Claims Adjuster
Best In The World Insurance Company
Anywhere, USA

Dear Sir/Madam:

Thank you for referring this case to our office. I have reviewed the materials provided with respect to the above captioned matter, including the Charge of Discrimination filed with the New Hampshire Commission for Human Rights and the EEOC entitled John Doe v. ABC College, Numbers EA 0047-00 and 16DA00040, (the "claim"), Commercial General Liability Coverage Form 00 01 01 96 and Declarations and Endorsements, the Educators Legal Liability Policy Form G12530 and Declarations, and various other claim file materials.

According to the claim and file materials, John Doe ("claimant") was employed by ABC College ("the insured") as a biographical researcher from September 1998 until October 19, 1999 when he was fired. Claimant believes that he was discriminated against because of his age (61) and retaliated against because of the following factors: he was limited to 15 to 20 hours of work per week, but younger employees were allowed to work about 30 hours per week; he was not given a performance review or raise after he completed a year of employment although younger employees were given annual evaluations and raises; younger employees were given adequate office space, desks and computers but he was denied adequate resources to do his job effectively; claimant sent a letter to the insured's vice president, Bob Smith ("Smith") on September 30, 1999 which included an objection to what he perceived as discriminatory practices; by letter dated October 15, 1999, Smith terminated claimant. Claimant believes that he was terminated in retaliation for complaining about the discriminatory practices. Claimant does not specify the injuries sustained or the relief sought.

The Worldly Insurance Company ("Wordly") issued to ABC College, 1 South Street, Portsmouth, New Hampshire, Policy No. 123456 with effective dates of July 1, 1999 to July 1, 2000, under Commercial General Liability Coverage Form CG 00 01 01 96 ("the CGL"). The policy provides limits of $1,000,000 per occurrence for bodily injury and property damage claims, $1,000,000 for personal and advertising injury and a $2,000,000 general aggregate limit. The file materials indicate that the instant policy is a renewal. Worldly also issued to ABC College an Educators Legal Liability Insurance Policy, policy number 654321, with effective dates of July 1, 1999 to July 1, 2000 under form G12530. The policy is a claims made policy providing a $1,000,000 aggregate limit subject to a $1,000 deductible for each wrongful act.

The relevant portions of the CGL policy are as follows:

Your interoffice memorandum dated March 24, 2000 requests a coverage opinion regarding the matter captioned above.

In New Hampshire, an insurer's obligation to defend is determined by whether the cause of action against the insured alleges sufficient facts in the pleadings to bring it within the express terms of the policy, even though the suit may eventually be found to be without merit. Hersey v. Maryland Casualty Company, 102 N.H. 541, 543 (1960). If the facts alleged in the complaint do not either fall within the express terms of the policy or clearly preclude coverage, the court may look beyond the pleadings. Happy House Amusement v. New Hampshire Insurance Company, 135 N.H. 719 (1992). The duty of an insurer to defend is not necessarily coextensive with its duty to pay. United States Fidelity and Guaranty Company v. Johnson Shoes, Inc., 123 N.H. 148 (1983). However, if some of the claims trigger coverage, the insurer must defend the insured against the entire complaint. P.J. Noyes Company v. American Motorist Insurance Company, 855 F.Supp. 492 (D.N.H. 1994).

