Coverage for “Bodily Injury” Extends to Alleged Biological Injury Caused by Radio Frequency Radiation from Cell Phones
In Zurich American Ins. Co. v. Nokia, Inc., 268 S.W.3d 487 (Tex., 2008), Nokia, a wireless telephone manufacturer, was sued in a number of putative class actions alleging that radiation emitted by its phones caused biological injury. The consumer-plaintiffs in those cases alleged that radio frequency radiation (RFR) from the phones caused “biological injury.”
Nokia tendered the defense of one of these cases to Zurich American Insurance Company, from which it had purchased several commercial general liability (CGL) insurance policies covering the years 1985-89 and 1995-2000. Although Zurich agreed to defend Nokia, it reserved its right to later contest its obligation to defend or indemnify. Nokia's other insurers, National Union Fire Insurance Company and Federal Insurance Company, followed suit.
Seeking to resolve the coverage issue, Zurich sued Nokia, National Union, and Federal and sought a declaration that Zurich had no duty to defend or indemnify Nokia and that Zurich was not responsible for defense or indemnity payments made by National Union or Federal. Zurich also sought contribution and subrogation against all defendants. National Union and Federal cross-claimed against Nokia asserting, among other things, that they had no duty to defend or indemnify Nokia.
The district court entered summary judgment in favor of the insurers, and Nokia appealed. The court of appeals affirmed in part, reversed in part, and remanded. The insurers petitioned for review, arguing that they had no duty to defend because the complaints did not state claims for bodily injury or seek damages because of bodily injury.
The Supreme Court of Texas granted the petitions for review. Finding that most of the underlying suits sought damages because of bodily injury, the court modified the court of appeals' judgment and, as modified, affirmed.
In its decision, the court first explained that an insurer must defend its insured if a plaintiff's factual allegations potentially support a covered claim, while the facts actually established in the underlying suit determine whether the insurer must indemnify its insured. In determining a duty to defend, Texas courts followed the “eight-corners rule,” also known as the “complaint-allegation rule”, under which an insurer's duty to defend is determined by the third-party plaintiff's pleadings, considered in light of the policy provisions, without regard to the truth or falsity of those allegations.
Further, the general rule is that the insurer is obligated to defend if there is, potentially, a case under the complaint within the coverage of the policy.
In answering the question of whether the underlying cases alleged bodily injury, the court held that coverage for bodily injury extended to alleged biological injury to human cells caused by radio frequency radiation from cellular telephones.
As to whether the plaintiffs sought damages here, the court noted that the insurers asserted that the plaintiffs sought headsets, not damages, removing their claims from coverage. However, the court agreed with Nokia, which responded that the plaintiffs sought damages including, but not limited to, headsets, and those damages were squarely covered by the policy.
Although the complaints sought compensation for headsets that would eliminate their exposure to allegedly harmful radiation, the users did not disclaim damages for injuries based on their physical exposure to radiation.
The insurers had also contended that, even if the MDL cases did seek damages, those damages were not “because of” bodily injury. The court determined that although the complaint allegations were varied, each included at least one theory under which tort damages could be recovered. Because past purchasers were alleged to have suffered bodily injury and because they sought damages for those injuries already incurred, the suits fell within the policy language—even if the case also involved claims by those who had not yet purchased wireless telephones. Further, over-inclusive allegations did not negate the duty to defend, and the duty applied if there was a possibility that any of the claims might be covered.
The court also explained that the appropriateness of class certification in an action for damages against an insured was not relevant to an insurer's duty to defend.
Finally, the court held that the CGL policies' business risk exclusions precluded coverage for economic loss claims based on product defects. Those exclusions applying to “property damage to your product,” “property damage arising out of a defect, deficiency, inadequacy or dangerous condition in 'your product,'” and damages related to a product recall, were, however, inapplicable to claims alleging bodily injury.