Knutsen et al v. State Farm Fire and Casualty Company
OPINION AND ORDER granting 16 Motion for Summary Judgment. Signed by Judge William K. Sessions III on 3/25/2019. (jam)
UNITED STATES DISTRICT COURT
DISTRICT OF VERMONT
RAYMOND KNUTSEN AND
STATE FARM FIRE AND
Case No. 2:18-cv-88-wks
OPINION AND ORDER
Plaintiffs Raymond and Marilynn Knutsen brought action
against Defendant State Farm Fire and Casualty Company for
breach of its duty to defend under Plaintiffs’ homeowner’s
insurance policy. Now before the Court is Defendant’s Motion for
Summary Judgment. For the reasons set forth below, Defendant’s
Motion for Summary Judgment is granted.
Since at least January 2015, Plaintiffs Raymond and
Marilynn Knutsen (collectively, “the Knutsens”) have had a
homeowners insurance policy (“the Policy”) with State Farm Fire
and Casualty Company (“State Farm”). ECF 16-1 at 1.
In April, 2015, Karen Cegalis (“Cegalis”) filed a lawsuit
against the Knutsens, claiming that the Knutsens “conspired to
create a campaign to cause severe estrangement of Leif Cegalis
from his mother Karen Cegalis.” ECF 16-3 at 1-2, ECF 16-1 at 2.
Leif Cegalis is the child of Raymond Knutsen and Karen Cegalis.
ECF 16-3 at 1. Cegalis’ Complaint alleges that, inter alia, the
Knutsens prevented contact between her and her son, violated
Court Orders to not engage in discussing their Family Court case
with Leif Cegalis, brainwashed Leif Cegalis against Karen
Cegalis, recklessly or knowingly made defamatory statements
about Karen Cegalis to Leif Cegalis, tortuously interfered with
Karen Cegalis’ custodial rights, and “engaged in a crusade to
prosecute Karen Cegalis for unsubstantiated allegations of abuse
towards Leif Cegalis.” ECF 16-3 at 2. The Complaint alleged four
separate claims: Negligence, Breach of Good Faith and Fair
Dealing, Intentional Infliction of Emotional Distress, and
Intentional Torts. ECF 16-3. In terms of damages, Karen Cegalis
sought “damages in an amount sufficient to compensate her for
her damages including but not limited to past, present and
future damages for physical pain, suffering [sic] emotional
damages, economic damages for the cost of litigating false
accusations, counseling costs and other equivalent out of pocket
expenses.” ECF 16-3 at 5. Damages are for “compensation of
medical bills past, present and future” and “for pain and
suffering past, present and future.” Id.
On September 23, 2015, the Knutsens contacted State Farm
and requested that State Farm provide insurance coverage for the
claims asserted against them in the Cegalis Complaint. ECF 16-1
at 2. State Farm replied on October 28, 2015, denying insurance
coverage for the claims. Id. State Farm determined that the
claims in the Cegalis Complaint are not covered by the Policy.
ECF 16-4 at 1. The Policy provides personal liability coverage
to the Knutsens as follows:
If a claim is made or a suit is brought
against an insured for damages because of
bodily injury or property damage to which
this coverage applies, caused by an
occurrence, we will:
1. Pay up to our limit of liability
for the damages for which the
insured is legally liable; and
2. Provide a defense at our expense
by counsel of our choice. We may
make any investigation and settle
any claim or suit that we decide
is appropriate. Our obligation to
defend any claim or suit ends when
the amount we pay for damages, to
effect settlement or satisfy a
judgment resulting from the
occurrence, equals our limit of
ECF 16-2 at 24. The Policy defines “bodily injury” as follows:
1. “Bodily injury” means physical injury,
sickness, or disease to a person. This
includes required care, loss of services and
death resulting therefrom.”
Bodily injury does not include:
a. Any of the following which are
communicable: disease, bacteria,
parasite, virus, or other organism, any
of which are transmitted by any insured
to any other person;
b. The exposure to any such disease,
bacteria, parasite, virus, or other
organism by any insured to any other
c. Emotional distress, mental
humiliation, mental distress,
injury, or any similar injury
arises out of actual physical
Id. at 10. Additionally, the Policy contains the following
Coverage L [Personal Liability] and Coverage
M [Medical Payments to Others] do not apply
a. bodily injury or property damages:
(1) which is either expected or intended by
the insured; or
(2) which is the result of willful or
malicious acts of the insured.
