.,1 CA-CV 05-0400.
• Citation: 132 P.3d 1197,212 Ariz. 417
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff-Appellant, v. Trista CONNOLLY, a minor, by and through her parents Jewel and Michael CONNOLLY, and Jewel and Michael Connolly, wife and husband, Defendants-Appellees.
• Court: Arizona Court of Appeals

132 P.3d 1197

212 Ariz. 417

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff-Appellant, v. Trista CONNOLLY, a minor, by and through her parents Jewel and Michael CONNOLLY, and Jewel and Michael Connolly, wife and husband, Defendants-Appellees.

No. 1 CA-CV 05-0400.

Court of Appeals of Arizona, Division 1, Department A.

May 4, 2006.

Jones, Skelton & Hochuli, P.L.C. By Ronald W. Collett, Randall H. Warner, Phoenix, Attorneys for Plaintiff-Appellant.

Matthew L. Riggs, P.C. By Matthew L. Riggs, Mesa, Attorney for Defendants-Appellees.

OPINION

IRVINE, Presiding Judge.

¶ 1 State Farm Mutual Automobile Insurance Company ("State Farm") appeals the trial court's summary judgment in favor of Trista Connolly, a minor, by and through her parents Jewel and Michael Connolly ("Trista"), in this declaratory judgment action. Because we conclude that Trista's claim for negligent infliction of emotional distress arising from the death of her sister in a car accident is not subject to the same "Each Person" policy limits as her parents' wrongful death claim, we affirm.

FACTS AND PROCEDURAL HISTORY

¶ 2 The facts are undisputed. Dana Connolly was fatally injured after being struck by a pickup truck driven by Billy Breedlove. Trista, Dana's sister, was nearby and witnessed the accident. Trista, through her parents, asserts a claim for negligent infliction of emotional distress based on the emotional injury she sustained from witnessing her sister's death.

¶ 3 State Farm insured Breedlove under an automobile liability policy with limits of $50,000 per person and $100,000 per occurrence. State Farm paid $50,000 to Jewel and Michael Connolly for the wrongful death of their daughter, Dana, but denies that Trista is entitled to an additional $50,000. State Farm contends that Trista's negligent infliction of emotional distress claim is subject to the same per-person policy limits as her parents' wrongful death claim. State Farm filed a declaratory judgment action to resolve the coverage issue, and the parties submitted the dispute to the trial court on cross-motions for summary judgment. The trial court granted judgment in favor of Trista, and State Farm timely appealed.

DISCUSSION

¶ 4 Interpretation of an insurance contract is a question of law which we review de novo. Benevides v. Ariz. Prop. & Cas. Ins. Guar. Fund, 184 Ariz. 610, 613, 911 P.2d 616, 619 (App.1995). We construe provisions in insurance contracts according to their plain and ordinary meaning whenever possible. Sparks v. Republic Nat. Life Ins. Co., 132 Ariz. 529, 534, 647 P.2d 1127, 1132 (1982). If a clause is susceptible to different constructions, we attempt to discern the meaning of the clause "by examining the purpose of the exclusion in question, the public policy considerations involved and the transaction as a whole." See Ohio Cas. Ins. Co. v. Henderson, 189 Ariz. 184, 186, 939 P.2d 1337, 1339 (1997). If all else fails, and the clause remains ambiguous, the insurance policy will be construed to provide coverage. See Thomas v. Liberty Mut. Ins. Co., 173 Ariz. 322, 325, 842 P.2d 1335, 1338 (App.1992).

¶ 5 The policy at issue requires State Farm to pay "damages which an insured becomes legally liable to pay because of bodily injury to others ... caused by accident resulting from the ownership, maintenance or use of your car" (emphasis in original). The policy defines "bodily injury" (somewhat circularly) as "bodily injury to a person and sickness, disease or death which results from it" (emphasis in original). The policy further states as follows:

The amount of bodily injury liability coverage is shown on the declarations page under "Limits of Liability — Coverage A — Bodily Injury, Each Person, Each Accident." Under "Each Person" is the amount of coverage for all damages due to bodily injury to one person. "Bodily Injury to one person" includes all injury and damages to others resulting from this bodily injury. Under "Each Accident" is the total amount of coverage, subject to the amount shown under "Each Person," for all damages due to bodily injury to two or more persons in the same accident (emphasis in original).

