Are emotional distress damages covered under an insurance policy providing liability coverage only for “bodily injury”?

Kramer v. Nationwide Prop. & Casualty Ins. Co., 271 A.3d 431 (Pa. Super. 2021), allocatur granted Oct. 18, 2022, appeal docket 103 MAP 2022

This case arises from a complaint filed by Stewart Kramer and Valerie Conicello (the parents) against their insurer, Nationwide Property & Casualty Insurance Company (Nationwide) seeking a declaratory judgment that Nationwide had a duty to defend the parents in a wrongful death and survival suit arising from the drug overdose death of their son’s (Kramer) houseguest, Michael T. Murray, Jr. (decedent).

The decedent’s mother, Laurie S. Cruz (Cruz), filed a wrongful death and survival action against Kramer and his parents, alleging that Kramer was widely known to use and sell controlled substances and was negligent in supplying the decedent with the drugs that caused his overdose, and that the parents were negligent in allowing Kramer to use their home for such illicit activities. The wrongful death count included a demand for damages by the beneficiaries of the decedent’s estate, including the decedent’s parents. The survival action included a demand for recovery of damages based on the decedent’s “sustained pain and suffering prior to his untimely death.” Slip op. at 2.

Nationwide refused to provide the parents with a legal defense based on an exclusion contained in the parents’ policy limiting coverage and the corresponding duty to defend where controlled substances are involved. The trial court granted summary judgment in favor of the parents and ordered Nationwide to provide a defense to the parents in the wrongful death and survival suit.

Superior Court affirmed the trial court’s grant of summary judgment. Agreeing that Nationwide had a duty to defend the parents in the wrongful death and survival suit, Superior Court reasoned:

It is undisputed that Nationwide is bound to pay damages within the policy limit if the damages resulted from the parents’ negligent personal acts or negligence arising out of the ownership, maintenance or use of their personal property. In the wrongful death and survival action filed against the parents, the basis of the claims is that the parents were negligent in the ownership, maintenance and use of their home by allowing their son to supply the decedent with controlled substances at the residence. This is generally the type of occurrence that would be covered by the parents’ policy, triggering Nationwide’s duty to defend the claims.

However, the parents’ policy contains an exclusion limiting coverage and the corresponding duty to defend where controlled substances are involved. Section II(1) of the policy excludes personal liability coverage for bodily injury and property damages resulting from:

Use, sale, manufacture, delivery, transfer or possession by a person of a controlled substance(s) as defined by Federal Food and Drug Law (21 U.S.C.A. Sections 811 and 812). Controlled substances include but are not limited to: cocaine; LSD; marijuana; and all narcotic drugs.

Nationwide Policy, Section II(1)(m). The policy defines “bodily injury” as “bodily harm, including resulting care, sickness or disease, loss of services or death.” Nationwide would have no obligation to pay out for such damages if the parents are ultimately found liable for them. Correspondingly, Nationwide would then have no duty to defend with respect to those discrete classes of damages.

Significantly, though, the wrongful death claim against the parents in the underlying action is not limited to bodily injury, as such damages are defined in the policy. The decedent’s family is also potentially seeking other types of damages rooted in its “emotional distress, mental distress or injury, or any similar injury,” none of which would be the direct result of bodily harm to the decedent’s family itself. See generally Rettger v. UPMC Shadyside, 991 A.2d 915, 922 (Pa. Super. 2010) (recognizing that in a wrongful death suit, a family may recover for its emotional and psychological loss).

Since these are the types of damages that do not fall under the ambit of the policy’s “bodily injury” definition, the policy’s controlled substance exclusion would not apply to them. See Transamerica Ins. Co., 533 A.2d 1363 (“If the complaint filed against the insured avers facts which would support a recovery that is covered by the policy, it is the duty of the insurer to defend until such time as the claim is confined to a recovery that the policy does not cover.”).

Having construed the relevant portions of the subject policy as excluding coverage as to some, but potentially not all, of the damages sought from the parents, Nationwide would be obligated to pay out on the covered portions of the underlying claims if the parents are ultimately found liable. See id. This obligation triggers Nationwide’s duty to defend in the underlying action against the parents. See id. Accordingly, we affirm the trial court’s summary judgment order granting the parents a declaratory judgment as to Nationwide’s duty to defend.

Slip op. at 8-10 (footnote omitted).

The Pennsylvania Supreme Court granted allocatur limited to the following issue:

Did the Superior Court incorrectly rule that emotional distress damages are covered under an insurance policy providing liability coverage only for “bodily injury,” even when the policy itself excludes emotional distress from the definition of bodily injury?

For more information, contact Kevin McKeon or Dennis Whitaker.