Title: EVANS v. FARMERS INSURANCE EXCHANGE

State: wyoming

Issuer: Wyoming Supreme Court

Document:

EVANS v. FARMERS INSURANCE EXCHANGE2001 WY 11034 P.3d 284Case Number: 00-28Decided: 11/09/2001

October Term, A.D. 2001

 

 

LEE 
EVANS and LINDA EVANS,     

 Appellants(Plaintiffs),

 

v.

 

FARMERS 
INSURANCE EXCHANGE,

a 
California corporation, 

Appellee(Defendant).

 

 

 

W.R.A.P. 
11 Certified 
Question 

from the 
District Court of Uinta County:

The 
Honorable John D. Troughton, Judge

 

Representing 
Appellants:

Dennis 
W. Lancaster of Lancaster Law Offices, P.C., Evanston, WY.

 Representing 
Appellee:

George 
E. Powers, Jr. of Sundahl, Powers, Kapp & Martin, LLC, Cheyenne, 
WY.

 

Before 
LEHMAN, C.J., and GOLDEN, HILL and KITE, JJ.

 

LEHMAN, 
Chief Justice.

 [¶1]      Lee and Linda 
Evans suffered emotional distress as a result of witnessing the impact and 
immediate aftermath of an automobile accident in which their son was seriously 
injured as the result of a third party's negligence.  When the third party's insurance 
coverage was exhausted, the Evans couple looked to the underinsured motorist 
(UIM) coverage they held through Farmers on the vehicle they had been driving at 
the time of witnessing their son's injuries.  Farmers agreed that the Evanses had 
suffered trauma but refused to cover purely emotional or psychic injury 
unaccompanied by any kind of physical harm.  Subsequently, the question of whether 
"bodily injury" as used in the policy affording Lee and Linda Evans UIM coverage 
may be read so as to embrace emotional distress was certified to this 
court.  Under the specific terms of 
the insurance policy involved in this case, we answer in the 
affirmative.

 

 

ISSUE

 

[¶2]      The parties pose 
the following question:

 

Where 
an insured has sustained emotional distress as a result of witnessing the injury 
of another family member, are these emo­tional distress claims covered for 
purposes of establishing a claim for recovery of underinsured motorist coverage 
under the terms of the policy issued by Farmers Insurance Exchange (Policy No. 
76 14686-97-07)?

 

 

FACTS

 

[¶3]      The parties 
have stipulated to all of the material facts.  Lee and Linda Evans are hus­band and 
wife and the natural parents of Cody Evans.  About 7:25 p.m. on August 9, 1997, Lee 
and Linda were driving their 1997 Ford Expedition, followed closely by their son 
Cody, who was driving a 1990 Ford Ranger pickup.  Due solely to the negligence of Bradley 
Vallee, Vallee's vehicle collided with Cody's pickup, causing serious bodily 
injury to Cody, including a broken collarbone, broken femur, cuts, and 
abrasions.

 

[¶4]      Lee and Linda 
Evans were not involved in the collision, nor did their Expedition sus­tain 
any impact or damage as a result.  
They did, however, observe the accident and quickly turned back to 
witness the immediate aftermath of the accident, including the serious bodily 
injuries sustained by their son Cody.  
Although Lee and Linda sustained no physical injury, Farmers agrees that 
they sustained emotional distress as a direct result of observing the 
seri­ous injuries sustained by Cody.

 

[¶5]      Mr. Vallee was 
insured by Allstate Indemnity Company.  
His policy was subject to limits of $25,000 per person and $50,000 per 
occurrence.  Allstate settled the 
claims against Vallee through payments to the Evans family and others not party 
to the instant action, exhausting the policy limits.  Farmers Insurance Exchange consented to 
the settlement.

 

[¶6]      Through Farmers 
Insurance Exchange, Linda Evans had insured the Ford Expedition in which she and 
her husband were riding at the time of their son's accident.  That insurance contract, policy number 
76 14686-97-07, became effective July 16, 1997, and remained in full force and 
effect at the time of the collision.  
Subject to the stated terms of the policy, Farmers agreed to provide 
underinsured motorist coverage (UIM) to Lee and Linda Evans.  

