Trinity Universal Ins. Co. v. Cowan

Decision Date16 May 1997
Docket NumberNo. 95-1160,95-1160
Citation40 Tex. Sup. Ct. J. 583,945 S.W.2d 819
Parties40 Tex. Sup. Ct. J. 583 TRINITY UNIVERSAL INSURANCE COMPANY and Trinity Lloyd's Insurance Company, Petitioners, v. Nicole COWAN, individually and as assignee of Gregory D. Gage, Respondent.
CourtTexas Supreme Court

Ben Taylor, Dallas, Jack McKinley, Houston, for Petitioners.

Ray Chester, David Denis Griner, Austin, for Respondent.

CORNYN, Justice, delivered the opinion for a unanimous Court.

We decide in this case the meaning of two terms commonly used in insurance policies. First, we decide whether mental anguish alone is a "bodily injury" under a standard homeowners' insurance policy defining "bodily injury" as "bodily harm, sickness or disease." We conclude that, absent an allegation of physical manifestation of mental anguish, a claim of mental anguish is not a "bodily injury" as defined in the policy for purposes of invoking the duty to defend. Second, we decide whether an insured's intentional tort that results in unintended injuries is an "accident," and thus an "occurrence" under the same policy. We conclude that it is not, and thus there is no coverage under the policy.

Gregory Gage was working at an H.E.B. Photo Place as a photo lab clerk when a roll of film containing somewhat revealing pictures of Nicole Cowan was delivered for developing. Gage made extra prints of four of the pictures and took them home. He later showed them to some friends and left the pictures with one friend with instructions to throw them away. That friend, however, showed the pictures to someone else, who was a friend of Cowan and who told her of Gage's actions. Cowan then sued Gage and H.E.B., alleging, among other things, negligence and gross negligence. Cowan alleged that she had suffered "severe mental pain, a loss of privacy, humiliation, embarrassment, fear, frustration, mental anguish, and [would] continue to do so in the future." Gage, who was about twenty years old and living with his parents at the time, notified his parents' homeowners' insurance carrier, Trinity Lloyd's Insurance Company, a subsidiary of Trinity Universal Insurance Company (collectively "Trinity"), of the suit.

Trinity initially defended Gage under a reservation of rights, but later denied coverage and withdrew its defense. Cowan settled with H.E.B., and then Gage agreed to assign to Cowan any claims he might have against Trinity in exchange for her promise not to execute against any of his assets except any coverage afforded by the Trinity policy. During the ensuing nonjury trial against Gage, at which he did not appear or otherwise defend, Cowan and her mother testified that Nicole suffered mental anguish, along with headaches, stomachaches, and sleeplessness as a result of Gage's actions. The trial court found Gage negligent and grossly negligent, and awarded Cowan $250,000.

Cowan then filed this lawsuit against Trinity, bringing a claim as Gage's judgment creditor, and also bad faith claims as Gage's assignee. Both parties moved for summary judgment, Cowan on the question of insurance coverage and Trinity on both coverage and bad faith. The trial court granted Cowan's motion and denied Trinity's, leaving the issue of damages, the bad faith claims, and attorney's fees for trial.

Cowan and Trinity settled most of their dispute on the eve of trial. Trinity agreed to pay the $250,000 underlying judgment, postjudgment interest, and $100,000 in attorney's fees, and Cowan agreed to waive any claim for extracontractual damages above that amount. Trinity expressly reserved the right to appeal the trial court's partial summary judgment on coverage and whether Trinity was bound by the amount of the underlying judgment. The trial court signed a final judgment incorporating the parties' agreement. Trinity appealed, and the court of appeals affirmed. 906 S.W.2d 124.

Because our decision on the coverage issue is dispositive of this entire controversy, we do not reach Trinity's challenge to the amount of damages, see TEX.R.APP. P. 81(c), except to note that it is controlled by our recent decision in State Farm Fire & Casualty Co. v. Gandy, 925 S.W.2d 696 (Tex.1996). There, we held, "In no event ... is a judgment for plaintiff against defendant, rendered without a fully adversarial trial, binding on defendant's insurer or admissible as evidence of damages in an action against defendant's insurer by plaintiff as defendant's assignee." Id. at 714.

On the coverage issue, Trinity complains of the court of appeals' holding that Cowan's alleged "severe mental pain, ... loss of privacy, humiliation, embarrassment, fear, frustration, [and] mental anguish" were "bodily injur[ies]" resulting from a covered "occurrence" under the policy. 906 S.W.2d at 130-31. Cowan's principal arguments are that her claims were covered under the Trinity policy because either (1) her claim for mental anguish implicitly raised a claim for associated physical manifestations, or (2) a claim for pure mental anguish, even absent any physical manifestations, is a "bodily injury" as defined by the policy. Cowan also argues that Trinity waived its right to deny coverage because it did not investigate Cowan's claims. The court of appeals affirmed the trial court's judgment based solely on Cowan's first argument. 906 S.W.2d at 130-31, 133 n. 4.

