SALVATORE BUCCA v. THE HARTFORD INSURANCE COMPANY

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-4392-06T24392-06T2

SALVATORE BUCCA,

Plaintiff-Appellant,

v.

THE HARTFORD INSURANCE COMPANY,

Defendant-Respondent.

_________________________________________________________

 

Argued February 14, 2008 - Decided

Before Judges Wefing, R. B. Coleman and Lyons.

On appeal from the Superior Court of New Jersey, Law Division, Mercer County, L-2900-06.

Thaddeus P. Mikulski, Jr. argued the cause for appellant (Mikulski & Mitchell, LLC, attorneys; Mr. Mikulski, on the brief).

Susan A. Lawless argued the cause for respondent (Purcell, Ries, Shannon, Mulcahy & O'Neill, attorneys; Ms. Lawless, on the brief).

PER CURIAM

Plaintiff, Salvatore Bucca (Bucca), appeals from a March 16, 2007 order of the Law Division, Mercer County, granting the motion of defendant, the Hartford Insurance Company (the Hartford), to dismiss the complaint in plaintiff's action for a declaratory judgment. In this action, plaintiff sought to enforce rights allegedly assigned to him by his former employer, TSD Advanced, Inc. (TSD), in connection with the settlement of a lawsuit brought by plaintiff against TSD. After reviewing the record in light of the contentions advanced on appeal, we affirm.

An employment relationship between TSD and plaintiff began on January 19, 1984 and continued until February 7, 2001 when plaintiff alleges he involuntarily resigned. On April 24, 2001, plaintiff filed a four-count complaint against TSD alleging (1) intentional harassment and discrimination that subjected plaintiff to emotional and physical stress and aggravated his disability, Multiple Sclerosis (MS), in violation of the New Jersey Law Against Discrimination (NJLAD); (2) constructive discharge; (3) the need for injunctive and declaratory relief regarding the rights and responsibilities of the parties under documents creating a contractual relationship; and (4) entitlement to wages, commissions and expense reimbursement under common law and applicable statutes.

The Hartford had issued a workers' compensation and employers' liability policy to TSD for the policy periods between the dates of December 1, 1999 and December 1, 2001. In response to a demand by TSD that the Hartford take up the defense of plaintiff's lawsuit and indemnify TSD for all possible loss, the Hartford sent TSD a reservation of rights letter, dated June 4, 2001. Subject to its reservation of rights, the Hartford acknowledged that "[i]t would appear that counts one and two of the pleading make allegations which might be covered if there can be shown to be a qualifying bodily injury." It noted, however, that "counts three and four clearly make no allegations coming within the coverage." The Hartford advised that it would only provide a defense and pay damages for a qualifying bodily injury during the policy period, but in the meantime, it allowed TSD to choose its own counsel to defend the case. Thus, the Hartford agreed to reimburse TSD for counsel fees related to the defense, without waiving its right to an apportionment of defense fees and costs associated with potentially covered and uncovered counts.

Once plaintiff's case against TSD had proceeded through discovery, TSD filed a motion seeking to dismiss plaintiff's claims under count one. That count alleged, among other things, that the actions of TSD had aggravated, exacerbated or contributed to the aggravation or exacerbation of the plaintiff's MS. By order dated June 1, 2004, the Law Division granted that motion, and it also precluded plaintiff from offering

any medical expert or other expert at trial to provide any medical liability or medical damage opinion that any medical/physical condition or disability of plaintiff, Salvatore Bucca, was caused, injured, damaged, aggravated or exacerbated as a result of the misconduct alleged against [TSD] in the within matter or the stress from [plaintiff's] work and/or employment at/with [TSD].

The June 1, 2004 order specified, however, that it would have no preclusive effect in plaintiff's pending workers' compensation action.

Thereafter, TSD again moved to dismiss all claims and, by an order dated April 15, 2005, the court granted partial summary judgment. That order dismissed plaintiff's claim of constructive discharge (count two), and his claim for economic damages relating to unpaid commissions and expenses (count four). TSD's motion to dismiss plaintiff's claim alleging a hostile work environment, the remaining claim in count one, was denied.