 

[¶7]      Lee Evans has 
made a claim under Farmers UIM coverage for $20,000 as compensa­tion for the 
emotional damage he suffered as a result of witnessing his son's accident and 
its immediate aftermath.  Linda 
Evans has asserted a similar claim seeking emotional distress damages in the 
amount of $47,000.  Believing that 
the emotional distress suffered by the Evanses falls outside the scope of 
"bodily injury" as described in the UIM coverage, Farmers has denied the 
emotional distress claims.  However, 
to the extent that Lee Evans and Linda Evans may be able to establish that their 
emotional distress constituted bodily injury as con­templated by the UIM 
policy, Farmers has agreed that it will not contest the amount of the 
claims.  All claims for UIM coverage 
asserted by Cody Evans have been settled and released by separate agreement of 
the parties.

 

 

STANDARD 
OF REVIEW

 

[¶8]      An insurance 
policy constitutes a contract between the insurer and the insured.  Helm v. Board of County Comm'rs, 
989 P.2d 1273, 1275 (Wyo. 1999).  
When called upon to determine the meaning of a contract, our focus is 
upon the intent of the parties.  
Wolter v. Equitable Resources Energy Co., 979 P.2d 948, 951 (Wyo. 
1999).  The nature of the exercise 
depends upon the clarity with which the parties have memorialized their 
intent.  Clarity and lack of 
ambiguity limit the exercise to one of interpretation marked by a 
simple reiteration of the parties' intent gleaned from within the four corners 
of the document.  Sierra Trading 
Post, Inc. v. Hinson, 996 P.2d 1144, 1148 (Wyo. 2000).

 

[¶9]      Only when a 
contract is ambiguous do we acquire license to construe that 
document by resort to rules of construction.  Sinclair Oil Corp. v. Republic Ins. 
Co., 929 P.2d 535, 539 (Wyo. 
1996); Martin v. Farmers Ins. Exch., 894 P.2d 618, 620 (Wyo. 
1995).  An exception to construing insurance 
policies as other contracts has been observed by this court where the language 
of the policy is ambiguous.  
Ahrenholtz v. Time Ins. 
Co., 968 P.2d 946, 949 (Wyo. 
1998); State Farm Fire & Cas. 
Co. v. Paulson, 756 P.2d 764, 765 
(Wyo. 1988).  "Because insurance 
policies represent contracts of adhesion where the insured has little or no 
bargain­ing power to vary the terms, if the language is ambiguous, the 
policy is strictly construed against the insurer."  Doctors' Co. v. Insurance Corp. of 
America, 864 P.2d 1018, 1024 (Wyo. 
1993) (citing St. Paul Fire & 
Marine Ins. Co. v. Albany County Sch. Dist. No. 1, 763 P.2d 1255, 1258 (Wyo. 1988)). 

 

Ambiguity 
is found if indefiniteness of expression or double meaning obscure the intent of 
the parties, though disagreement between the parties as to the Agreement's 
meaning does not give rise to an ambiguity.

 

Hansen 
v. Little Bear Inn Co., 9 P.3d 960, 964 (Wyo. 2000).  Whether there 
is ambiguity within the four corners of the contract is a question of law.  Martin v. Farmers Ins. Exchange, 
894 P.2d  at 620.

 

 

DISCUSSION

 

[¶10]   The insurance contract between the 
parties calls, at page 7, for coverage of bodily injury incurred in an accident 
arising out of the ownership, maintenance, and operation of an underinsured 
vehicle.  A common sense reading of 
the term "bodily injury," without more, may indeed connote physical harm rather 
than emotional harm.  In fact, we 
are aware that "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."  Citizens 
Ins. Co. of America v. Leiendecker, 
962 S.W.2d 446, 452 (Mo.App.E.D. 1998) (collecting cases); see 
also 
Keri Farrell-Kolb, Note, General 
Liability Coverage for Claims of Emotional DistressAn Insurance 
Nightmare, 
45 Drake L.Rev. 981, 986-989 (1997).  
Generally, in cases that analyze the definition of "bodily injury" cited 
by the Missouri court, the question is whether the term "bodily" modifies only 
injury or whether "bodily" also modifies the terms sickness and disease, thus 
creating coverage for bodily injury, bodily sickness, and bodily disease.  Most courts addressing the issue have 
concluded the term "bodily" also modifies the terms sickness and disease, that 
"bodily" refers to some sort of physical harm, and that the defini­tion of 
bodily injury in question is thus not ambiguous.  Citizens 
Ins. Co. of America v. Leiendecker, 
962 S.W.2d  at 453; Daley 
v. Allstate Ins. Co., 
958 P.2d 990, 995 (Wash. 1998).1  

 

[¶11]   However, the definition of bodily 
injury provided in the Evanses' policy does not fit squarely within the majority 
rule.  The Evanses' policy defines 
bodily injury as "bodily harm to or sickness, disease or death of any 
person."  Clearly, given the 
grammatical structure employed in this definition, the term "bodily" does not 
modify the terms sickness or disease.  
Thus, the question becomes whether the emotional distress claimed by the 
Evanses' can be included under the rubric of either sickness or disease.  