Preliminarily, we note that under the "complaint allegation rule," factual allegations in the pleadings and the policy language determine an insurer's duty to defend. American Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842, 847-48 (Tex.1994). "If a petition does not allege facts within the scope of coverage, an insurer is not legally required to defend a suit against its insured." Id. at 848. The duty to indemnify is triggered by the actual facts establishing liability in the underlying suit. Heyden Newport Chem. Corp. v. Southern Gen. Ins. Co., 387 S.W.2d 22, 25 (Tex.1965). Thus, the duty to defend and the duty to indemnify by an insurer are distinct and separate duties. See American Alliance Ins. Co. v. Frito-Lay, Inc., 788 S.W.2d 152, 153 (Tex.App.--Dallas 1990, writ dism'd).

I. Bodily Injury
A. Pure Mental Anguish Is Not Bodily Injury

Trinity's standard homeowners' policy provides, in relevant part:

Coverage C (Personal Liability)

If a claim is made or suit is brought against an insured for damages because of bodily injury or property damage caused by an occurrence to which this coverage applies,

[Trinity] will:

1. pay up to our limit for the damages for which the insured is legally liable.

2. provide a defense at [Trinity's] expense by counsel of [Trinity's] choice even if the suit is groundless, false or fraudulent. [Trinity] may investigate and settle any claim or suit that [Trinity] decide[s] is appropriate.

"Bodily injury" is defined as "bodily harm, sickness or disease. This includes required care, loss of services and death that results."

Cowan contends that two Texas cases, City of Austin v. Davis, 693 S.W.2d 31 (Tex.App.--Austin 1985, writ ref'd n.r.e.), and McGovern v. Williams, 741 S.W.2d 373 (Tex.1987), support her argument that pure mental anguish alone is "bodily injury" as defined under Trinity's homeowners' policy. Davis, however, concerned whether a father could recover as a bystander when he and others discovered the body of his son several hours after a fatal fall, not whether mental anguish constitutes "bodily injury" under the terms of an insurance policy. 693 S.W.2d at 33. Compare Davis with Edinburg Hosp. Auth. v. Trevino, 941 S.W.2d 76 (Tex.1997) (declining to recognize bystander recovery in medical malpractice cases). Moreover, in Davis, the parties stipulated to the plaintiff's physical manifestations of emotional distress. 693 S.W.2d at 33.

McGovern is also distinguishable and thus not controlling here. In McGovern, we held that the loss of consortium claim of a wife who had not herself been involved in an automobile accident was derivative of her husband's injuries and was thus not a separate bodily injury for purposes of increasing the applicable policy limits of the couple's automobile insurance policy. 741 S.W.2d. at 374. One might, we concede, infer from language in that opinion that mental anguish is a bodily injury:

Loss of consortium, therefore, does not involve any allegation of physical harm, nor does it include an element of mental anguish. Mental anguish is a cause of action separate and distinct from loss of consortium. Moore v. Lillebo, 722 S.W.2d 683, 687-88 (Tex.1986). [ 1] In the present case, Mrs. McGovern neither alleged physical harm nor mental anguish. Her claim for loss of consortium, therefore, cannot constitute a claim of "bodily injury."

Id. at 374-75.

But on closer scrutiny, McGovern does not support Cowan's contention. First, we were answering a different question in McGovern from that presented here, not one of coverage under the definition of terms in the policy, but one of the applicable policy limits given a loss of consortium claim in a case in which coverage was uncontested. Second, later cases relying on McGovern have largely rejected separate mental anguish claims of similarly situated plaintiffs based on the holding that such claims are also derivative of the bodily injury to the person involved in the accident. See Eshtary v. Allstate Ins. Co., 767 S.W.2d 291, 293 (Tex.App.--Fort Worth 1989, writ denied) (applying McGovern 's "ultimate rationale" that "the term 'bodily injury' cannot be reasonably construed to incorporate mental pain and anguish if the claim is being asserted as a derivative claim arising only as a consequence of injuries to another person"); Manriquez v. Mid-Century Ins. Co., 779 S.W.2d 482, 485 (Tex.App.--El Paso 1989, writ denied) (stating that McGovern ultimately turned on fact that the "per person" limit referred only to persons involved in the auto accident and not to persons who suffer a loss as a result of an injury to someone else); Miller v. Windsor Ins. Co., 923 S.W.2d 91, 97 (...

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