On appeal from Superior Court, Law Division, Burlington County.
J.h. Coleman and Landau. The opinion of the court was delivered by Landau, J.A.D.
Plaintiff SL Industries (SL) appeals from the grant of summary judgment to defendant American Motorists Insurance Company and Kemper Insurance Group (collectively American) holding that American had no duty to defend or indemnify SL under the terms of a General Liability policy and a Comprehensive Catastrophe Liability Policy.
The facts giving rise to SL's claim of coverage are as follows. On January 23, 1986, Newell Whitcomb (Whitcomb), an employee of SL, filed a complaint in the Federal District Court of New Jersey against SL and John Instone (Instone), SL's chief executive officer. Whitcomb alleged violations of the Age Discrimination Employment Act, 29 U.S.C. § 626, the Fair Labor Standards Act of 1938, 29 U.S.C. § 211(b), §§ 216-217, and fraudulent misrepresentation. SL promptly notified American of the lawsuit by letter dated March 5, 1986. American declined coverage under the policies because "the allegations in the complaint [did] not fit the definition of bodily injury or property damage as defined in the policy."
As a result of American's refusal to defend, SL retained counsel. During the course of discovery, Whitcomb particularized the injuries he allegedly suffered in order to sustain a claim of damages. In response to interrogatory number 32, Whitcomb stated:
Since discovering that he was treated unfairly by defendants, plaintiff has suffered loss of sleep, loss of self-esteem, humiliation and irritability.
Whitcomb supplemented that response by stating that "plaintiff has received treatment for his emotional pain and suffering from Dr. Floyd S. Cornelison of Wilmington, Delaware." Whitcomb also included among his summary of damage elements a
claim for pain and suffering. The Pretrial Stipulation and Order stated:
Plaintiff seeks an additional $150,000.00 to compensate him for physical and mental pain and suffering, including humiliation, loss of self-esteem, irritability and sleeplessness.
Thereafter, on July 22, 1988, SL made a second demand upon American to provide coverage. Although SL set forth Whitcomb's claim for emotional damages and provided it with the portion of the pre-trial order pertaining to that claim, American refused to defend or indemnify SL. On September 7, 1988, SL, Instone and Whitcomb entered into a settlement agreement whereby Whitcomb received $400,000.00.
On January 25, 1989, SL filed a complaint against American and Kemper seeking a declaratory judgment that the Whitcomb action was within the coverage afforded by the policies and for reimbursement of the settlement award as well as costs of defense. Cross motions for summary judgment were filed by all parties, including Instone's directors and officers liability carrier Federal Insurance Company (Federal), alleging that it was improperly made a third party. By Order dated April 27, 1990, American's motion for summary judgment was granted; SL's motion for summary judgment was denied; and Federal's motion was rendered moot since the court dismissed SL's complaint.
SL raises four issues on this appeal: 1) that American had a duty to defend based upon the allegations contained in Whitcomb's complaint; 2) that American had a duty to defend when it subsequently learned of Whitcomb's specific claim for emotional damages; 3) that emotional distress and mental anguish constitute "bodily injury", "personal injury" and an "occurrence" under the terms of each policy so as to trigger American's duty to defend; and 4) that American is liable for settlement ...