Based on the entry of those orders, the Hartford wrote to TSD on September 22, 2005, advising of its position that the complaint no longer contained any count directly relating to bodily injuries. It also communicated its view that the remaining discrimination claims contained in count one appeared to be framed by plaintiff as intentional acts, which would be subject to a policy exclusion. As a consequence, the Hartford asserted that its coverage obligations had been completely satisfied, that it was no longer obligated to fund the costs associated with defending TSD and that it could not be called upon to indemnify TSD under the policy.

Approximately eight months after that notification from the Hartford to TSD, the underlying action was called for trial, but in lieu of trial, plaintiff and TSD entered into a settlement agreement. Pursuant to their agreement, plaintiff agreed to release his claims for $125,000, and TSD agreed to assign to plaintiff any and all rights, interest, coverage or claims TSD might have against the Hartford under the terms of its insurance policy for payment of that settlement amount. The terms of the settlement agreement are more particularly set forth in the Release and the Assignment exchanged between plaintiff and TSD.

The Release, finalized on July 12, 2006 as part of the settlement, states:

1. Release. Releasor [plaintiff] hereby releases and gives up any and all claims and rights which Releasor may have against Releasee [TSD], its agents, servants, employees, predecessors, successors, officers and directors. This releases all past, present and future claims, causes of action, or demands for damages, monies, personal injuries (physical, mental, emotional or otherwise), medical costs and care, expenses, attorney fee earnings, compensation (compensatory and punitive) or any other thing whatsoever in any way arising out of the Superior Court of New Jersey, Law Division, Mercer County Complaint Salvatore Bucca v. TSD Advanced, Inc. also known as Tri-State Design Docket No. MER-L-000455-01 ("Bucca Complaint") as filed or which could have been filed. Except to the extent that the settlement consideration, described in Paragraph 2 Consideration herein, may be sought and collected by Releasor from the Hartford Insurance Company ("Hartford") in accordance with the Assignment attached hereto as Exhibit A, Releasee [sic] shall not and forever releases and gives up any claim or right to seek collection of such settlement consideration from Releasee, its agents, servants, employees, predecessors, successors, officers and directors.

2. Consideration. Releasor has received from Releasee a settlement of the Bucca Complaint for $125,000 in accordance with and as entered on the record before the Honorable Bill Mathesius, J.S.C. on March 30, 2006 ("Bucca Complaint Settlement"). A copy of such settlement as entered on the record before the Honorable Bill Mathesius, J.S.C. on March 30, 2006 is attached hereto as Exhibit B.

Although the Release recites the receipt of $125,000, TSD did not pay that settlement amount. Instead, TSD merely assigned to plaintiff its right of indemnity, if any, against the Hartford. Michael Nussbaum, President of TSD, executed an Assignment, dated June 19, 2006, which provides:

This Assignment is hereby given by TSD ADVANCED, INC., also known as TRI-STATE DESIGN (Assignor) to SALVATORE BUCCA (Assignee) in accordance with full and final Settlement of the Superior Court of New Jersey, Law Division, Mercer County Complaint Salvatore Bucca v. TSD Advanced, Inc. also known as Tri-State Design Docket No. MER-L-000455-01 ("Bucca Complaint") of $125,000 in accordance with and as entered on the record before the Honorable Bill Mathesius, J.S.C. on March 30, 2006 ("Bucca Complaint Settlement").

Assignor hereby assigns to the Assignee any and all rights, interest, coverage, claims, that Assignor has, if any, against the Hartford Insurance Company ("Hartford") in accordance with the Hartford Policy No. 13 WECBD 5392 issued to Assignor ("Hartford Policy") for payment of the Bucca Complaint Settlement.

[(emphasis added).]

The Hartford was not a party to the settlement; it did not consent to the terms; it denies that it is bound by the settlement. It questions the good faith of the settlement and asserts that at the time of the settlement all covered claims for bodily injury had been dismissed and that TSD had no right to indemnification under the insurance policy.

In light of the disagreement between the parties regarding the Hartford's obligations under the policy, plaintiff filed, on November 3, 2006, his complaint in this action, seeking a declaratory judgment that plaintiff is entitled, as the assignee of TSD, to the rights that TSD had under its policy with the Hartford. Plaintiff's declaratory judgment complaint alleges that

the Hartford declined coverage under the terms of its insurance policy with TSD Advanced, Inc. [and that] the Hartford refused to both provide a defense or indemnification to TSD Advanced, Inc., on the claims of Salvatore Bucca for emotional distress damages and attorney fees on the hostile work environment claim.

