After exiting Grand China, Ullom dialed 911. The police arrived shortly thereafter to investigate the incident, but advised Ullom that Chen was “afraid of what other customers would say about a dog in his restaurant,” and that he had the “right to refuse service to anyone.”

Damages for 'wrong doing'

Ullom sued Grand China and Qi Feng Chen in his capacity as “Director, Incorporator, and President” of Grand China, alleging violations of the West Virginia Human Rights Act (“WVHRA”) as well as “all applicable West Virginia Statutes” and “Constitutional Laws.”

Ullom sought “a significant amount” of damages under the WVHRA, both to accommodate Ullom and to punish Chen and Grand China for their “intentional acts of wrong doing.” His complaint also sought damages for emotional distress, embarrassment, and humiliation in an amount that would “fairly compensate [Ullom] for the intentional acts of wrong doing.”

Chen placed Grand China's commercial general liability insurance company, State Auto Property & Casualty Company, on notice of Ullom's complaint.

State Auto at first provided a defense. After deposing Ullom, however, State Auto decided that he had not incurred a “bodily injury” covered under Grand China's policy, and it withdrew any further defense to Grand China and Mr. Chen.

Restaurant sued State Auto for CGL coverage

Grand China and Chen filed an action against State Auto seeking declarations that the State Auto policy provided them with:

(1) Bodily injury liability coverage for some or all of Ullom's claims; and

(2) Personal and advertising injury liability coverage for some or all of Ullom's claims.

The insurer moved for summary judgment on the coverage issues.

The federal district court first ruled that Ullom's claims for statutory violations, “emotional distress, embarrassment, [and] humiliation” did not fall within the definition of “bodily injury” under the State Auto insurance policy. (Photo: Shutterstock)

CGL policy language

The State Auto policy provided:

SECTION I – COVERAGES

COVERAGE A BODILY INJURY AND PROPERTY DAMAGE LIABILITY

1. Insuring Agreement

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for “bodily injury” or “property damage” to which this insurance does not apply. We may at our discretion investigate any “occurrence” and settle any claim or “suit” that may result.

SECTION V – DEFINITIONS

2. “Bodily injury” means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.

The policy also stated:

SECTION I – COVERAGES

COVERAGE B PERSONAL AND ADVERTISING LIABILITY

1. Insuring Agreement

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of “personal and advertising injury” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit seeking damages for “personal and advertising injury” to which this insurance does not apply. We may, at our discretion, investigate any offense and settle any claim or “suit” that may result.

SECTION V – DEFINITIONS

14. “Personal and advertising injury” means injury, including consequential “bodily injury”, arising out of one or more of the following offenses:

a. False arrest, detention or imprisonment;

b. Malicious prosecution;

c. The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor;

d. Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services;

e. Oral or written publication, in any manner, of material that violates a person's right of privacy;

f. The use of another's advertising idea in your “advertisement”; or

g. Infringing upon another's copyright, trade dress or slogan in your “advertisement”.

(Emphasis added.)

Coverage for 'bodily injury' not triggered under policy

The district court granted State Auto's motion.

In its decision, the district court first ruled that Ullom's claims for statutory violations, “emotional distress, embarrassment, [and] humiliation” did not fall within the definition of “bodily injury” under the State Auto insurance policy. Ullom, the district court found, had not alleged “any physical manifestation” of these “purely mental or emotional harm[s].”

Therefore, the district court ruled, coverage for “bodily injury” had not been triggered under the State Auto policy.

No personal & advertising injury coverage

The district court also rejected the contention by Grand China and Chen that the State Auto policy provided “personal and advertising injury liability coverage for some or all of the claims asserted and losses allegedly sustained” by Ullom. The district court was not persuaded by their argument that Ullom's allegation that service had been refused and that he had been directed to leave Grand China was “reasonably susceptible of an interpretation that the claim may be covered” under the State Auto policy as a “wrongful eviction.”

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The district court reasoned that although the State Auto policy did not define “eviction,” the term was not ambiguous. The district court noted that not every allegation of “eviction” was a covered personal injury but that the policy provided coverage only for “wrongful eviction from … a room, dwelling or premises that a person occupies.” Therefore, the district court decided, the policy “clearly” signaled the requirement that Ullom “be wrongly deprived of occupation.”

Because Ullom's complaint had not alleged any possessory interest in Grand China that had given him a right to occupy the restaurant but only that Grand China had wrongfully denied him the right to be served with certain accommodations required by West Virginia law — namely, the presence of his service dog — Ullom's allegation was “not reasonably susceptible to an interpretation” that was covered by the policy's provision for “wrongful eviction,” the district court concluded.

The case is Grand China Buffett & Grill, Inc. v. State Auto Property & Cas. Co., No. 1:16CV159 (N.D. W.Va. May 16, 2017).

Related: Top 10 causes of liability loss by total value of claims, from 2011 to 2016 [infographic]

Steven A. Meyerowitz, Esq., is the director of FC&S Legal, the editor-in-chief of the Insurance Coverage Law Report, and the founder and president of Meyerowitz Communications Inc. Email him at [email protected].