In Evanston Ins. Co v. Legacy of Life Inc, No. 10-50267 (5th Cir. Aug. 24, 2012) the United States Court of Appeals for the Fifth Circuit held an insurer owed no duty to defend its insured in an underlying suit where the insured is accused of selling body-parts for profit. Prior to issuing a decision, the 5th Circuit certified two questions of law to the Supreme Court of Texas, asking the Texas Court to determine if Evanston Insurance Company (“Evanston”) owed a duty to defend its insured, Legacy of Life Inc. (“Legacy”) under the insured’s professional and general liability policies.
The plaintiff in the underlying suit contends she consented to Legacy’s harvesting of her mother’s organs and tissues after her mother’s death, because Legacy, a nonprofit organization, represented to her that the organs would be distributed on a nonprofit basis. The plaintiff alleges Legacy harvested the tissues and organs, but gave the body parts to a for-profit company who sold the parts to hospitals. Additionally, the complaint alleges that Legacy and the for-profit company it transfers the tissues and organs to are, “closely related entities” that are engaging in unconscionable business practices aimed at profiting from grieving family members. The plaintiff maintains that as a result of Legacy’s actions, she suffered severe emotional distress. Legacy sough coverage for the suit under its professional and general liability policies issued by Evanston. Evanston denied Legacy’s request for defense and filed suit seeking a declaratory judgment, maintaining the conduct alleged in the underlying complaint was outside the scope of both insurance policies.
The district court denied Evanston’s motion finding the insurer had a duty to defend, because the policy’s definition of “personal injury” was broad enough to cover the underlying plaintiff’s claims of extreme mental anguish and emotional distress. The district court also determined the allegations of “property damage” triggered coverage because a Texas court could find the deceased’s tissues and organs were property.
On appeal to the Fifth Circuit, Evanston argued the district court erred in its decision because the underlying claim did not assert either “personal injury” or “property damage” as required to trigger a duty to defend under the insured’s policies. The appellate court certified two questions to the Texas Supreme Court, asking the Court to determine: (1) if the insurance policy provision for coverage for personal injury included coverage for mental anguish unrelated to physical damage; and (2) if the policy provision for coverage of property damage included coverage for the plaintiff’s loss of use of her deceased mother’s tissues and organs. The Texas Supreme Court answered both questions in the negative, finding the claims in the underlying complaint did not constitute personal injury or property damage and thus, Evanston has no duty to defend Legacy in the underlying lawsuit.