Under the Insuring Agreement of the CGL policy, Worldly only has a duty to defend a "suit" seeking damages to which the insurance applies. "Suit" is defined in SECTION V--DEFINITIONS to include certain civil proceedings in which damages because of bodily injury, property damage, or other damage or injury to which the insurance applies are alleged. Presently, claimant has filed a Charge of Discrimination with the New Hampshire Commission for Human Rights and the Equal Employment Opportunity Commission. In examining the applicable statute of limitations on a discrimination claim, the court distinguished between a complaint of discrimination filed with the New Hampshire Commission for Human Rights and the judicial process initiated by filing a civil complaint in federal court under the Americans with Disabilities Act. Doukas v. Metropolitan Life Insurance Company, 882 F.Supp. 1197, 1201 (1995). While New Hampshire has not specifically examined this issue, a number of jurisdictions have held that a complaint filed with the Equal Employment Opportunity Commission is not a "suit" as defined by a general liability policy because such a complaint is not seeking "damages" as the term is used in the policies. Maryland Cup Corporation v. Employers Mutual Liability Insurance Company of Wisconsin, 81 Md. App. 518 (1990); Maine State Academy of Hair Design, Inc. v. Commercial Union Insurance Company, 699 A.2d 1153 (Me. 1997); Campbell Soup Company v. Liberty Mutual Insurance Company, 239 N.J. Super. 488 (Ch.Div. 1988) aff'd 239 N.J. Super. 403 (App.Div. 1990). As there is no "suit" or enumerated civil proceeding against the insured in the matter captioned above, there is no duty to defend the insured under the Commercial General Liability Policy at this time. The following analysis addresses the issues that appear to be involved in this claim and the allegations that are likely to appear in the event a civil suit is filed. If and when a complaint is filed against the insured, a coverage analysis addressing the complaint's specific allegations is recommended.

COVERAGE A--BODILY INJURY AND PROPERTY DAMAGE LIABILITY affords coverage for bodily injury or property damage arising out of an "occurrence" defined as an "accident," subject to Exclusion a. for bodily injury expected or intended from the standpoint of the insured. In A.B.C. Builders, Inc. v. American Mutual Insurance Company, 139 N.H. 745, 749 (1995), considering a comprehensive general liability policy that defined an occurrence as "an accident," the New Hampshire Supreme Court stated that an accident is "an undesigned contingency, . . . a happening by chance, something out of the usual course of things, unusual, fortuitous, not anticipated, and not naturally to be expected" (quoting Jespersen v. United States Fidelity & Guaranty Company, 131 N.H. 257, 260 (1988)). The court explained that an "insured's intentional acts may be considered accidental if the insured did not intend to inflict injury and the insured's intentional acts were not inherently injurious," id., quoting Lumber Insurance Companies, Inc. v. Allen, 820 F. Supp. 33, 35 (D.N.H. 1993). However, an "act is inherently injurious if it cannot be performed without a certainty that some injury will result." Id. at 750 (quoting Providence Mutual Fire Insurance Company v. Scanlon, 138 N.H. 301, 306 (1994)). See also Fisher v. Fitchburg Mutual Insurance Company, 131 N.H. 769 (1989); Vermont Mutual Insurance Company v. Malcolm, 128 N.H. 521 (1986); MacKinnon v. Hanover Insurance Company, 124 N.H. 456 (1984). Claimant alleges that his employment was terminated as a result of discrimination and retaliation based on his age and the complaints he had made regarding the discriminatory treatment he had received. New Hampshire courts view employment termination as a deliberate and intentional act, and because the results flowing from the act can be anticipated, they are purported to be expected or intended. See Jespersen v. United States Fidelity & Guaranty Company, 131 N.H. 257, 260 (1988); Vermont Mutual Insurance Company v. Malcolm, 128 N.H. 521, 524 (1986). Therefore, Worldly should decline to provide the insured with a defense or indemnification under COVERAGE A of the CGL policy, as the damages sought were not caused by an "occurrence" and are excluded by Exclusion a. as expected or intended by the insured.