Id at 25.
Trial for the Cegalis lawsuit began on June 5, 2017. ECF
16-1 at 2. At trial, Cegalis described how the alleged acts by
the Knutsens were affecting her: “I couldn’t concentrate . . . I
was starting to have physical symptoms, tingling and numbness in
my fingers and just this brain fog.” ECF 16-5 at 3. Cegalis
added that she also had “trouble sleeping.” ECF 16-5 at 5.
On July 5, 2017, the trial judge announced the close of
evidence and gave the jury closing instructions. Id. The
instructions attached to the Knutsen Complaint in Rutland
Superior Court are not signed by the trial judge. Id. The
instructions for the Negligence claim instruct jurors that:
To prove that the Knutsens were negligent
Ms. Cegalis must prove all the following:
(1) That the Knutsens had a duty to Ms.
(2) They failed to use reasonable care in
discharging that duty; and
(3) The Knutsen’s [sic] failure to use reasonable
care caused physical injury to Ms. Cegalis.
ECF 16-6 at 3. The instructions further provide that “[i]f you
find that the Knutsens breached a duty toward Ms. Cegalis, then
you must decide whether Ms. Cegalis has proved that the breach
caused physical harm to her.” Id.
The jury returned a verdict for Cegalis and eventually
awarded her $500 in damages: $499 for negligence and $1 for
intentional infliction of emotional distress. ECF16-1 at 3. On
October 7, 2017, the court ordered that the Cegalis lawsuit be
re-tried. Id. On November 1, 2017, the Knutsens’ attorney wrote
to State Farm, renewing their claim for insurance coverage. Id.
On January 19, 2018, State Farm wrote back to the Knutsens,
reiterating State Farm’s position that there is no coverage for
the Cegalis claims. Id.
On April 2, 2018, Cegalis filed an Amended Complaint. ECF
16-1 at 4. The Amended Complaint is identical to the original
Complaint except that Count IV is now labeled ‘Defamation’
instead of ‘Intentional Torts.’ Id. That same month, the
Knutsens renewed their request for insurance coverage, and State
Farm again replied that there was no insurance coverage for the
disputed claims. Id.
State Farm now moves for summary judgment arguing that it
has no duty to defend the Cegalis lawsuit because the Cegalis
Complaint does not allege that Cegalis sustained “bodily injury”
as that term is defined in the Policy. ECF 16 at 6. State Farm
also argues that it has no duty to defend the Cegalis lawsuit
because the Cegalis Complaint alleges that the harm to Cegalis
was “expected or intended” or was “willful and malicious.” Id.
1. Summary Judgment Standard
A court shall grant summary judgment if the movant shows
that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law. Fed. R. Civ.
P. 56(a). In making a determination on summary judgment, the
court must construe all evidence in the light most favorable to
the nonmoving party, drawing all inferences and resolving all
ambiguities in its favor.” Dickerson v. Napolitano, 604 F.3d
732, 740 (2d Cir. 2010). The moving party bears the initial
burden of demonstrating “the absence of a genuine issue of
material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986). Once the moving party has discharged its burden the
opposing party must set out specific facts showing a genuine
issue of material fact for trial. Wright v. Goord, 554 F.3d 255,
266 (2d Cir. 2009).
The moving party bears the burden of
establishing that there are no factual issues and that they are
entitled to judgment as a matter of law. Battery Steamship
Corporation v. Refineria Panama S.A., 513 F.2d 735, 738 (2d Cir.
2. Choice of Law
Jurisdiction in this case is based on diversity of the
parties. “It is well established that federal courts determine
governing law in diversity actions by looking to choice of law
principles in the forum state.” Evergreen Bank, N.A. v.
Sullivan, 980 F. Supp. 747, 750 (D. Vt. 1997). When contractual
parties have not specified the state law to be applied in a
given case, Vermont uses the test laid out in Restatement
(Second) Conflict of Laws § 188 (the “Restatement”) to determine
which state has the most significant relationship to the
transaction and the parties. Id.; see also McKinnon v. F.H.
