Does a Homeowner’s Insurance Policy Cover Lawsuit Defense When There Was No Physical Injury or Property Damage?

The United States Court of Appeals for the Tenth Circuit decided this unique case in State Farm Fire v. Dawson, No. 16-6356 (10^th Cir. 2017).

Charles Dawson (“Dawson”) was a math teacher at Wanette High School in Wanette, Oklahoma. While a teacher there, he engaged in inappropriate communications with one of his students. Dawson was criminally prosecuted. The student brought a lawsuit against Dawson in the appropriate district court in Oklahoma, seeking damages for invasion of privacy, intrusion on seclusion, negligence, and negligence per se. Dawson asked State Farm to defend him under his homeowner’s insurance policy (“the policy”). State Farm provided a defense to Dawson in the state court action but reserved its right to contest coverage. State Farm filed an action in the United States District Court for the Western District of Oklahoma, seeking a declaration that the Policy provided no coverage for the claims made against Dawson in the state court action. The district court granted summary judgment in favor of State Farm. Dawson appealed.

In the policy issued by State Farm, the language is unambiguous. The policy provides definitions of terms. For example, “bodily injury” is defined as “physical injury, sickness, or disease to a person…” The definition continued, clearly stating that bodily injury does not include “emotional distress, mental anguish, humiliation, mental distress, mental injury, or any similar injury unless it arises out of actual physical injury to some person.” “Property damage” is defined by the policy as “physical damage to or destruction of tangible property, including loss of use of this property.” The policy also states that State Farm will pay up to the limit of liability for damages for which the insured is legally liable, and will provide a defense at State Farm’s expense—IF, the suit against the insured is for damages because of bodily injury or property damage.

Here, the policy clearly stated that bodily injury is NOT emotional distress, mental anguish, etcetera, and property damage is physical damage to tangible property. On appeal, Dawson presented no evidence to show there was any genuine issue of material fact. The plain language of the policy excluded coverage for Dawson’s defense or for any financial liability in the state court action. The Court of Appeals affirmed the district court’s order granting State Farm’s summary judgment motion.

The Metier Law Firm is committed to assisting people with personal injury claims throughout Colorado, Wyoming and Nebraska, and we frequently serve as co-counsel to law firms nationwide. Tom Metier recently secured the largest personal injury verdict in Colorado.