Voorhees v. Preferred Mut. Ins. Co.

Citation607 A.2d 1255,128 N.J. 165
Parties, 75 Ed. Law Rep. 347, 8 A.L.R.5th 937 Eileen VOORHEES, Plaintiff-Respondent, v. PREFERRED MUTUAL INSURANCE COMPANY, Defendant-Appellant.
Decision Date17 June 1992
CourtUnited States State Supreme Court (New Jersey)

Anthony P. Pasquarelli, Rahway, for defendant-appellant (Methfessel & Werbel, attorneys).

Francis X. Garrity, Montclair, for plaintiff-respondent (Garrity, Fitzpatrick, Graham, Hawkins & Favetta, attorneys; Frances X. Garrity and Rudolph G. Morabito, on the brief).

David J. D'Aloia, Newark, submitted a brief on behalf of amicus curiae, Nat. Ass'n of Independent Insurers (Saiber, Schlesinger, Satz & Goldstein, attorneys; David J. D'Aloia, Joan M. Schwab, and Mary Fran Farley, on the brief).

The opinion of the Court was delivered by

GARIBALDI, J.

The primary issue in this appeal is whether a homeowner's insurance policy providing coverage for bodily injuries caused by the insured will cover liability for emotional distress accompanied by physical manifestations. We hold that it will. Further, we hold that the event causing the distress will be deemed an accidental occurrence entitling the insured to coverage when the insured's actions, although intentional, were not intentionally injurious.

I

In the underlying suit, filed in 1985, Eileen Voorhees was sued by her child's teacher for her comments questioning the teacher's competency and fitness. The complaint against Voorhees indicates that Voorhees and other parents had expressed their concern about the teacher at an open school-board meeting and had requested that their children be removed from her class. The school board decided to relieve the teacher of her teaching duties pending the results of a psychiatric examination. Local newspapers published stories regarding the controversy. The teacher alleged that

[t]he January 17, 1985 issue of The Cranford Chronicle, one of the defendant newspapers in this case, quotes the defendant, Eileen Voorhees, as speaking for the parents of some of the school children of the plaintiff and as saying that she, Eileen Voorhees, was glad the Board of Education had finally "done something." The article goes on to quote the defendant, Eileen Voorhees, as having stated, "We have been warning them since September that there were serious problems which should be investigated. I'm just sorry it took an incident like the one on December 10 to convince them."

After the psychiatric examination, the schoolteacher was considered fit to resume teaching, and did so at a special assignment.

The teacher sued Voorhees, the local Board of Education, the Superintendent of Schools, the school principal, the local newspapers, and one other parent seeking compensation for the injuries she had suffered due to their behavior. Count four of the complaint, concerning Voorhees and the other parent, alleged that

[a]t various times and on various dates * * * defendants [other parent] and Eileen Voorhees made false and erroneous statements about the competency and fitness of the plaintiff, such statements serving to place plaintiff before the public in a false light, further serving to interfere with her rights of privacy and to inflict upon her humiliation, embarrassment, emotional distress and mental anguish. The statements as well as conduct of these defendants respecting the plaintiff herein were made and carried out willfully, deliberately, recklessly and negligently. Moreover, these defendants knew or should have known that their statements about plaintiff were false and would probably, as occurred, place plaintiff before the public in a false light, interfere with her rights of privacy, cause her severe humiliation, embarrassment, emotional distress and mental anguish.

As a direct and proximate result of the foregoing, plaintiff was damaged in her reputation as a professional teacher and has been unable and remains unable to function in her customary teaching assignment. Moreover, she has been placed before the public in a false light, has had her rights of privacy interfered with and has suffered and continues to suffer embarrassment, humiliation, emotional distress and mental anguish.

The teacher alleged that the parents' accusations and the school system's response caused her extreme emotional distress. Medical evidence generated in response to interrogatories revealed that the emotional distress associated with the events had resulted in "an undue amount of physical complaints," including "headaches, stomach pains, nausea, * * * [and] body pains * * *."

Voorhees was insured under a homeowners policy issued by Preferred Mutual Insurance Company. That policy obligated the insurer to

pay * * * all sums for which any insured is legally liable because of bodily injury * * * caused by an occurrence to which this coverage applies[, and to] defend any suit seeking damages, provided the suit results from bodily injury * * * not excluded under this coverage.

In its definitions section, the policy stated that

Bodily injury means bodily harm, sickness or disease to a person including required care, loss of services and death resulting therefrom.

