Summer, 2001

CLAIMS LAW UPDATE

AUTOMOBILE INSURANCE AND
BYSTANDER EMOTIONAL DISTRESS

[Ref: Law of Auto Liability Insurance, Paras. 1.03 and 4.01]

You are a claims professional for an auto insurer faced with a difficult issue. Your insured struck and killed a pedestrian with his car. Liability is clear, and the insured’s policy has a limit of $100,000 per person and $300,000 per occurrence. After you settle the estate’s wrongful death claim for $100,000, you receive a call from another attorney representing the victim’s wife. The wife claims she suffered emotional distress as a result of witnessing the accident. She contends that her harm is a separate bodily injury from the estate’s, and insists she is entitled to damages under your policy. You must determine whether her claim is covered as a bodily injury and, if so, if it is subject to the same $100,000 per person limit as the estate’s claim.

While the resolution of this dispute depends upon the jurisdiction, many jurisdictions have not litigated this precise issue, and the reasoning of some courts resolving similar cases has yielded inconsistent results. While it may be impossible to predict how a court will rule on any given day, understanding how neighboring jurisdictions handle similar claims, or how other courts apply comparable laws, may provide guidance in considering claims in your jurisdiction. Consequently, this article will outline three arguments commonly raised by insurers. This article will also address the reasons these arguments are accepted by some courts and rejected by others.

THE ELEMENTS OF A BYSTANDER’S CLAIM

Negligent infliction of emotional distress is an area of the law that has undergone rapid change due to courts refining common law principles to address different factual scenarios. Historically, recovery for emotional harm resulting from witnessing another’s injury, or fearing for another’s safety, was not permitted. Courts eventually abandoned the harsh rule of categorically denying recovery and recognized claims where the plaintiff was within the same “zone of danger” as the injured person. Recovery was only permitted if the plaintiff feared for his or her own safety. In other words, courts normally denied recovery for emotional distress caused solely by witnessing harm to another.

Some courts have rejected the zone of danger test and now allow for bystander recovery. The first court to extend the scope of foreseeable victims outside the zone of danger was California’s Supreme Court in Dillon v. Legg, 69 Cal. Rptr. 72 (1968). In Dillon, the Court held that a bystander could recover for emotional harm if: (1) the plaintiff was located near the scene of the accident, as contrasted with one who was a distance away from it; (2) the shock resulted from a direct emotional impact upon plaintiff from the sensory and contemporaneous observance of the accident, as contrasted with learning of the accident from others after its occurrence; and, (3) the plaintiff and the victim were closely related, as contrasted with an absence of any relationship or the presence of only a distant relationship.

After Dillon, other jurisdictions began recognizing bystander recovery. Some courts are more restrictive while others are more liberal. The main point to remember is that both the Dillon analysis, and the zone of danger test, have been modified over the years. Even California’s Supreme Court revisited Dillon in 1989 to set tighter guidelines for recovery. Therefore, it is critical that you check the law of your jurisdiction when presented with a bystander’s emotional distress claim. One of the most effective ways to analyze any claim is by focusing on the elements of the cause of action. A plaintiff who cannot establish the elements of a negligent infliction of emotional distress claim will not recover under the policy.

However, what if the plaintiff can make out a prima facie case, and the damages of the plaintiff and the plaintiff’s relative exceed the policy’s per person limit? Insurers facing this dilemma often rely on one or all of the following arguments: (1) Emotional distress is not bodily injury and, therefore, there is no coverage; (2) The emotional distress arises from the relative’s injury and, therefore, is subject to the same per person limit, which may have been exhausted; and/or (3) Recognizing the bystander’s claim would cause a flood of claims not contemplated by the policy and, therefore, there is no coverage.

