International Insurance Co. v. Allied Van Lines, Inc.

FIRST DIVISION
November 17, 1997

No. 1-96-0875


INTERNATIONAL INSURANCE COMPANY,

Plaintiff-Appellee,

v.

ALLIED VAN LINES, INC.,

Defendant-Appellant.)
)
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)
)
)
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)
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)Appeal from the
Circuit Court of
Cook County.

No. 92 CH 5250

Honorable
Margaret
Stanton McBride,
Judge Presiding.

JUSTICE O'BRIEN delivered the opinion of the court:

Former employees Gerald Oberg, Nicholas Tautz, and Steven
Adams filed a class action complaint against Allied Van Lines,
Inc. (Allied) alleging Allied terminated their employment in
violation of the Age Discrimination in Employment Act of 1967
(ADEA) (29 U.S.C. 626 (1994). Allied tendered the matter to its
insurer, International Insurance Company (International), for
defense pursuant to its comprehensive general liability policy
(CGL policy). International denied coverage and filed the
instant action seeking a declaration of the parties' rights and
liabilities under the CGL policy. Following a hearing on cross-
motions for summary judgment, the trial court entered summary
judgment in favor of International and against Allied. Allied
appeals. We affirm.
Summary judgment is proper only where there are no issues of
material fact and the moving party is entitled to judgment as a
matter of law. 735 ILCS 5/2-1005(c) (West 1996). We review the
matter de novo. Outboard Marine Corp. v. Liberty Mutual
Insurance Co., 154 Ill. 2d 90, 102, 607 N.E.2d 1204 (1992).
As a general rule, International has a duty to defend Allied
"unless it is clear from the face of the underlying complaint
that the allegations fail to state facts that bring the case
within, or potentially within, the policy's coverage." (Emphasis
added.) Dixon Distributing Co. v. Hanover Insurance Co., 161 Ill. 2d 433, 439, 641 N.E.2d 395 (1994); Thornton v. Paul, 74 Ill. 2d 132, 384 N.E.2d 335 (1978) (reaffirming Illinois'
adherence to the general rule). Here, however, the procedural
posture of the case--an appeal from a grant of summary judgment--
permits this court to look beyond the face of the complaint and
take into consideration the affidavits, depositions, admissions,
exhibits, and pleadings on file. See 735 ILCS 5/2-1005(c) (West
1996) (in rendering summary judgment, court should take into
consideration affidavits, depositions, admissions, exhibits, and
pleadings on file and construe them against the movant);
Associated Indemnity Co. v. Insurance Co. of North America, 68
Ill. App. 3d 807, 386 N.E.2d 529 (1979) (in appeal from grant of
summary judgment in favor of insurer, court considered "true but
unpleaded facts" indicating the underlying claim was at least
potentially within the policy's coverage); Kufalk v. Hart, 636 F. Supp. 309 (N.D. Ill. 1986) (in appeal from grant of summary
judgment in favor of insurer, court considered allegations in
discovery deposition taken in the underlying action indicating
the underlying claim was at least potentially within the policy's
coverage).
International's CGL policy provided the following relevant
coverage:
"Coverage A. Bodily Injury and Property Damage Liability

1. Insuring Agreement.

a. We will pay those sums that the insured
becomes legally obligated to pay as damages
because of 'bodily injury' or 'property damages'
to which this insurance applies. *** This
insurance applies only to 'bodily injury' ***
caused by an 'occurrence.'"

The policy defined "bodily injury" as "bodily injury,
sickness or disease sustained by a person" (hereinafter, "bodily
injury coverage").
The CGL policy also included an endorsement that enhanced
the policy's liability coverage. It added the following:
"A. Employee Benefits Liability Coverage

1. Insuring Agreement.

We will pay those sums that the insured becomes
legally obligated to pay as damages sustained by
[a] * * * former employee * * * of the insured
* * * and caused by any negligent act, error, or
omission of the insured *** in the
'administration' of your 'Employee Benefit
Program.'

2. Exclusions

This Coverage does not apply to:

a. any *** criminal *** act, *** or humiliation
b. 'Bodily injury' ***
* * *
d. Your failure to comply with any state or
federal law, regulation or order ***." (Emphasis
added.)

(Hereinafter employee benefits coverage.)
The underlying age discrimination complaint against Allied
alleged that "[a]s a result of defendants' conduct, plaintiffs
and members of the class have suffered and will suffer the loss
of salary, loss or reduction of other job-related benefits, and
other damages and expense." The complainants sought
reinstatement with seniority rights and benefits, back pay and
other pecuniary losses plus interest thereon. Because the
complaint alleges monetary loss rather than bodily injury (bodily
injury coverage), and because it alleges those losses arise out
of Allied's intentional termination of plaintiffs' employment
rather than a negligent act (employee benefits coverage), it is
clear from the face of the complaint that the allegations fail to
state facts that bring the case within, or potentially within,
the policy's coverage. Accordingly, if a duty to defend exists,
it arises from matters outside the four corners of the complaint.
Allied points to two documents contained in the record on
appeal to support its claim that International had a duty to
defend: Nicholas Tautz's response to Allied's interrogatory No.
7 and the transcript of his deposition. Allied's interrogatory
No. 7 asked Tautz to "[S]tate the amount of back pay, front pay
or other damages which you claim you are entitled to in this
matter, and, with respect to that amount, state in detail the
basis for that calculation." Tautz responded that, in addition
to lost wages, legal fees, and the difference between reduced and
full pension, he sought "reimbursement for humiliation." The
transcript of Tautz's deposition recounts the following relevant
exchanges:
"COUNSEL FOR ALLIED: When you found out that your
position at Allied had been terminated, what efforts
did you make to find alternative employment?