¶ 6 Trista contends that the policy language makes derivative claims arising from one person's bodily injuries subject to the "Each Person" limit, while providing separate "Each Person" policy limits, up to the aggregate amount of the "Each Accident" policy limits ($100,000), to non-derivative claims asserted by other parties injured by the same accident. Our cases generally have held that "derivative" claims, such as loss of consortium, that arise from an injury or death to another person, are subject to the "Each Person" coverage limits of an automobile liability policy, with the amount paid to be pro-rated among all of the claimants. See, e.g., Herring v. Lumbermen's Mut. Cas. Co., 144 Ariz. 254, 697 P.2d 337 (1985) (holding that three minor children had no claim against the decedent's uninsured motorist coverage for the difference between the $5,000 they each received under the tortfeasor's policy, and the $15,000 minimum coverage limit required by law); Campbell v. Farmers Ins. Co. of Ariz., 155 Ariz. 102, 104-07, 745 P.2d 160, 162-65 (App.1987) (compiling cases from other jurisdictions and holding that surviving spouse's and children's "derivative" loss of consortium claims were subject to the "each person" limit of underinsured coverage, rather than the "each accident" limit). Claims by separate victims for their independent, separate injuries are paid separately to each up to the total amount of coverage set forth in the "Each Accident" coverage limits.

¶ 7 Our cases have not considered whether a negligent infliction of emotional distress claim such as the one Trista asserts is a "derivative" claim, or is an independent injury to another victim. Trista contends, and the trial court agreed, that her negligent infliction of emotional distress claim is not a derivative claim, and therefore is not subject to the "Each Person" policy limits.

¶ 8 State Farm states the issue somewhat differently, arguing that regardless whether Trista's negligent infliction of emotional distress claim "stands alone" or is considered "derivative," the policy language makes the claim subject to the "Each Person" limits because Trista's claim could not exist but for Dana's injury and death. State Farm asserts that the claim falls squarely within the policy language stating that the "Each Person" limits apply to "all damages due to bodily injury to one person," which "includes all injury and damages to others resulting from this bodily injury" (emphasis added). State Farm emphasizes the importance of the phrases "due to" and "resulting from," asserting that because Trista's "injury and damages" resulted from witnessing Dana's bodily injury, Trista's claim is for "damages due to bodily injury to one person [Dana]" and is included in the policy limits for "injury and damages to others resulting from [Dana's] bodily injury." State Farm contends that the policy essentially requires a causal test: if one person's injuries could not exist but for bodily injury to another, that person's claim is subject to the "Each Person" policy limits ($50,000).

¶ 9 We agree that coverage depends on the intent of the contract, as determined by the policy language, not on whether a claim is labeled "derivative" or "independent." For example, under South Carolina law, loss of consortium is considered an independent, not a derivative, cause of action. Stewart v. State Farm Mut. Auto. Ins. Co., 341 S.C. 143, 533 S.E.2d 597, 604 (2000). Nevertheless, the South Carolina Court of Appeals held, as have most courts, that a State Farm automobile insurance policy's "Each Person" liability limits applied to both the husband's injuries and the wife's "consequential damages" for loss of consortium. Id. at 602, 604-05. The court explained:

The crux of coverage is not the separateness of a loss of consortium claim. Instead, the key is the consequential or direct nature of the damages sought. Where the claim is for consequential damages resulting from the bodily injuries suffered by the other spouse, rather than direct emotional or physical injury inflicted by the tortfeasor, the damage claim is covered by the single "per person" limit applicable to the claim for bodily injury giving rise to the consequential damages.

Id. We agree with the approach taken by the court in Stewart — the language of the policy and the nature of the damages sought are paramount, not the label of the claim as "derivative" or "independent." It is thus critical to understand exactly what claim is being asserted before attempting to interpret the policy language to determine what policy limits apply.

¶ 10 To state a negligent infliction of emotional distress claim arising from witnessing another person's injury or death, a plaintiff must establish that she was within the "zone of danger," and "must prove physical injury resulting from the shock of witnessing injury to a closely related person." Duke v. Cochise County, 189 Ariz. 35, 38, 938 P.2d 84, 87 (App.1996); see also Keck v. Jackson, 122 Ariz. 114, 115-16, 593 P.2d 668, 669-70 (1979). State Farm does not argue that Trista has not properly stated a negligent infliction of emotional distress claim. Consequently, State Farm has conceded that Trista was within the zone of danger when Dana was struck. Moreover, State Farm concedes that Trista's emotional distress "could constitute `bodily injury' covered under the policy." Thus, the only issue raised by this appeal is whether Trista's bodily injury claim based on negligent infliction of emotional distress is subject to the "Each Person" coverage limits applicable to Dana's claim, or qualifies as a separate claim on behalf of a second victim, under the higher "Each Accident" coverage limits. This is an issue of first impression in Arizona.

¶ 11 Cases from other jurisdictions have addressed this issue with...