COVERAGE A--BODILY INJURY AND PROPERTY DAMAGE LIABILITY affords coverage for damages the insured becomes legally obligated to pay as a result of certain "bodily injury" or "property damage". "Bodily injury" is defined as "bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time." In New Hampshire, claims of emotional distress must be accompanied by physical manifestations to constitute "bodily injury." The physical manifestations must affect the general health and be more than a temporary indisposition. Allegations of emotional pain alone do not rise to the level of "bodily injury." Thorpe v. Department of Corrections, 133 N.H. 299 (1990); Panas v. Harakis, 129 N.H. 591 (1987); Artcraft of New Hampshire, Inc. v. Lumberman's Mutual Casualty Company, 126 N.H. 844 (1985); Siciliano v. Capitol City Shows, Inc., 124 N.H. 719 (1984); Corso v. Merrill, 119 N.H. 647, 653 (1979). The Charge of Discrimination does not specify the damages sought by claimant. Claimant has not alleged that he sustained physical or emotional injury as a result of the discrimination and termination of his employment. Therefore, claimant has not alleged "bodily injury." Claimant presumably has sustained lost wages. Although New Hampshire courts have not directly addressed the issue, those courts which have are consistent in holding that economic losses do not constitute "property damage" within the meaning of a liability policy. "Property damage" is defined in SECTION V--DEFINITIONS as physical injury to tangible property and loss of use of tangible property.

Tangible property

is property that is capable of being handled, touched, or physically possessed. Purely economic losses are not included in this definition. Oxford Lumber Co. v. Lumbermen's Mutual Insurance Co., 472 So.2d 973 (Ala.1985) (employee's claim for insured's failure to provide medical benefits not covered). See also, Keating v. National Union Fire Insurance Co. of Pittsburgh, 995 F.2d 154 (9th Cir. 1993) (economic loss is not damage or injury to tangible property covered by a comprehensive general liability policy); Allstate Ins. Co. v. Russo, 829 F. Supp. 24 (D.R.I. 1993) (lost investments and lost deposits are not tangible property); Graber v. State Farm Fire & Cas. Co., 244 Mont. 265, 797 P.2d 214 (1990) (lost business and injury to reputation and goodwill are not damage to tangible property under a business owner's policy; Travelers Indemnity Co. v. State, 140 Ariz. 194, 680 P.2d 1255 (Ariz. App. 1984) (loss of investment represented by an investment certificate not a loss of tangible property); L. Ray Packing Co. v. Commercial Union Insurance Co., 469 A.2d 832 (Me. 1983) (antitrust action claiming loss of profits and financial interests resulting from insured's alleged price-fixing scheme not covered).

American States Insurance Company v. Martin, 662 So.2d 245, 249 (Ala. 1995) ("[S]trictly economic losses like lost profits, loss of an anticipated benefit of a bargain, and loss of an investment, do not constitute damage or injury to 'tangible' property." Id.). Furthermore, construing a "property damage" definition similar to the instant policy, the New Hampshire Supreme Court affirmed a lower court decision that inchoate equitable property interests do not constitute "tangible property." Fisher v. Fitchburg Mutual Insurance Company, 131 N.H. 769, 774 (1989). It appears that New Hampshire would agree with the majority position if confronted with the issue. Therefore, claimant has failed to allege "property damage." Worldly should decline to provide the insured with a defense or indemnification under the CGL policy as claimant has not alleged "bodily injury" or "property damage" caused by an "occurrence".

COVERAGE A is also subject to Exclusion 2.e. which excludes damages for bodily injury sustained by the insured's employee arising out of and in the course of employment. Although New Hampshire courts have not addressed this issue directly, other courts have interpreted wrongful discharge claims to fall within the scope of the "employee exclusion." Jefferson-Pilot Fire & Casualty Company v. Sunbelt Beer Distributors, Inc., 839 F. Supp. 376, 380 (D.S.C. 1993); McLeod v. Tecorp International, Ltd., 318 Or. 208, 865 P.2d 1283 (1993); Watson v. Town of Arcadia, 542 So.2d 1168, 1170-71 (La Ct. App.), writ denied, 548 So.2d 123 (La. 1989). New Hampshire will enforce the plain meaning of the language in an insurance policy. See, e.g., Wyatt v. Maryland Casualty Company, 738 A.2d 949, 951 (N.H. 1999); Brouillard v. Prudential Property & Casualty Insurance Company, 141 N.H. 710, 712 (1997); MacKinnon v. Hanover Insurance Company, 124 N.H. 456, 462 (1984); Royal Globe Insurance Companies v. Fletcher, 123 N.H. 189, 194 (1983). Therefore, in the event that claimant alleges "bodily injuries", Worldly should decline to provide a defense and indemnification as claimant's alleged injuries arose out of and in the course of his employment by the insured.