* * * * * *

Occurrence means an accident * * *.

The policy excluded coverage for "liability * * * caused intentionally."

Voorhees requested Preferred Mutual to defend her against the schoolteacher's suit. The carrier refused on two grounds: one, that the policy expressly excluded coverage for liability created by intentional acts; and two, that the teacher's claim sounded in libel and/or slander, causes of action that result in "personal" rather than "bodily" injury claims, and are therefore not covered under the policy.

The underlying case settled for $750 in August 1987. Voorhees alleges she spent more than $14,000 defending the suit. In September 1988, Voorhees filed this suit against Preferred Mutual for damages for breach of the insurance contract. Both parties moved for summary judgment.

The trial court granted Preferred Mutual's motion. The trial court quickly disposed of Preferred Mutual's first contention, that the policy excluded coverage for liability resulting from intentional acts, by noting that the complaint alleged not only intentional conduct but also negligent conduct, which would be covered. However, the trial court agreed with Preferred Mutual's second contention that the complaint alleged defamation, a cause of action not covered under the bodily-injury policy. The court based its decision on Lumbermen's Mutual Casualty Co. v. United Service Automobile Ass'n, 218 N.J.Super. 492, 528 A.2d 64 (App.Div.1987), which held that a defamation claim is not covered under a bodily-injury policy.

The Appellate Division reversed. 246 N.J.Super. 564, 569, 588 A.2d 417 (1991). A majority of the court disagreed with the trial court's conclusion that the complaint alleged only defamation and not alternative causes of action including outrage and the negligent infliction of emotional distress, id. at 570-71, 588 A.2d 417, causes of action that would be covered under the phrase "bodily injury." Id. at 573, 588 A.2d 417. Although the allegations were far from convincing, the court noted that "[i]f the pleadings state facts bringing the injury within the coverage of the policy, the insurer must defend regardless of the insured's ultimate liability to the complainant." Id. at 569, 588 A.2d 417.

The dissenting judge below strongly disagreed with the majority's position that emotional-distress claims fall within an insurer's duty to defend under a policy covering liability for bodily injuries. Noting that an ambiguous insurance policy is to be interpreted in line with the policyholder's "reasonable expectations," the dissent indicated that the term "bodily injury" is unambiguous and thus can and should be given its ordinary meaning. Id. at 583-84, 588 A.2d 417 (Deighan, J.A.D., dissenting). That ordinary meaning, he argued, would preclude coverage for the essentially-emotional injuries alleged in the present case. Id. at 588, 588 A.2d 417. The dissent also found that under Voorhees' policy, which defined an occurrence as an accident, there had been no occurrence because verbal statements such as Voorhees' do not constitute an "accident." Id. at 588-89, 588 A.2d 417.

This appeal is here as of right. 1 R. 2:2-1(a)(2).

II Interpreting the Complaint

The dispute centers on whether the complaint alleges a covered claim. Preferred Mutual argues that the complaint sets forth only one cause of action, for defamation. Because such a claim is not based on a plaintiff's personal distress and humiliation, but is based instead on the harm to the plaintiff's relations with others--the harm to the plaintiff's "relational" interest--it is not covered by a bodily-injury policy. Lumbermen's Mutual, supra, 218 N.J.Super. at 494, 498-99, 528 A.2d 64. Voorhees, on the other hand, alleges that the complaint sets forth various alternative causes of action, among them outrage and the negligent infliction of emotional distress, both of which fall within the policy's coverage.

"[T]he duty to defend comes into being when the complaint states a claim constituting a risk insured against." Danek v. Hommer, 28 N.J.Super. 68, 77, 100 A.2d 198 (App.Div.1953), aff'd o.b., 15 N.J. 573, 105 A.2d 677 (1954). Whether an insurer has a duty to defend is determined by comparing the allegations in the complaint with the language of the policy. When the two correspond, the duty to defend arises, irrespective of the claim's actual merit. Id. 28 N.J.Super. at 76-77, 100 A.2d 198. If the complaint is ambiguous, doubts should be resolved in favor of the insured and thus in favor of coverage. Central Nat'l Ins. Co. v. Utica Nat'l Ins. Group, 232 N.J.Super. 467, 470, 557 A.2d 693 (App.Div.1989). When multiple alternatives causes of action are stated, the duty to defend will continue until every covered claim is eliminated. Mt. Hope Inn v. Travelers Indem. Co., 157 N.J.Super. 431, 440-41, 384...

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