Plaintiff contends that pursuant to the terms of the insurance policy issued to TSD, the Hartford Insurance Company is liable to indemnify TSD on plaintiff's claims for emotional distress and to pay the $125,000 settlement.

On January 11, 2007, the Hartford filed a motion, pursuant to Rule 4:6-2(e), to dismiss plaintiff's complaint with prejudice for plaintiff's failure to state a claim upon which relief can be granted. The trial court heard oral argument on the motion on March 16, 2007. During the oral arguments, counsel for plaintiff conceded that plaintiff's complaint only asserted a claim for emotional distress. He indicated he should have pleaded bodily injury, as opposed to emotional distress in the complaint, and accordingly, he asked that the court, if it were inclined to grant the Hartford's motion, instead grant plaintiff leave to amend the complaint to allege a claim for bodily injury.

Counsel for the Hartford argued that the insurer had fully satisfied its obligations to TSD under the policy, saying:

Unfortunately, it looks like Mr. Bucca was painted in the corner. Hartford assumed the defense, issued a timely reservation of rights and paid for the defense without controlling it until discovery was complete, and fortunately for Hartford, the defense counsel, which was selected by TSD, did an excellent job.

When the arguments were concluded, the trial court granted the motion to dismiss and filed its order to that effect the same day. Although the Hartford had contended the Assignment was invalid, either because tort claims are by their nature not assignable or because the settlement amount had not been determined with its consent or by actual trial and final judgment in accordance with the terms of the policy, the trial court declined to premise the decision on those bases. Instead, the trial court relied upon the requirement of the policy that the individual claiming damages have suffered a "bodily injury," as defined in the policy, and upon the exclusions expressed in the policy.

On his appeal from the court's order, plaintiff raises the following arguments for our consideration:

POINT I: THE DISMISSAL OF PLAINTIFF'S DECLARATORY JUDGMENT ACTION ON THE GROUND THAT THE LANGUAGE OF THE POLICY PRECLUDED AN ASSIGNMENT BY DEFENDANT'S INSURED OF ITS RIGHTS TO PLAINTIFF CONTRAVENES THE RULING OF THE NEW JERSEY SUPREME COURT IN GRIGGS V. BERTRAM, 88 N.J. 347 (1982).

POINT II: THE DISMISSAL OF PLAINTIFF'S DECLARATORY JUDGMENT ACTION ON THE GROUND THAT PLAINTIFF'S CLAIMS WERE BARRED BY THE POLICY'S DISCLAIMER FOR DAMAGES ARISING OUT OF DISCRIMINATION AGAINST ANY EMPLOYEE CONTRAVENES THE RULING OF THE NEW JERSEY SUPREME COURT IN SCHMIDT V. SMITH, 155 N.J. 44 (1998).

POINT III: THE DISMISSAL OF PLAINTIFF'S DECLARATORY JUDGMENT ACTION ON THE GROUND THAT THE COMPLAINT ALLEGED RECOVERY FOR ONLY EMOTIONAL DISTRESS DAMAGES RATHER THAN EMOTIONAL DISTRESS DAMAGES ACCOMPANIED BY PHYSICAL MANIFESTATIONS OR BODILY INJURY CONTRAVENES THE RULING OF THE NEW JERSEY SUPREME COURT IN PRINTING MART-MORRISTOWN V. SHARP ELECTRONICS CORP., 116 N.J. 739 (1989).

POINT IV: THIS MATTER SHOULD BE REMANDED TO THE TRIAL COURT FOR A HEARING ON WHETHER PLAINTIFF'S CLAIMS FOR EMOTIONAL DISTRESS WITH PHYSICAL MANIFESTATIONS ARE COVERED BY DEFENDANT'S POLICY AND WHETHER THE SETTLEMENT BETWEEN PLAINTIFF AND DEFENDANT'S INSURED WAS REASONABLE AND MADE IN GOOD FAITH.

POINT V: AN EXPERT WITNESS IS NOT REQUIRED TO PROVE PHYSICAL MANIFESTATIONS OF EMOTIONAL DISTRESS AND PLAINTIFF MUST BE GRANTED THE OPPORTUNITY TO PRESENT HIS EVIDENCE OF THE PHYSICAL MANIFESTATIONS OF EMOTIONAL DISTRESS HE SUFFERED AT THE HANDS OF DEFENDANT'S INSURED. (RAISED IN REPLY BRIEF).