In addition, the file materials indicate that the CGL policy No. 123456 was endorsed with the EMPLOYMENT-RELATED PRACTICES EXCLUSION ENDORSEMENT (the "employment-related practices exclusion"), which excludes coverage under COVERAGE A for "bodily injury" that arises out of any termination of employment or any employment- related policies, including "discrimination." Claimant's allegations all derive from the alleged discrimination in his treatment by the insured and the terms and conditions of employment. Although New Hampshire courts have not yet looked at the language of the employment-related practices exclusion, a number of jurisdictions have upheld similar exclusions. See I.B.E.W. Local 1357, Waialeale v. American International Adjustment Company, 955 F. Supp. 1218 (Hawaii 1997), aff'd. 142 F.3d 443 (9th Cir. 1998); Potomac Insurance Company of Illinois v. Peppers, 890 F. Supp. 634 (S.D. Tex. 1995); United States Fidelity and Guaranty Company v. Mobile Convention and Visitors Corporation, No. 93-0491-CB-C, 1993 U.S. Dist. LEXIS 17738 (Ala. December 10, 1993); Frank & Freedus v. Allstate Insurance Company, 52 Cal. Rpt. 2d 678 (Cal. App. 1996); Michelet v. Scheuring Security Services, Inc., 680 So.2d 140 (La. App. 1996), rev. den. 692 So.2d 371 (La. 1996); Meadowbrook, Inc. v. Tower Insurance Company, Inc., 559 N.W.2d 411 (Minn. 1997); Berman v. General Accident Insurance Company of America, 671 N.Y.S.2d 619, 622-23 (1998). Moreover, New Hampshire courts give effect to the plain meaning of language contained in insurance polices. See, e.g., Wyatt v. Maryland Casualty Company, 738 A.2d 949, 951 (N.H. 1999); Brouillard v. Prudential Property & Casualty Insurance Company, 141 N.H. 710, 712 (1997); MacKinnon v. Hanover Insurance Company, 124 N.H. 456, 462 (1984); Royal Globe Insurance Companies v. Fletcher, 123 N.H. 189, 194 (1983). Therefore, Worldly should decline to provide a defense or indemnification for any claim which may be asserted for "bodily injury" under the CGL policy in this matter as all of claimant's allegations derive from the insured's employment-related practices.

Under COVERAGE B--PERSONAL INJURY AND ADVERTISING INJURY LIABILITY, Worldly agrees to pay those sums that the insured becomes legally obligated to pay as damages because of "personal injury" or "advertising injury" to which the insurance applies. An "advertising injury" can only result from an offense committed in the course of advertising the insured's goods, products or services. COVERAGE B also affords coverage for "personal injury" caused by an offense arising out of the conduct of the insured's business. Personal injury is defined in SECTION V--DEFINITIONS to include oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services, or the oral or written publication of material that violates a person's right of privacy. COVERAGE B is only triggered by one of the listed offenses and thus is not implicated in this matter. In addition, the "personal injury" coverage would also be subject to the EMPLOYMENT-RELATED PRACTICES EXCLUSION ENDORSEMENT discussed above.