Morgan & Co., 750 A.2d 1026, 1028 (Vt. 2000) (“This Court has
adopted the Restatement (Second) of Conflicts for choice-of-law
questions in both tort and contract cases.”). The Restatement
considers five factors in determining the law applicable
including: (1) the place of contracting, (2) the place of
negotiation of the contract, (3) the place of performance, (4)
the location of the subject matter of the contract, and (5) the
domicile, residence, nationality, place of incorporation, and
place of business to the parties. Restatement (Second) Conflict
of Laws § 188.
Here, the balance of factors weighs heavily in Vermont’s
favor. The Knutsens are residents of Castleton, Vermont and
State Farm has its principal place of business in Illinois. ECF
1 at 1. The contract at issue is a Homeowners Insurance Policy
purchased by the Knutsens from State Farm. The Knutsens are
alleging that State Farm has a duty, under this contract, to
defend them in a lawsuit in Vermont state court. The alleged
acts which gave rise to the state court lawsuit occurred in
Vermont. Vermont has the most significant relationship to the
transaction and the parties, and thus Vermont state law applies.
3. State Farm Has No Duty to Defend or Indemnify the
Knutsens in the Cegalis Lawsuit
An insurer has a duty to defend “whenever it is clear that
the claim against the insured might be of the type covered by
the policy.” Garneau v. Curtis & Bedell, Inc., 158 Vt. 363, 366,
610 A.2d 132, 134 (1992). This duty does not extend, however, to
circumstances where, as a matter of law, there is no duty to
indemnify. Id. Thus, the issue in this case is whether the
Cegalis Complaint contains claims which are potentially or
arguably within the Policy, requiring a duty to defend from
State Farm. More specifically, the question is whether Cegalis’
claims of emotional distress fall within the Policy’s definition
of “bodily injury,” which she argues is the basis for State
Farm’s duty to defend.
When looking at unsettled areas of state law, a federal
court must “carefully . . . predict how the state’s highest
court would resolve the uncertainty or ambiguity.” Maska U.S.,
Inc. v. Kansa General Ins. Co., 198 F.3 74, 78 (2d Cir. 1999).
The Court may also “consider ‘decisions in other jurisdictions
on the same or analogous issues.’” Id. (quoting Leon’s Bakery,
Inc v. Grinnell Corp., 990 F.2d 44, 48 (2d Cir. 1993)).
The Vermont Supreme Court has not spoken on the definition
of “bodily injury” in regards to the Policy, or addressed
whether the definition of “bodily injury” in homeowner’s
insurance extends to emotional distress. Outside the context of
homeowner’s insurance, the Vermont Supreme Court has stated that
“[a]bsent physical contact, one may recover for negligently
caused emotional distress only when the distress is ‘accompanied
by substantial bodily injury or sickness.’” Fitzgerald v.
Congleton, 155 Vt. 283, 292, 583 A.2d 595 (1990) (quoting
Vaillancourt v. Medical Ctr. Hosp., 139 Vt. 138, 143, 425 A.2d
92 (1980)). While not dispositive, this clear opinion by
Vermont’s highest court provides strong guidance on how it would
view damages for emotional distress unaccompanied by
considerable bodily injury in this instance.
Additionally, the Vermont Supreme Court has stated that:
Rules and categories are tempting devices for
arriving at automatic answers. Sometimes the
classifications coincide with the essential
differences between situations. And sometimes
they do not. Sometimes the categories carry
with them characteristics of their own which
distinctions into a decision, leading us away
from the substance of an inquiry.
It is, therefore usually best for courts to
meet the issues completely on a case by case
basis, leaving classification to others,
limiting the use of general propositions to
those that are essential to an understanding
of the manner in which the court resolved the
questions involved, and the way it will
approach others like it. This is the genius of
our common law system, deriving the general
rule from the specific case.
Woodstock Resort Corp. v. Scottsdale Ins. Co., 927 F. Supp. 149,
153 (D. Vt. 1996) (quoting American Fidelity Co. v. North
British & Mercantile Ins. Co., 124 Vt. 271, 272–73, 204 A.2d 110
(1964)). The Court approaches the instant case with this guiding
principle in mind.
“An insurer's duty to defend is normally measured by
comparing the terms of its policy with the underlying
allegations in the complaint against its insured.” Allstate Ins.
