State Farm Mut. Auto. Ins. Co. v Glinbizzi

In this extremely interesting declaratory judgment action, the insurer sought a declaration that it was not obligated to indemnify its insured under the applicable autombile insurance policy for psychological injury claims in an underlying action. The insured was involved in an automobile accident in which he struck and killed a pedestrian who was walking with his son. In an underlying action, the son alleged a zone-of-danager cause of action to recover for psychological injuries that were caused by witnessing the accident and his father’s resulting death.

The insurer commenced the declaratory judgment action, claiming that the automobile policy’s definition of “bodily language” did not encompass zone-of-danger injuries. The Appellate Division, Third Department agreed with Supreme Court’s determination that held that the insurer had to provide coverage to its insured. It concluded that the policy’s definition of “bodily injury” was susceptible to two interpreations, noting that an average insured owner could interpret the provision to mean the sickness, disease or death to any person is covered if it results from bodily injury to the same or a different person. The provision defined “bodily injury” as “bodily injury to a person and sickness, disease or death which results from it.” The Third Department reasoned that the average insured owner would expect to be insured under the policy’s definition of “bodily injury” for causing a person’s psychological and emotional injuries suffered as a result of witnessing a relative’s death while in the zone of danger.

The Third Department also noted that the ambiguity of the “bodily injury” definition was further exacerbated by language in the policy’s “Limits of Liability” section of the policy. This decision has an excellent discussion of the applicable law on interpretation of an insurance contract.