The Declarations indicate that the insured has also been issued an EDUCATORS LEGAL LIABILITY POLICY. The Insuring Agreement of the Educators Legal Liability Form extends coverage to "all sums which the Insured is legally obligated to pay as damages as a result of claims made and reported during the Policy Period against the Insured by reason of Wrongful Act(s)." Wrongful Act is defined in the policy as any actual or alleged errors or misstatement or misleading statement or act or omission or neglect or breach of duty committed in the performance of duties for the Insured. Claimant alleges that the insured discriminated against him due to his age, and terminated him in retaliation for his complaints about his treatment. Therefore, claimant has arguably alleged a Wrongful Act within the meaning of the policy.

The policy restricts payment to those sums evidencing damages resulting from Claims made against the Insured. Claims are defined in the policy as demands upon the Insured for monetary compensation and relief or redress other than monetary. Claims also include the service of suit papers or arbitration proceedings against the Insured for monetary compensation and relief or redress other than monetary. While this provision permits flexibility in the form of the demand, it specifically requires a demand for monetary compensation, either exclusively or in conjunction with a demand for non-monetary relief or redress. However, claimant's charge does not specify the relief he is seeking. The New Hampshire Supreme Court has recognized a distinction between 'damages' which compensate a loss with a sum of money, and 'restitution' which reimburses a party for restoring the status quo. Coakley v. Maine Bonding and Casualty Co., 618 A.2d 777 (N.H. 1992). Courts of other jurisdictions have reached similar conclusions. See also, Centennial Insurance Company v. Lumbermens Mutual Casualty Company, 677 F. Supp. 342, 349 (E.D. Pa. 1987). Doyle v. Allstate Insurance Company, 1 N.Y.2d 439 (1955), rev'd on other grounds, 147 N.Y.S.2d 200 (1955); Hazen Paper Company v. United States Fidelity and Guaranty Company, 407 Mass. 689, 698 (1990); AIU Insurance Company v. Superior Court of Santa Clara County, 51 Cal. 3d 807 (1990); Cutler Orosi Unified School District v. Tulare County School District Liability /Property Self Insurance Authority, 37 Cal. Rptr.2d 106 (Cal. App. 1994); Patrons Oxford Mutual Insurance Company v. Marois, 573 A.2d 16, 19 (Me. 1990). Although claimant has failed to allege specific damages, he can receive an award of damages from the New Hampshire Human Rights Committee. N.H.R.S.A. 354-A:21(d). Therefore, Worldly should reserve its right to decline to indemnify the insured for those amounts assessed against it which do not qualify as "sums" on account of "damages".

Several other provisions of the instant policy are implicated by the facts currently alleged. The specific terms of the Educator Legal Liability Form have not been interpreted by the courts. However, New Hampshire courts hold that when the language of an insurance policy is clear and unambiguous, the language "must be accorded its natural and ordinary meaning." Coakley v. Maine Bonding and Casualty Company, 136 N.H. 402, 410 (1992), quoting Trombly v. Blue Cross/Blue Shield, 120 N.H. 764, 771 (1992). "The courts will enforce a policy provision that limits the insurance company's liability when the policy language is clear and unambiguous." Deyette v. Liberty Mutual Insurance Company, 142 N.H. 560, 561(1997). See, also Allstate Insurance Company v. Armstrong, 738 A.2d 1280, 1282 (N.H. 1999).

Exclusion 2. excludes any obligation to indemnify or defend under the policy for any damage arising from bodily injury, sickness, emotional distress, mental anguish, disease or death of any person. Claimant does not presently allege bodily injury or emotional distress arising from the alleged discrimination, but such claims, which are frequently alleged in conjunction with a claim of discrimination, would be excluded under Exclusion 2. Therefore, Worldly should reserve its right to decline to provide indemnification for any damage arising from bodily injury, sickness, emotional distress, mental anguish, disease or death of any person.

Exclusion 11. excludes any obligation to indemnify or defend under the policy for any loss, cost, civil fine, penalty or expense arising from any complaint or enforcement action by any federal, state or local governmental regulatory agency. To the extent that any fine or penalty may be assessed against the insured by the Equal Employment Opportunity Commission, such amounts would be excluded under Exclusion 11. Therefore, Worldly should reserve its right to decline to provide indemnification for any loss, cost, civil fine, penalty or expense arising from any complaint or enforcement action by any federal, state or local governmental regulatory agency.