Co. v. Vose, 177 Vt. 412, 869 A.2d 97 (2004). The “claims in the
complaint control the analysis.” Co-operative Ins. Cos. v.
Woodward, 191 Vt. 348,353, 45 A.3d 89 (2012), see also TBH By
and Through Howard v. Meyer, 168 Vt. 149, 153, 176 A.2d 31
(1998) (“We must focus on the factual allegations in [the]
complaint and not on the legal theories asserted, and unless the
complaint alleges facts within the coverage of the policies,
[the insurance carrier] has no duty to defend or indemnify.”).
In the Policy at issue, “bodily injury” is defined as
“physical injury, sickness, or disease to a person.” ECF 16-2 at
10. The Policy itself explicitly excludes “[e]motional distress
. . . unless it arises out of actual physical injury to some
person.” Id. There are no physical injuries alleged in the
Complaint. Neither the original Complaint nor the Amended
Complaint allege any sort of harmful, physical contact between
the Knutsens and Karen Cegalis. The only mention of physical
pain or harm is listed in the damages section: there are no
facts alleging bodily injury. ECF 16-3 at 5. Looking at the
factual allegations of the Cegalis Complaint, as Vermont law
instructs, there is no bodily injury which places Cegalis’
allegations under the coverage of the policy.
Courts across the country have interpreted “bodily injury,”
as it is used in different insurance policies, to exclude purely
emotional harm. See, e.g., National Cas. Co. v. Great Southwest
Fire Ins. Co., 833 P.2d 741, 746 (Colo 1992) (“The majority of
courts that have interpreted bodily injury as it is used in the
Hartford policy have determined that it covers physical injury
and does not include claims for purely nonphysical or emotional
harm.”); Moore v. Continental Cas. Co., 252 Conn. 405, 412
(2000) (collecting cases).
The Knutsens urge the Court to look beyond the Cegalis
Complaint. ECF 19 at 5. While resolution of coverage is
generally made on the language of the policy and the language of
the complaint, Vermont courts will occasionally examine “the
known facts underlying a plaintiff’s complaint to understand the
application of policy provisions or exclusions.’” Garneau v.
Curtis & Bedell, Inc., 158 Vt. 363, 366, 610 A.2d 132, 134
(1992). If the Court looks beyond the Complaint, there is still
little support for a claim of harm outside purely emotional
distress. In her testimony at trial, Cegalis mentions that the
actions of the Knutsens have caused “tingling and numbness in my
fingers” and “trouble sleeping.” ECF 16-5 at 3, 5. These are the
only references Cegalis makes to any physical symptoms.
Since the Vermont Supreme Court has not addressed this
specific issue, this Court may consider analogous situations in
other jurisdictions. Many courts have found that physical
symptoms which occur as a result of emotional distress still do
not count as “bodily injury.” See, e.g., D.B.C. v. Pierson, No.
2:13-CV-00377-LSC, 2014 WL 2155017 at *4 (N.D. Ala. May 22,
2014) (“There is no indication in the policy definition of
bodily injury that it covers physical injuries that arise out of
mental injuries, without there first being some actual physical
injury.”); Heacker v. American Family Mut. Ins. Co., No. 094270-CV-W-GAF, 2011 WL 124301 at *8 (W.D. Mo. Jan. 14, 2011)
(“[T]here is no justification for interpreting [“bodily injury”]
in a manner that excludes coverage for ‘purely emotional
distress’ but provides coverage when emotional distress is
accompanied by physical manifestations.”); State Farm Mut. Auto
Ins. Co. v. D.L.B., 881 N.E.2d 665, 666 (2008) (holding that
insured did not suffer bodily injury even though his emotional
distress was accompanied by physical manifestation, because
these physical manifestations were not the result of an impact,
force, or harm); Taylor v. Mucci, 952 A.2d 776, 781 (Conn. 2008)
(explaining that “although emotional distress might be
accompanied by some physical manifestations, it [does] not
follow that emotional distress constituted a type of bodily
injury under the policy.”) (internal quotations omitted); Geraci
v. Conte, No. 77420, 2000 WL 1739294 at *6 (Ohio Ct. App. Nov.