NO BODILY INJURY - NO COVERAGE

Under most liability policies, insurers must pay damages for which the insured is legally liable “because of bodily injury.” As a result, if the plaintiff did not sustain a “bodily injury” as defined by the policy, nothing is owed. In the context of bystander claims, courts have historically taken one of three positions. First, they find that emotional distress is a bodily injury if it leads to physical manifestations. In these jurisdictions, emotional trauma which causes ulcers, for example, would constitute a bodily injury. Second, some courts are more expansive, ruling that bodily injury includes emotional harm even if there is no physical manifestation. Third, other courts hold that emotional harm does not constitute a bodily injury, regardless of whether there is physical harm. While this issue may be settled in some jurisdictions, courts concluding that emotional distress is not a bodily injury sometimes use slightly different reasoning.

For example, in Allstate Insurance Company v. Clohessy, 32 F.Supp2d 1333 (M.D. Florida 1998), Brendan Clohessy was killed by an uninsured driver. His estate and his mother and brother, witnesses to the accident, made claims under the uninsured motorist provisions of an auto policy, with the mother and brother claiming emotional distress. The court, after reviewing decisions of other jurisdictions, said:

In the context of insurance coverage, “the overwhelming majority of jurisdictions which have considered the issue hold that ‘bodily injury’ standing alone or defined in a policy as ‘bodily injury [or harm], sickness, or disease’ is unambiguous and encompasses only physical harm.”...Although no Florida court has decided the precise issue of whether emotional distress constitutes a “bodily injury,” the Florida Supreme Court has noted that “bodily injury” is not synonymous with “personal injury.” Moreover, the majority rule is consistent with the United States Supreme Court’s construction of the term “bodily injury,” albeit in a different context... In Eastern Airlines, the Court considered whether recovery for mental anguish against an airline was possible under Article 17 of the Warsaw Convention... Because the Convention limited carriers’ liability to “bodily injury,” the Supreme Court held that there could be no recovery for mental distress under the Convention.

In Bowman v. Holcomb, 614 NE2d 838 (Ohio App. 1992) the court, when faced with a similar situation, reached the same result using a slightly different analysis. In Bowman, in addition to examining the policy and case law, the court was also persuaded by the definitions of “bodily injury,” “sickness,” and “disease” found in Black’s Law Dictionary. In fact, the court concluded that the “commonly accepted” definitions of these terms excluded non-physical harms from the term “bodily injury.”

SUBJECT TO THE PER PERSON LIMIT

Taking the fact pattern introduced at the beginning of this article, suppose the plaintiff suffered emotional harm, and there is no dispute that emotional distress is covered by your policy. Is there coverage for the plaintiff or is there another obstacle to coverage?

This was the situation faced by the insurer in McNeill v. Metropolitan Property and Liability Insurance Company, 650 NE2d 793 (1995). In McNeill, the plaintiff, a bystander, claimed he suffered emotional harm which aggravated a diabetic condition and caused an ulcer. The per person policy limit was $100,000, and the per accident limit was $300,000. The policy also provided that “[t]he most we will pay for injuries to one or more persons as a result of bodily injury to any one person in any one accident is shown...as the ‘per person’ limit...[s]ubject to this limit, the most we will pay for injuries to two or more people in any one accident is shown...as the ‘per accident’ limit.” The estate’s wrongful death claim settled for the $100,000 limit. The plaintiff argued that his emotional distress triggered a second $100,000 per person limit because his claim was independent of the estate’s wrongful death claim. The defendant argued that a single $100,000 limit applied to both claims. The Massachusetts Supreme Court, focusing on the policy language and the nature of the claims, ruled as follows:

The wrongful death claim sought recovery for an injury (i.e., the plaintiff’s daughter’s death) resulting from bodily injury to the plaintiff’s daughter in the accident. While the emotional distress claim seeks recovery for a different injury (i.e., the plaintiff’s emotional distress), this injury also was the result of the daughter’s bodily injury in the accident. It is his daughter’s injuries, and her resulting death which caused the plaintiff the emotional distress for which he seeks relief. As the motion judge noted, the plaintiff’s emotional distress claim “is a by-product of and entirely dependent upon the bodily injury to his daughter.” The claims thus are subject to the same “per person” limit.

