Eleventh Circuit Holds Mental Anguish Claim Not Bodily Injury

In its recent decision in N.H. Ins. Co. v. Hill, 2013 U.S. App. LEXIS 7204 (11^th Cir. Apr. 10, 2013), the United States Court of Appeals for the Eleventh Circuit, applying Florida law, had occasion to consider whether an emotional distress claim arising out of an alleged breach of contract qualified as a claim for bodily injury.

New Hampshire insured Leisure Tyme, a seller of RVs, under a garage operations liability policy.  Leisure Tyme entered into a series of deals with customers whereby the customers traded in their used RVs toward the purchase price of new RVs.  Leisure Tyme agreed to pay the customers’ loan balances on the traded in RVs as part of this promotion.  Leisure Tyme, however, filed for bankruptcy before these loans could be fully paid.  The bankruptcy court lifted the bankruptcy stay to allow the customers to sue Leisure Tyme to the extent of available proceeds.  New Hampshire provided Leisure Tyme with a defense, but brought a declaratory judgment action regarding its coverage obligations.

The New Hampshire policy insured Leisure Tyme for bodily injury or property damage caused by an accident and resulting from garage operations.  New Hampshire argued that plaintiffs’ claims for financial harm occasioned by Leisure Tyme’s failure to honor its loan repayment commitments did not qualify as bodily injury, notwithstanding any financial harm or emotional distress claimed by the plaintiffs.  The court agreed, finding that under Florida law, plaintiffs’ “complained of injuries, pecuniary loss and damage to credit worthiness do not constitute physical injuries to their persons.”  The court further stated that under Florida law, the “impact rule” precluded coverage “for mental anguish-and any physical manifestations of mental anguish” that were caused by Leisure Tyme’s breach of contract.

In addition to its holding with respect to the absence of bodily injury, the court agreed that plaintiffs’ claims did not come within the policy’s coverage for property damage; specifically as loss of use of property.  The court concluded that even if plaintiffs lost use of their traded-in RVs, those RVs were nevertheless in the care, custody or control of Leisure Tyme, and thus excluded under the policy’s coverage.  The policy also contained a breach of contract exclusion that the court held applicable to any property damage claim.