A: First of all, I had a shock, and it took me
about a week to recover. * * *

* * *

COUNSEL FOR ALLIED: You said that after you found
out that your position had been terminated, you were in
shock and it took you a week to recover. Were you ill?

A: No. Just emotionally going through the trauma
of losing a position. * * *

* * *

COUNSEL FOR ALLIED: Did you become physically
sick?

A: Just emotionally.

COUNSEL FOR ALLIED: Did you lose any sleep?

A: Yes, and I'm still losing sleep.

* * *

COUNSEL FOR ALLIED: Do you have any nervousness?

A: It still bothers me.

COUNSEL FOR ALLIED: Did you become depressed?

A: And I'm still depressed.

COUNSEL FOR ALLIED: Have you sought any medical
assistance for this depression?

A: No.

COUNSEL FOR ALLIED: Have you spoken to any
psychiatrists or psychologists about the depression?

COUNSEL FOR TAUTZ: I think we ought to take a
break. Also, I don't understand what the line of
questioning is here. I don't think we can put any
evidence like that in.

COUNSEL FOR ALLIED: Well, you had some very vague
assertions concerning your damages.

COUNSEL FOR TAUTZ: Well, you can't get damages
like that under the Age Discrimination Act. I think
we're sort of wasting time.

Based upon the foregoing, Allied contends International has
a duty to defend the suit under one or both of the CGL policy's
insuring agreements outlined above. Initially, Allied contends
International has a duty to defend the suit under the policy's
bodily injury converage because Tautz's humiliation, shame, shock
and depression are injuries or illnesses within the meaning of
the policy definition of "bodily injury." Allied's analysis is
misplaced.
As previously noted, the insuring agreement for bodily
injury converage provides, "[Insurer] will pay those sums that
the insured becomes legally obligated to pay as damages because
of 'bodily injury' * * * to which this insurance applies."
(Emphasis added.) Here, Allied's claim ignores the nature of the
underlying complaint. As counsel for Tautz pointed out during
Tautz's deposition, one cannot recover damages for emotional
distress under the ADEA. See 29 U.S.C.S. 626(b)n.122 (Law Co-
op. 1990) (collecting cases, including Pfeiffer v. Essex Wire
Corp., 682 F.2d 684 (7th Cir. 1982), cert. denied, 459 U.S. 1039,
74 L. Ed. 2d 606, 103 S. Ct. 453 (1982); Stevenson v. J.C. Penney
Co., 464 F. Supp. 945 (N.D. Ill. 1979) (damages for mental
suffering not available under ADEA)). Thus, even assuming
without deciding that humiliation, shame, shock and depression
are injuries or illnesses within the meaning of the policy
definition of "bodily injury," the nature of the complaint
precludes the possibility that Allied could become legally
obligated to pay damages "because of" such injuries. The fact
that claimants' emotional suffering may have been occasioned by
their economic loss does not transmute an economic claim under
the ADEA into one seeking recovery from Allied for "bodily
injury." Accordingly, the CGL policy's bodily injury converage
does not apply.
Allied's reliance on Kufalk v. Hart, 636 F. Supp. 309 (N.D.
Ill. 1986), is misplaced. In Kufalk, a school director sought to
hold the school board and certain individuals liable for injuries
he suffered as a result of his allegedly wrongful termination.
The defendants filed a third-party complaint against their
insurer seeking a declaration of the insurer's duty to defend the
action under the "bodily injury" provision of a CGL policy.
During the pendency of the third-party action, the school
director was deposed. During his deposition, the school director
claimed that since his discharge he had suffered "bouts of
depression resulting in general lethargy, headaches, stomach
pains and diarrhea." 636 F. Supp. at 311. Because the court
could not say that the school director's deposition allegations
clearly fell outside the CGL policy's definition of "bodily
injury," it concluded the insurer had a duty to defend. 636 F. Supp. at 312.
The striking factual similarities notwithstanding, Kufalk is
distinguishable from the case sub judice. In Kufalk, the
underlying claimant brought his suit under 42 U.S.C.  1983. A
section 1983 action, unlike an action brought under the ADEA,
permits recovery of compensatory damages for emotional distress,
humiliation and the like. See 42 U.S.C.S. 1983 n.1624 (Law Co-
op 1994) (collecting cases). Thus, in Kufalk, unlike here, the
nature of the complaint did not preclude the possibility that
Allied could become legally obligated to pay damages "because of"
such injuries. Accordingly, Kufalk is not persuasive authority
in the instant case and we express no opinion as to the accuracy
of the district court's interpretation of Illinois law on the
issue of whether emotional distress which is manifested by
physical symptoms falls within the CGL policy's definition of
"bodily injury."
Alternatively, Allied contends that International has a duty
to defend the suit under the policy's employee benefits coverage
because it alleges loss of "job-related benefits" all of which
are covered under the insuring agreement. We disagree.
Again, as previously noted, the CGL policy's employee
benefits coverage provides that International will pay for
damages "caused by any negligent act, error, or omission" of
Allied in the administration of its benefits program. The policy
excludes from coverage damages caused by any "criminal" act,
"humiliation," "bodily injury," or Allied's "failure to comply
with any state or federal law." Because Allied purposefully
rather than negligently or erroneously terminated the underlying
complainants' employee benefits, there is no coverage under the
endorsement. Moreover, if we assume, as Allied would have us do,
that at least the underlying complainants sought damages for
their humiliation or other emotional distress amounting to
"bodily injury," then the policy specifically excludes coverage.
Finally, Allied's alleged failure to comply with the ADEA
precludes employee benefits coverage.
For the foregoing reasons, the judgment of the circuit court
is affirmed.
Affirmed.
BUCKLEY, J., and GALLAGHER, J., concur.