22, 2000) (“Thus, appellant's physical sickness, which occurred
as a result of her emotional distress, is excluded by the
unambiguous terms of the policy. Therefore, we find that
appellant has suffered no bodily injury as that term is defined
in the policy.”); Pratchenko v. Fuller, 212 Wis. 2d 641, 570
N.W.2d 62 (Wis. Ct. App. 1997) (denying coverage even though
insured’s mental distress manifested itself in physical symptoms
such as sleeplessness and loss of appetite.); Zerr v. Erie Ins.
Exchange, 446 Pa. Super 451 (1995) (denying coverage for an
insured who suffered emotional injuries which later manifested
themselves in physical symptoms); Dahlke v. State Farm Mut. Auto
Ins. Co., 451 N.W. 2d 813, 815 (Iowa 1990) (“We think the term
‘bodily injury’ is clear on its face and does not include the
physical manifestation of the parents’ loss here.”).
However, a strong contingent of courts have ruled the other
way. See, e.g., Allstate Ins. Co. v. Wagner-Ellsworth, 344 Mont.
445, 459, 188 P.3d 1042, 1051 (2008) (finding that allegations
of physically-manifested emotional distress fall within bodily
injury coverage in the insurance context); Am. Motorists Ins.
Co. v. S. Sec. Life Ins. Co., 80 F. Supp.2d 1280, 1283 (M.D.
Ala. 2000) (under Florida law, allegation of physically
manifested mental anguish met insurance policy's definition of
“bodily injury”); Twin City Fire Ins. Co. v. Colonial Life &
Acc. Ins. Co., 124 F. Supp.2d 1243, 1247 (M.D. Ala. 2000)
(applying South Carolina law, emotional trauma can constitute
“bodily injury” unless the complaint contains no allegations of
physical damages); Gen. Star Indem. Co. v. Sch. Excess Liability
Fund, 888 F. Supp. 1022, 1027 (N.D.Cal.1995) (“Physical injury
resulting from emotional distress, however, constitutes ‘bodily
injury.’”); State Farm Fire & Cas. Co. v. Nikitow, 924 P.2d
1084, 1089 (Colo. App. 1995) (although the term “bodily injury”
in insurance contract did not encompass purely emotional harm,
coverage was available if injury was accompanied by physical
manifestations such as nausea and ongoing nightmares); Garvis v.
Employers Mut. Cas. Co., 497 N.W.2d 254, 257 (Minn. 1993)
(“emotional distress with appreciable physical manifestations
can qualify as a ‘bodily injury’ within the meaning of the
insurance policy”); Voorhees v. Preferred Mut. Ins. Co., 607
A.2d 1255, 1262 (N.J. 1992) (emotional distress resulting in
headaches, stomach pains, nausea, and body pains constituted
“bodily injury” under homeowner's insurance policy).
On the facts presented in this case, the Court finds no
duty to defend. Given that this Court is predicting how
Vermont’s highest court would resolve the ambiguity, the Court
first emphasizes that it is only deciding the issue in this
case, and “leaving classification to others.” Woodstock Resort
Corp., 927 F. Supp. at 153. As instructed by Vermont law, the
Court has compared the terms of the policy with the underlying
allegations in the Complaint and found that the Cegalis
Complaint does not detail any bodily injury, much less
substantial bodily injury. Even looking beyond the facts alleged
in the Complaint, as the Knutsens urge this Court to do, there
is only a small basis for supporting a claim of bodily injury:
Cegalis testified at trial to tingly fingers and trouble
sleeping. These slight, physical manifestations may offer
insight into the severity or extent of Cegalis’ emotional harm,
but they are thin facts upon which to rest a duty to defend.
Since these minor symptoms all stem from her emotional distress,
which is explicitly excluded from the State Farm policy, State
Farm is not obligated to indemnify or defend the Knutsens in the
Since the Court has found that State Farm has no duty to
defend because Cegalis’ harms do not constitute “bodily injury”
as defined in the Policy, the Court need not address State
Farm’s other argument that the harm to Cegalis was intended or
expected. State Farm’s Motion for Summary Judgment is granted.
For the reasons set forth above, Defendant’s Motion for
Summary Judgment is granted.
DATED at Burlington, in the District of Vermont, this 25th
day of March, 2019.
/s/ William K. Sessions III
William K. Sessions III
District Court Judge
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