Exclusion 12. excludes any obligation to indemnify or defend under the policy for any back wages, overtime, future wages or similar Claims. Claimant alleges he was terminated for complaining about age-related discrimination. To the extent that claimant alleges lost wages as a result of the alleged discrimination and retaliation, such amounts would be excluded under Exclusion 12. Therefore, Worldly should reserve its right to decline to provide indemnification for any back wages, overtime, future wages or similar Claims.

Exclusion 16. excludes any obligation to indemnify or defend under the policy for any payment or action or suit in connection with claims made against the Insured seeking relief or redress in any form other than monetary damages. Exclusion 16. further provides that a defense will be afforded for actions in which monetary damages are requested, even if non-monetary relief is also requested. As noted above, the demand at present does not include a request for monetary damages. Therefore, Worldly should reserve its right to decline to provide indemnification for any claims in which solely non-monetary relief or redress is sought.

It should be noted that the policy only covers Claims first made and reported to the Company during the policy period of July 1, 1999 to July 1, 2000. Furthermore, Exclusion 6. excludes any obligation to defend or indemnify claims potentially covered under a policy which expired prior to the inception of the instant policy. Exclusion 7. excludes any obligation to indemnify or defend under the policy for any circumstance(s) or incident(s) which might give rise to a Claim, which was either known or reasonably should have been known to the Insured prior to the inception of this policy. Although claimant alleges that he was terminated on October 19, 1999, it appears that claimant is claiming discrimination throughout his employment which commenced in September of 1998. While the policy is a "claims made" policy effective July 1, 1999, encompassing the date claimant filed the charge on December 28, 1999, if the insured knew or reasonably should have known that the alleged discrimination would give rise to a claim prior to July of 1999, or if the insured notified any other insurance carrier under a policy in effect at that time, Worldly has no obligation to provide a defense or indemnification for the claim under Exclusions 6. or 7. Therefore, Worldly should reserve its right to decline to provide a defense or indemnification for any Claims which are potentially covered under a policy which expired prior to the inception of the instant policy or which arise from any circumstance which was either known or reasonably should have been known to the Insured prior to the inception of this policy.

In summary, Worldly should decline to provide the insured with a defense and indemnification under the Commercial General Liability policy as claimant has not filed a suit alleging "bodily injury" or "property damage" caused by an "occurrence" or "personal injury" or "advertising injury". In the event that claimant files suit alleging "bodily injuries" arising from an "occurrence", Worldly should decline to provide a defense and indemnification as claimant's alleged injuries arose out of and in the course of his employment by the insured and are excluded by Exclusion 2.e. and the employment-related practices exclusion. Worldly should provide the insured with a defense under the EDUCATORS LEGAL LIABILITY POLICY, subject to a reservation of Worldly's right to decline indemnification for those amounts assessed against the insured which do not qualify as "sums" on account of "damages". Worldly should also reserve its right to decline to provide indemnification for any damage arising from bodily injury, sickness, emotional distress, mental anguish, disease or death of any person. In addition, Worldly should reserve its right to decline to provide indemnification for any loss, cost, civil fine, penalty or expense arising from any complaint or enforcement action by any federal, state or local governmental regulatory agency. Worldly should reserve its right to decline to provide indemnification for any back wages, overtime, future wages or similar Claims. Finally, Worldly should reserve its right to decline to provide a defense or indemnification for any Claims which are potentially covered under a policy which expired prior to the inception of the instant policy or which arise from any circumstance which was either known or reasonably should have been known to the Insured prior to the inception of this policy. A proposed letter to the insured is enclosed.

Very truly yours,

SHAPIRO & ASSOCIATES