Interestingly, while the Court initially appeared to acknowledge that the claim for emotional distress was independent of the wrongful death claim, it ultimately ruled that the per person limit applied to “all claims resulting from” one person’s bodily injury. In other words, the emotional distress cause of action was a derivative claim and, therefore, did not trigger a separate per person limit.

The Wisconsin Court of Appeals used similar reasoning to reach an identical result in Estate of Gocha v. Shimon, 573 NW2d 218 (1997). In Gocha, four plaintiffs attempted to convince the court that they established an independent claim by arguing that their emotional distress arose directly from seeing a family member killed, rather than as a derivative of the family member’s death. This court, like the McNeill Court, relied upon the policy language:

Despite the public policy gloss put forward by the Gochas, the answer to this controversy is also found in the language of State Farm’s policy. The following language governs: “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.” If only one person receives bodily injuries in an accident, the “each person” limit applies regardless of how many others may derive secondary claims from those injuries. The policy language is clear and unambiguous. The bodily injury to Kyle includes all injury and damages to others resulting from Kyle’s bodily injury. But for the bodily injury to Kyle, the Gochas would not have suffered any emotional injuries. Their injuries are the natural and probable consequence of witnessing the accident that killed Kyle.

Although the court agreed that emotional distress was an injury under the policy, it rejected the theory that the plaintiffs’ harm was “bodily injury.” Because the plaintiffs’ injuries were the result of the decedent’s bodily injury and not their own bodily injuries, the court ruled that the “Each Person” limit applied.

At least one court appeared to support this line of reasoning by comparing how the jurisdiction applies the per person limit to other claims. More specifically, in Allstate Insurance Company v. Clohessy, the District Court was persuaded by prior Florida Supreme Court rulings that the per person limit applies to loss of consortium and wrongful death claims, and that the per person limit applies to all direct and consequential claims when only one person suffers a bodily injury, regardless of the number of causes of action. Note also that the policy language in Clohessy was unusual, in that it provided that the per person limit applied to damages for bodily injury to any one person, “including the damages sustained by anyone else as a result of that bodily injury.” This language appears to have been drafted specifically to address the argument that emotional distress sustained by a bystander is a separate bodily injury.

However, courts in California, Iowa, Louisiana, Michigan, Montana, New Jersey and Pennsylvania have rejected the reasoning set forth above, and have held that bystander claims are not subject to the same limit as that of the injured relatives. The basis of most of these decisions is that emotional distress constitutes an independent or separate claim for bodily injury, and is not derivative of the victim’s bodily injury claim. This reasoning was explained by Iowa’s Supreme Court in Pekin Insurance Company v. Hugh, 501 NW2d 508 (1993):

Unlike the loss of consortium claim, an injury the bystander suffers is not one that results from an injury to another person. Rather, the injury is directly to the bystander as a result of the bystander seeing the accident and reasonably believing that the direct victim of the accident would be seriously injured or killed...When confronted with accidental death, the reaction to be expected of normal persons,...is shock and fright. It is the sensory perception of a shocking event which causes a separate, compensable injury... Such emotional distress is not the equivalent of grief from losing a loved one, but is inflicted by the trauma of seeing a loved one suffer or die or of seeing efforts to revive [the loved one] being unsuccessful.

Other courts drawing similar conclusions seem to spend less time debating whether the bystander’s claim is a derivative claim, choosing instead to focus on policy language. For instance, in Employers Casualty Insurance Co. v. Foust, 105 Cal. Rptr. 505 (Cal. App. 1972), the court rejected the argument that the bystanders’ claims were derivative of their child’s injuries and reasoned that “...the [policy] language demonstrates that the policy includes within the scope of bodily injury those damages for care and loss of services, thus showing the company has adopted an expanded definition of bodily injury within the meaning of their policy.” Similarly, at least one court disregarded the issue of whether the bystander’s claim was derivative because it determined her mental anguish was a bodily injury under the policy. In Crabtree v. State Farm Insurance, 632 So2d 736 (1994), Louisiana’s Supreme Court said:

