Lavanant v. General Acci. Ins. Co.

Lavanant v. General Acci. Ins. Co.

Opinion

 [*626]  [**820]  [***745]    This appeal by an insurer presents an issue that has divided courts in other jurisdictions but remains open here: whether coverage for "bodily injury" includes emotional distress resulting from the insured's negligent conduct, where no [****6]  physical injury or contact is involved. We conclude that in the circumstances presented, mental injury alone is covered.

Plaintiffs are the owner and managing agent of a four-story brownstone located on East 24th Street in Manhattan. The property was insured under two policies. The first, a comprehensive general liability policy issued by defendant General Accident Insurance Company of America, provided coverage of up to $ 500,000 for each occurrence. The second, an umbrella policy issued by defendant Federal Insurance Company, provided excess liability coverage of $ 10,000,000 over General Accident's occurrence limit.

General Accident's policy--the one directly in issue in this case--provided coverage for bodily injury and property damage. "Bodily injury" was defined as "bodily injury, sickness or disease."

In 1984, during renovation of the premises, a portion of the ceiling collapsed in the apartment rented by Emilio Belliti and Victor Rizika. In a single action, they sought damages from plaintiffs for personal injury and property damage, alleging negligence, intentional infliction of emotional distress, assault, and breach of warranty of habitability. The complaint [****7]  did not allege any physical injury or contact.

Upon receiving notification of the action, General Accident undertook the defense, reserving its rights on certain questions of coverage. Federal took no action until 1988, when it acknowledged the negligence cause of action and disclaimed liability as to the remaining claims.

Concerned with assigned counsel's handling of the case, plaintiffs substituted their own counsel.  On the day of the substitution, and over plaintiffs' objection, General Accident settled the property damage claim under the first cause of action for $ 50,000. The second and third causes of action--  [*627]  based on intentional conduct--were dismissed by the trial court prior to submission to the jury. In 1988, the jury awarded the tenants $ 400,000 for personal injuries--including emotional distress--on their negligence claim and $ 5,226 on the breach of warranty claim; a punitive damage award of $ 2,500,000 was set aside by the trial court. Judgment was entered in the amount of $ 410,738, which was affirmed on appeal ( Belliti v Lavanant, 151 AD2d 1051, lv denied 75 NY2d 702).

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