We start with plaintiff's argument in Point III that the trial court's ruling contravenes the principles of Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739 (1989). We acknowledge that courts ordinarily approach motions to dismiss for failure to state a cause of action with caution because such motions are usually brought at the earliest stages of litigation. Lieberman v. Port Auth. of N.Y. & N.J., 132 N.J. 76, 79 (1993). Thus, trial courts are cautioned to view complaints with indulgence to ascertain whether a claim for relief has been pled.

[A] reviewing court "searches the complaint in depth and with liberality to ascertain whether the fundament of a cause of action may be gleaned even from an obscure statement of claim, opportunity being given to amend if necessary." At this preliminary stage of the litigation [a] [c]ourt [should not be] concerned with the ability of plaintiffs to prove the allegation contained in the complaint . . . . [P]laintiffs are entitled to every reasonable inference of fact. The examination of a complaint's allegations of fact required by the aforestated principles should be one that is at once painstaking and undertaken with a generous and hospitable approach.

[Printing Mart-Morristown, supra, 116 N.J. at 746 (internal quotations and citations omitted).]

However, if the complaint states no basis for relief and discovery would not provide one, dismissal of the complaint is appropriate. Camden County Energy Recovery Assocs., L.P. v. Dep't of Envtl. Prot., 320 N.J. Super. 59, 64 (App. Div. 1999), aff'd o.b. 170 N.J. 246 (2001). In this case, we agree with the trial court that plaintiff's complaint, viewed indulgently, nevertheless failed to state a claim for which relief could be granted, and no further discovery would have altered that reality.

This case solely involves a declaration of insurance coverage and whether there exists the duty to defend and indemnify under the terms of the applicable policy and subject to the exclusions expressed therein. In that regard, "[t]he rights of an assignee can rise no higher than those of his assignor." Satellite Gateway Commc'ns, Inc. v. Musi Dining Car Co., Inc., 110 N.J. 280, 287 (1988).

Where a claim is covered by the terms of an insurance policy, the insurer has a duty to defend and indemnify the insured in related litigation. Our Supreme Court summarized the approach to a determination of the duty to defend as follows:

"[T]he duty to defend comes into being when the complaint states a claim constituting a risk insured against." Whether an insurer has a duty to defend is determined by comparing the allegations in the complaint with the language of the policy. When the two correspond, the duty to defend arises, irrespective of the claim's actual merit. If the complaint is ambiguous, doubts should be resolved in favor of the insured and thus in favor of coverage. When multiple alternatives [sic] causes of action are stated, the duty to defend will continue until every covered claim is eliminated.

[Voorhees v. Preferred Mut. Ins. Co., 128 N.J. 165, 173-74 (1992) (internal quotations and citations omitted).

The insured holds the burden to "'bring the claim within the basic terms of the policy.'" Sears Roebuck and Co. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA, 340 N.J. Super. 223, 234 (App. Div. 2001) (quoting Reliance Ins. Co. v. Armstrong World Indus., Inc., 292 N.J. Super. 365, 377 (App. Div. 1996)). Once the insured meets that burden, the carrier must take up defense and indemnify. However, "when the allegation in the underlying complaint triggering the duty to defend is determined to be groundless, the duty to defend dissipates unless there remains other viable grounds for coverage." Sears Roebuck and Co., supra, 340 N.J. Super. at 242.

Here, the Hartford undertook the cost of defending plaintiff's action against TSD until, in its view, all the covered claims were dismissed. At that juncture, it gave notice that its obligation had been satisfied and its defense under the policy would cease. Thereafter, plaintiff and TSD purported to settle the underlying action, but in this action, the trial court sustained the position taken by the Hartford that plaintiff's remaining claim was not for bodily injury and hence was not covered under the employer's liability part of the policy issued by the Hartford.

The provisions of the policy relevant to coverage and exclusion are the following:

A. How this Insurance Applies

This employers liability insurance applies to bodily injury by accident or bodily injury by disease. Bodily injury includes resulting death.

1. The bodily injury must arise out of and in the course of the injured employee's employment by you.

. . .

4. Bodily injury by disease must be caused or aggravated by the conditions of your employment. The employee's last day of last exposure to the conditions causing or aggravating such bodily injury by disease must occur during the policy period.

