It's When the Alleged Harm, Not the Alleged Negligence, Occurs that Triggers Coverage Under an Occurrence-Based Business Liability Policy

CGL – TRIGGER OF COVERAGE – OCCURRENCE – EMOTIONAL DISTRESS CLAIMS
Empire State Shipping Serv., Ltd. v Hanover Ins. Co.
(1st Dept., decided 11/1/2011) 

Interesting trigger of coverage case. The insured plaintiff allegedly mishandled a corpse, but the deceased's mother did not learn of the mishandling of her son's remains until the fall of 2005, more than two years after the plaintiff had cancelled its businessowners insurance policies with Hanover.  The mother sued the plaintiff in an underlying action, alleging in several causes of action that plaintiff's negligence cause her to suffer "severe pain and suffering, severe emotional distress and harm, financial or economic loss, including but not limited to, present and future lost wages, and other damages."  The plaintiff tendered the complaint to Hanover for coverage presumably based on the fact that its alleged negligence occurred during the period of one or more of its business liability policies with Hanover.

Hanover declined coverage because the complaint alleged harm that occurred well after the plaintiff's policies were cancelled, and the insured commenced this declaratory judgment action.  The Supreme Court, Bronx County (Edgar G. Walker, J.) granted Hanover's cross motion for summary judgment, dismissing the complaint.

In unanimously AFFIRMING the motion court's order, the Appellate Division, First Department, held:

The Businessowners Policy provides coverage for "bodily injury" but "only if" it is caused by an "occurrence" and the bodily injury "occurs during the policy period." Supreme Court properly determined that the first and second causes of action in the underlying action, which allege negligent and intentional infliction of emotional distress, do not fall within the scope of "bodily injury" because the earliest that harm is alleged to have occurred is in the fall of 2005, when the plaintiff in the underlying action learned of the alleged mishandling of her son's remains. This was over two years after plaintiff Empire cancelled its policies with defendant, effective June 20, 2003 (see Melfi v Mount Sinai Hosp., 64 AD3d 26 [2009]) .

While we agree with plaintiffs that Supreme Court should not have characterized the only damages alleged in the underlying action as emotional distress, this error was harmless because coverage would not have been triggered in any event. The only causes of action for which this error could have triggered coverage are the third and fifth causes of action for negligence and negligent misrepresentation. It is alleged that the plaintiff in the underlying action "was caused, and shall in the future be caused, to suffer severe pain and suffering, severe emotional distress and harm, financial or economic loss, including but not limited to, present and future lost wages, and other damages." While these causes of action may contain allegations that Empire was negligent during the policy period, there is no allegation that the plaintiff in the underlying action suffered "bodily injury" during the policy period.