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Several insurers do not have to indemnify and defend in a case alleging intentional infliction of emotional distress and discrimination, because the policies at issue provide coverage for only “bodily injury or property damage,” a Pennsylvania Superior Court has ruled. The court’s decision affirmed an opinion from the Montgomery County Court of Common Pleas that the insurers did not have to defend attorney William Shapiro in a federal suit where a former employee of William Shapiro Esq. PC claimed he was fired after the firm learned he suffered from AIDS. Both the common pleas court and the appeals court concluded that John Doe’s claims did not equate to bodily injury and, therefore, were not covered under the insurance policies. “The plaintiff in the [federal] John Doe litigation claimed that he suffered ‘compensatory and punitive damages … including but not limited to damages for mental anguish and humiliation,’” Judge Peter Paul Olszewski wrote for the court in The Philadelphia Contributionship Insurance Co. v. Shapiro. “He made no allegation that he suffered any ‘bodily harm’ as a result of being fired. Instead, the damages he claimed were all emotional damages and are not covered by the policy.” Doe filed suit in 1994 in federal court, alleging intentional infliction of emotional distress and discrimination under the Americans with Disabilities Act and the Pennsylvania Human Relations Act. According to the Superior Court opinion, the court dismissed a portion of the suit, and the parties settled the remaining claims. When attorney Shapiro and his firm were sued in 1994, however, he sought indemnification and legal defense from several insurers that provided coverage. The insurers — Philadelphia Contributionship Insurance Co., Commercial Union Insurance Co., Continental Casualty Co. and Illinois Insurance Exchange — each refused to provide coverage, citing language in the policies that precluded coverage for a discrimination-based lawsuit. One of the insurers then filed a declaratory judgment action against William Shapiro in the Montgomery County Court of Common Pleas, contending that neither its umbrella policy nor its homeowner’s policy provided coverage for the suit. Shapiro filed an answer and new matter, and then two days later filed a complaint against additional defendants, asserting claims against the remaining insurers for alleged bad faith and refusal to provide a defense, court documents say. Shapiro also named the other defendants from the federal Doe v. Shapiro case as additional defendants in the state action. The state trial court issued an order on March 14, 2001, disposing of all claims and parties. Prior to that order, the court had dismissed insurer Commercial Union as a sanction against Shapiro for “failing to obey several previous orders to comply with discovery requests.” The trial court had also granted motions for summary judgment from Contributionship and Agora prior to the March 14, 2001, ruling. Shapiro appealed each order separately, and the court sua sponte quashed appeals from the first three orders. But the court allowed Shapiro to challenge the first three orders in the appeal of the March 14 order. The Superior Court first addressed whether dismissing one of the insurers as a sanction for discovery violations was too severe an action. The court said it was not. “Appellants did not simply violate a single rule of procedure,” Olszewski wrote. “They engaged in a pattern of conduct over a 16-month period, which included: ignoring discovery requests and interrogatories, missing deadlines even when Commercial Union agreed to allow extensions, and disobeying court orders to comply.” “These discovery violations … were of a ‘nature and severity’ that warranted dismissal.” Turning to the issue of coverage, the court said that the three policies at issue contained nearly identical language and that the court would, therefore, not address each policy separately. The court said Shapiro’s homeowner’s policy said it would indemnify and defend him for damages due to “bodily injury or property damage caused by an occurrence to which this coverage applies.” “The policy defines ‘bodily injury’ as ‘bodily harm, sickness or disease, including required care, loss of services and death that results,’” Olszewski wrote. The court said the claims of intentional infliction of emotional distress and discrimination do not amount to bodily harm. Olszewski also said that Doe’s claims for front pay, backpay and benefits did not amount to property damage. In addition, the court said that even if it were to find that Doe’s lawsuit involved claims that constituted property damage or bodily injury, the court would still find that the insurers did not have a duty to defend and indemnify because, under the policy language, the damage must be caused by “an occurrence to which the coverage applies.” “The policy defines ‘occurrence’ as an ‘accident, including exposure to conditions, which results, during the policy period, in: a.) bodily injury; or b.) property damage,’” the court wrote. “Pennsylvania courts have held that an intentional act, such as assault, can never be deemed an ‘accident,’ including for purposes of an insurance policy.” The court also said that there was exclusionary language in the Contributionship policies precluding coverage for liability arising out of “the business pursuits of an insured.” Judge Correale F. Stevens joined Olszewski in the decision. Senior Judge Stephen A. McEwen concurred in the result without filing a separate opinion. Lancaster, Pa., attorney Nina B. Shapiro represented William Shapiro. Nina Shapiro did not return a call seeking comment yesterday afternoon.

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