. . .

C. Exclusions

This insurance does not cover:

. . .

5. bodily injury intentionally caused or aggravated by you

. . .

7. damages arising out of the discharge of, coercion of, or discrimination against any employee in violation of law.

I. The Hartford Policy Exclusions

Plaintiff asserts that his claims related to workplace discrimination are not barred by the applicable policy exclusions. For this proposition, plaintiff cites Schmidt v. Smith, 155 N.J. 44 (1998). In Schmidt, the plaintiff sued her employer for sexual harassment and the creation of a hostile workplace. Id. at 47. However, she included counts alleging assault, battery, invasion of privacy and intentional inflection of emotional distress. Ibid. The employer demanded a defense and indemnification from its workers' compensation insurance carrier who disclaimed coverage under the C7 Exclusion. Id. at 47, 50. The exclusionary language of the policy barred coverage for "[d]amages arising out of coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, discrimination against or termination of any employee, or any personnel practices, policies, acts or omissions." Id. at 50. The Court found the C7 exclusion void. It observed:

Exclusion C7 in the employers liability section disclaims coverage for a class of discomforts that one typically would not associate with bodily injury--criticism, demotion, evaluation, and defamation, for example--and that one typically would not expect to be covered by a scheme designed to insure that employees' bodily injuries be compensated. The exclusion is valid as long as the liability arising from those discomforts is not related to bodily injury.

[Id. at 52.]

In a companion case to Schmidt, the Court recognized the validity and enforceability of an employee exclusion clause in a comprehensive general liability insurance policy. Am. Motorists Ins. Co. v. L-C-A Sales Co., 155 N.J. 29, 42-43 (1998). Acknowledging the principle that ambiguities in policy language are to be resolved in favor of the insured in order to give effect to the insured's reasonable expectations, the Court nevertheless adhered to the principle that an insurance policy should generally be interpreted according to its plain and ordinary meaning. Id. at 41. Thus, the Court indicated it was "persuaded that the 'arising out of and in the course of employment' language of the CGL policy employee exclusion [was] clear and unambiguous, and that it preclude[d] coverage for [the employee's] wrongful discharge claim." Ibid.

The Court observed that the language of the exclusion and the presence of a workers' compensation exclusion immediately preceding the employee exclusion demonstrated that the objective of the CGL policy in American Motorist Insurance Company was to exclude from coverage "all claims -- whether falling within or beyond the workers' compensation system -- 'arising out of and in the course' of [the plaintiff's] employment." Id. at 42. Because the relevant contract was a CGL policy rather than a workers' compensation policy, the public policy considerations underlying the workers' compensation system were not implicated. Id. at 43. To distinguish that circumstance from that with which the Court was presented in Schmidt, supra, the Court explained:

We held [in Schmidt] that pursuant to N.J.S.A. 34:15-72, PAV was required to obtain coverage for any obligations incurred to compensate for an employee's bodily injuries. Id. at 51, 713 A.2d 1018. We determined that the employer's liability section of the workers' compensation policy was a "gapfiller," providing coverage for employees' job-related bodily injuries whether or not covered under the Workers' Compensation Act. Ibid. We concluded that "[t]o the extent [the exclusion] would otherwise operate to deny coverage for such [bodily] injuries, the exclusion violates the public policy underlying the workers' compensation scheme and is therefore void." Id. at 52, 713 A.2d 1018. Thus, our holding in Schmidt was based on the invalidity of an exclusion found in a workers' compensation insurance policy that we found to be inimical to the purposes of New Jersey's system of workers' compensation.

[Am. Motorists Ins. Co., supra, 155 N.J. at 36-37.]

Thus, the Schmidt holding is limited in scope.

Here, Exclusion C7 of the employers' liability part of the workers' compensation and employers liability policy provides that "[t]his insurance does not cover . . . damages arising out of the discharge of, coercion of, or discrimination against any employee in violation of law." That exclusion is clear and unambiguous. It excludes all damages arising out of violations for discrimination. It does not offend the provisions of the Workers' Compensation Act, and we are not aware of any statute, public policy or other consideration that would nullify or override that exclusion. Nor do we see how the enforcement of that exclusion could frustrate reasonable expectations of a policyholder such as TSD.