 

[¶12]   Webster's Third New International 
Dictionary 
(1986) defines "disease" as:

 

 1 a obs 
: lack of ease : DISCOMFORT, UNEASINESS, TROUBLE, DISTRESS  b (1) : an impairment of 
the normal state of the living animal or plant body or of any of its 
compo­nents that interrupts or modifies the performance of the vital 
functions, being a response to environmental factors (as malnu­trition, 
industrial hazard or climate), to specific infective agents (as worms, bacteria, 
or viruses), to inherent defects of the organism (as various genetic anomalies), 
or to combinations of these factors : SICKNESS, ILLNESS (2) : a 
particular instance or kind of such impairment : MALADY, AILMENT  c : disor­der or derangement 
(as of the mind, moral character, public institutions, or the state)  d : an alteration that impairs 
the qual­ity of a product usu. caused by the action of microorganisms   2 a obs 
:  a cause of discomfort or harm  b : an organism that causes 
disease. 

 

The 
same source defines "sickness" as 

 

1 
a : 
the condition of being ill : ill health : ILLNESS  b : a dis­ordered, weakened, 
or unsound condition  2 a : a 
form of disease : MALADY b : MENSES  3 a : NAUSEA QUEASI­NESS  b : VOMIT.

 

[¶13]   After reviewing these definitions 
of the terms disease and sickness, we conclude that emotional injuries are 
neither expressly included nor expressly excluded from those 
defini­tions.  Indeed, in 
contemplating the extent of a "disorder or derangement" or "disordered, 
weakened, or unsound condition," this court finds anything but a bright 
line.  We thus con­clude that 
the definition of bodily injury contained in the insurance policy before us is 
ambiguous with respect to whether emotional distress is included in the 
definition.  In mak­ing this 
conclusion, we find guidance from New York's highest court in the case of 
Lavanant 
v. General Accident Ins. Co. of America, 
595 N.E.2d 819, 822 (N.Y. 1992), which provides:  

 

The 
categories "sickness" and "disease" in the insurer's defini­tion not only 
enlarge the term "bodily injury" but also, to the average reader, may include 
mental as well as physical sickness and disease.

 

We 
decline [the insurance company's] invitation to rewrite the contract to add 
"bodily 
sickness" and "bodily 
disease," and a requirement of prior physical contact for com­pensable 
mental injury.  [The insurance 
company] could itself have specified such limitations in drafting its policy, 
but it did not do so.

 

The 
New York Court of Appeals thus held that the term bodily injury, as defined in 
the pol­icy before it, was ambiguous.  
Id.; 
see 
also 
Lanigan 
v. Snowden, 
938 S.W.2d 330, 332 (Mo.App.W.D. 1997); cf. 
David 
v. Nationwide Mut. Ins. Co., 
665 N.E.2d 1171, 1173 (Ohio App. 1 Dist. 1995).  We make the same conclusion and resolve 
the ambiguity in favor of coverage.  
Doctors' 
Co. v. Insurance Corp. of America, 
864 P.2d  at 1024.  

 

[¶14]   Because we find an ambiguity in the 
definition of bodily injury as applied in this instance, we answer the certified 
question in the affirmative.  

FOOTNOTES

1We note that, in determining this 
issue, at least one court has focused on whether the emotional injuries include 
physical manifestations.  In SL 
Industries, Inc. v. American Motorists Ins. Co., 607 A.2d 1266, 1274 (N.J. 
1992), the Supreme Court of New Jersey wrote:

 

We recognize that the difficulty in 
distinguishing between mental and physical injuries may justify characterizing 
"bodily injury" to be ambiguous in some circumstances.  Nonetheless, that occasional difficulty 
does not justify holding the term "bodily injury" to be ambiguous with respect 
to all types of emotional injuries.  
The phrase should be analyzed on a case-by-case basis to determine 
whether the alleged injuries are sufficiently akin to physical injuries to 
render the term "bodily injury" ambiguous.

 

(Citations omitted.)  The court went on to conclude:  "[I]in the context of purely emotional 
injuries, without physical manifestations, the phrase bodily injury' is not 
ambiguous."  607 A.2d  at 1275. 
Because the record is bereft of any information regarding whether the Evanses' 
emotional distress includes physical manifestations, the analysis of the New 
Jersey court is not helpful in this instance.