We therefore reject the reasoning of the court of appeal and State Farm that even if Mrs. Crabtree’s mental anguish constitutes “bodily injury,” her ... claim falls within the single person policy limit merely because the claim “resulted from” Mr. Crabtree’s bodily injuries. On the contrary, we conclude that even if Mrs. Crabtree’s ... claim “derives from” or “results from” Mr. Crabtree’s bodily injuries within the intendment of the policy language defining “bodily injury to one person,” under this policy “bodily injury to one person” does not encompass Mrs. Crabtree’s ... claim.

According to the Court, the language “bodily injury to one person” does not encompass “bodily injuries” to others under the per person limit. As such, the outcome of plaintiff’s claim hinged on whether she suffered a bodily injury as defined by the policy, rather than on any alleged relationship between the two claims.

Finally, note that the policy limit argument has been interpreted by some courts as a concession that emotional distress is “bodily injury” and is covered by the policy, although subject to the per person limit. For example, in Treichel v. State Farm Mutual Automobile Insurance Company, 930 P2d 661 (1997), the plaintiff witnessed a car strike her husband and observed his fatal injuries shortly thereafter. State Farm paid the estate $25,000 pursuant to the “Each Person” limit, and stipulated that the plaintiff established an emotional distress claim. As such, the plaintiff argued that she was entitled to $25,000 under the “Each Accident” limit because her claim was separate from the estate’s claim. State Farm initially asserted that her claim was subject to the “Each Person” limit because her emotional distress resulted from her husband’s injury. After Montana’s Supreme Court rejected State Farm’s first argument and ruled that the plaintiff’s claim was independent of the estate’s claim, State Farm argued that emotional distress is not a bodily injury and therefore is not covered at all. The court rejected this argument, stating:

We note that while the State Farm policy does not define bodily injury, per se, it does allow recovery for various injuries including loss of consortium which is not a physical injury. Moreover, State Farm is willing to provide coverage for emotional injuries resulting from the decedent’s physical injury, but only subject to the one person limitation. Under the circumstances, State Farm is estopped from arguing that there is no coverage for emotional or mental injuries. Clearly, State Farm is willing to provide coverage for those types of injuries.

In the opinion of the court in Treichel, when an insurer argues that a bystander emotional distress claim is subject to the same per person limit as applies to the underlying bodily injury claim, that insurer concedes the point that emotional distress is bodily injury, and is estopped from arguing otherwise. Thus, unless you are in a jurisdiction that has ruled definitively that emotional distress is “bodily injury,” it is advisable to first argue that emotional distress is not bodily injury and is not covered at all, and use the policy limit argument only as a fallback position.

FLOOD OF CLAIMS

Finally, courts in Ohio and Florida have recognized that allowing bystanders to recover under separate liability limits would expose insurers to “a broad class of new claims” they never contemplated when they entered into their insurance contracts. This argument is based, in part, on the realization that people normally experience mental suffering when a family member is injured in an accident, and that insurers would be reluctant to issue policies when faced with a potential flood of emotional distress claims. Although this theory seems sound based upon the number of claims insurers typically defend, there does not appear to be one court that rejected a claim based solely on this reasoning. However, insurers should not be discouraged from making this argument in combination with the two outlined above.

CONCLUSION

Liability for bystander emotional distress depends upon the law of the jurisdiction on more levels than the typical claim. First, it must be determined whether the bystander can prove the elements of a negligent infliction of emotional distress claim or if such claims are even permitted in the jurisdiction. If a viable claim exists, the insurance professional must then consider whether emotional distress meets the policy definition of bodily injury. If the court concludes the bystander’s claim is a bodily injury, then it must be determined whether the bodily injury arises from the injured/deceased relative’s claim or whether the bystander suffered a separate, independent bodily injury from the relative.

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