Importantly, the Hartford policy generally applies to and covers bodily injury by accident or bodily injury by diseases when such bodily injury arises out of and in the course of the injured employee's employment with the insured. It excludes coverage, however, for bodily injury intentionally caused or aggravated by the insured (Exclusion C5) and for damages arising out of discrimination against any employee in violation of law (Exclusion C7). The latter would include damages caused by a hostile work environment because of an employee's disability.

This dichotomy or distinction affects the duty to defend and to indemnify as articulated in Danek v. Hommer. There, we observed that "[l]iability of the insured to the plaintiff is not the criterion; it is the allegation in the complaint of a cause of action which, if sustained, will impose a liability covered by the policy." 28 N.J. Super. 68, 77 (App. Div. 1953) aff'd o.b., 15 N.J. 573 (1954). As we have noted, we are satisfied that the hostile work environment claim falls within the C7 exclusion and that plaintiff's claimed damages, however they are described, are not covered.

II. Bodily Injury vs. Emotional Damages with Physical Manifestations

Plaintiff argues that the trial court's dismissal of his complaint deprived him of the opportunity to demonstrate that he had suffered emotional damages with physical manifestations, and not solely emotional distress, as a result of the hostile work environment created by his employer. That argument is misdirected and overlooks the fact that even if such damages are recoverable in an action by an employee against his employer, that does not mean they are covered under the terms of the employer's insurance policy.

Where emotional distress is unaccompanied by physical injuries, "the term 'bodily injury' is not ambiguous in its requirement that an injury have some physical component in order to be considered 'bodily.'" SL Indus., Inc., v. Am. Motorists Ins. Co., 128 N.J. 188, 202-03 (1992). In SL Industries, Inc., plaintiff alleged loss of sleep, loss of self-esteem, humiliation and irritability due to willful age discrimination. Id. at 201. None of those symptoms qualified as bodily injuries. Id. at 202. Similarly, plaintiff in this case did not plead and could not prove any bodily injuries. He could only attest to symptoms of emotional injuries, which are not covered under the applicable insurance policy.

Plaintiff argues, however, that because of the liberality afforded to pleadings on a motion to dismiss, he should have been permitted to amend or supplement his declaratory judgment complaint to plead emotional distress damages with physical manifestations. As we have indicated, such an amendment or supplementation of the record would not have been sufficient to state a basis for relief under the policy. See, e.g., Voorhees supra, 128 N.J. at 179 (indicating that "[w]hen an emotional distress claim is not supported factually, the insurer can and should move to dismiss the meritless claims."); see also SL Indus., Inc., supra, 128 N.J. at 205 (concluding that "in the context of purely emotional injuries, without physical manifestations, the phrase 'bodily injury' is not ambiguous. Its ordinary meaning connotes a physical problem."); Cokus v. Bristol Myers Squibb Co., 362 N.J. Super. 366, 382 (App. Div. 2002) (noting that "[t]he mere allegation that defendants compromised her identity resulting in the creation of a hostile work environment which became so intolerable that plaintiff was forced to take disability leave, without factual support in the record, is not enough to survive summary judgment.").

In the underlying action, plaintiff was precluded from offering expert medical testimony to support the claim that TSD's conduct aggravated, exacerbated or contributed to plaintiff's disability. Because plaintiff could not have presented medical testimony to establish a causal relationship between the allegedly hostile work environment and his disability, he could not have demonstrated bodily injuries under the policy.

Plaintiff insists, however, that the term "bodily injury" as utilized in the policy encompasses emotional damage with physical manifestations that do not require testimony by an expert and that in Voorhees, supra, the Court concluded that the term "bodily injury" was ambiguous as it related to emotional distress accompanied by physical manifestations and that the ambiguity was to be resolved in favor of the insured. 128 N.J. at 177-78. He therefore contends that he should have been permitted to attest to symptoms such as headaches, anxiety, sleeplessness, nausea and the like. Significantly, the Court in Voorhees concluded that the duty-to-defend clause of the insurance policy would not be triggered absent a potentially-coverable occurrence, and it added "if a bodily injury were not caused by an occurrence, [the insurer] would not have to indemnify the insured." Id. at 180.

That policy, as does the policy in this case, defined "occurrence" as an "accident," which required consideration of whether the alleged wrongdoer intended or expected to cause injury. Id. at 183. Under the Court's analysis, absent exceptional circumstances that objectively establish the insured's intent to injure, it may be necessary to look to the insured's subjective intent to determine intent to injure. Id. at 185. The Court recognized, however, that the duty to defend ends when the negligence claim is dismissed or when a subjective intent to injure is demonstrated. Ibid.

