Damages from Failure to Reply to Writ’s Demand Are Not a Result of “Bodily Injury”

After the minor daughter of the owner of Tri County Contractors, Inc., was involved in an automobile accident, the injured person and his wife sued the Tri County owner and his wife to recover for the injuries sustained in the accident. The plaintiffs obtained a judgment against the Tri County owner and his wife for $2 million. To collect on the judgment, the plaintiffs filed a writ of execution against Tri County to seize the owner’s Tri County stock. As provided by applicable Mississippi law, the writ directed a Tri County officer to provide a sworn statement of the extent of the owner’s stock interest in Tri County. Tri County, however, failed to provide that statement, which made it liable for the full amount of the judgment under Mississippi law. Tri County subsequently sought coverage for the judgment under its commercial general liability (“CGL”) insurance policy.

In response, the insurer asked a court to rule that it had no duty to indemnify Tri County because the damages Tri County owed resulted from its violation of the Mississippi law. The district court agreed with the insurer and decided that Tri County’s liability was the result of its failure to respond to the information request and was not liability for damages due to bodily injury. Accordingly, the district court granted summary judgment in favor of the insurer, ruling that the policy did not provide any coverage.

On appeal, Tri County argued that because the underlying judgment was due to the bodily injury that had been sustained in the automobile accident, the judgment against it for the same amount was covered by the CGL policy. The U.S. Court of Appeals for the Fifth Circuit disagreed with Tri County. The circuit court explained that the judgment against Tri County had been imposed strictly as a sanction based on Tri County’s violation of the Mississippi statute that required it to provide information on the owner’s stock interest in Tri County. According to the circuit court, Tri County had not become “legally obligated to pay” any damages as a result of a “bodily injury,” which were the relevant terms in the CGL policy. Consequently, the Fifth Circuit concluded, there was no genuine issue of material fact as to whether coverage was owed under the CGL policy, and it affirmed the district court’s decision in favor of the insurer.

The case is Nationwide Mutual Ins. Co. v. A.H., No. 10-60609 (5th Cir. Oct. 3, 2011).

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