On a final note, Griggs v. Bertran, 88 N.J. 347 (1982), cited by plaintiff, is plainly distinguishable from this case. In Griggs, the insurer was estopped from denying coverage because it failed for an unreasonable period of time to inform the insured of the possibility of a disclaimer of coverage. Id. at 355-57. By contrast, the Hartford promptly acknowledged the possibility that certain of plaintiff's claims might not be covered. It gave notice to TSD that it would reimburse the costs of defense subject to a reservation of its right to disclaim coverage and to allocate costs between covered and uncovered claims.

Further, the Hartford paid for the defense costs in the underlying action and ceded control of the defense to counsel chosen by TSD. It continued to honor its qualified commitment to defend until the trial judge dismissed all counts relating to bodily injuries and precluded medical testimony. The Hartford then gave notice that its obligation had been satisfied and it would no longer be affording the defense. The insurer in Griggs, supra, was required, because of equitable considerations, to compensate the insured under the terms of a third-party settlement agreement. 88 N.J. at 355-57. Such equitable considerations are totally inapplicable to the facts of this case.

III. Conclusion

As already noted, the holding in Schmidt, supra, is wholly inapplicable to the case in question. The language contained in the Schmidt policy exclusion is somewhat similar to the language of the policy at issue here, but unlike the plaintiff in Schmidt, Bucca was not denied coverage mandated by statute for bodily injuries that were not intentionally caused or aggravated by TSD.

Because we conclude that the policy exclusions in the policy are valid and enforceable under the circumstances of this case, we need not determine the validity of the Hartford policy's non-assignment provision nor other arguments raised by plaintiff and not specifically addressed herein. R. 2:11-3(e)(1)(E).

Affirmed.

 

At the time of his resignation, plaintiff was fifty-six years old and had a complex medical history. He was diagnosed with MS in 1990. He broke his back and collar bone in the Fall of 1999. He had hypertension and had suffered a series of heart attacks in 2000-2001 that resulted in surgery. Plaintiff was declared totally disabled by the Social Security Administration by reason of his MS in or about September 2000.

The Release and the Assignment refer to a settlement on the record on March 30, 2006; however, the transcript of settlement in defendant/respondent's appendix indicates the proceeding occurred on May 30, 2006.

We have recognized that

to sustain a claim of hostile work environment based on disability, . . . a plaintiff must establish that the conduct complained of would not have occurred but for his or her handicap, and that it was severe [or] pervasive enough to make a reasonable person in the employee's shoes believe that the conditions of employment had been altered and the working environment had become hostile and abusive.

[Leonard V. Metro. Life Ins. Co., 318 N.J. Super. 337, 344 (App. Div. 1999).]

"'It is the harasser's conduct, not the plaintiff's injury, [and "not the alteration of the conditions of employment,"] that must be severe or pervasive.'" Taylor v. Metzger, 152 N.J. 490, 505 (1998) (quoting Lehmann v. Toys 'R' Us, Inc., 132 N.J. 587, 610 (1993)) (internal citations omitted, brackets in original).

"A cause of action asserting discrimination is willful rather than negligent." Tarr v. Ciasulli, 181 N.J. 70, 80 (2004). Victims of discrimination can obtain damages from their employer due to mental anguish or embarrassment. Id. at 81. Defendant does not dispute that Bucca may be able to prove that TSD caused him some degree of mental anguish. This type of evidence is pertinent to a claim of discrimination under NJLAD, but not to a declaratory judgment claim on an insurance policy. Because all counts related to bodily injury were dismissed prior to settlement, the $125,000 settlement sum was in all likelihood based on emotional/mental damages. Such damages are not recoverable through the Hartford policy. Hence, the assignment of these damages could not enhance plaintiff's rights.

According to Taylor, supra, "severe emotional distress means any type of severe and disabling emotional or mental condition which may be generally recognized and diagnosed by professionals trained to do so, including . . . posttraumatic stress disorder." 152 N.J. at 515 (citation omitted).

For purposes of this opinion, we have assumed, without deciding, the validity of the assignment.

(continued)

(continued)

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A-4392-06T2

July 25, 2008