The current Illinois federal court docket resolution McDonald’s Company, et al., v. Homeland Insurance coverage Firm Of New York illustrates the perils that policyholders could face in the event that they fail to grasp the contours of key outlined phrases of their insurance coverage insurance policies. 2025 WL 2614665, at *1 (N.D. Unwell. Sept. 10, 2025). In McDonald’s, the court docket agreed that an insurer who offered a common legal responsibility coverage didn’t have an obligation to defend its insured towards claims alleging concern and emotional misery as a result of that hurt didn’t meet the definition of bodily harm within the insurance coverage coverage.
McDonald’s includes a dispute between an insured-employer and its insurer over protection for an underlying lawsuit towards the insured by one in every of its workers. The worker alleged, amongst different issues, that she was “usually uncovered to violent and legal habits by prospects” at work, “witnessed prospects throw espresso at co-workers,” “suffered bodily and psychological hurt from the violence,” and feared that she too would “face violence sooner or later.” Id. at 4. The insured-employer sought protection protection for the lawsuit on the premise that the bodily accidents of others brought about the worker emotional misery. Following the four-corners rule, the court docket examined the precise allegations of the underlying grievance with the protection of the insurance coverage coverage and decided that the worker’s bodily harm allegations didn’t meet the bodily harm definition of the coverage. Particularly, the court docket held that the underlying allegations didn’t set up (because it should) that the worker had suffered an “precise bodily harm,” because the insurance coverage coverage required. Id.
In related half, the coverage coated bodily harm that came about throughout the coverage interval and outlined bodily harm as “bodily harm, illness or illness sustained by an individual, together with loss of life ensuing from any of those at any time.” Id. at 1. The court docket famous that the gist of the worker’s declare was that witnessing bodily harm inflicted on others resulted in psychological hurt to the worker. The court docket, nevertheless, discovered that “there may be ample precedent below Illinois legislation rejecting the competition that ‘precise bodily harm’ will be construed so broadly as to embody what are basically emotional accidents.” Id. at 4. And, whereas an incident was alleged throughout which the worker was pepper sprayed, it was undisputed that the incident came about outdoors of the coverage interval.
Counting on that precedent, the court docket concluded that the worker’s grievance was “devoid of information establishing that [the employee] sought damages for a coated bodily harm that occurred throughout the coverage interval.” Id. The court docket decided that, below Illinois legislation, second-hand accidents reminiscent of concern and emotional misery brought on by viewing one other particular person’s bodily accidents weren’t coated below the coverage at situation. Thus, the court docket held that the insurer didn’t have an obligation to defend the insured towards the worker’s lawsuit. Id. at 5.
McDonald’s is a crucial reminder for policyholders that the breadth of the responsibility to defend does have its limitations. Policyholders should rigorously assessment and perceive the wording of their insurance coverage insurance policies, and particularly how the definition of key phrases could have an effect on the scope of protection. The choice additionally highlights the necessity to consider insurance policies not solely on the preliminary procurement but in addition midterm or throughout renewal to establish potential gaps in protection or methods to broaden present coverage language to keep away from such gaps. For instance, related to McDonald’s, policyholders could inquire about whether or not there are methods to broaden the bodily harm definition of their common legal responsibility insurance policies to incorporate harms reminiscent of emotional misery or psychological anguish as a part of the bodily harm definition. Finally, having a whole and knowledgeable understanding of the scope of protection below their insurance policies and what’s obtainable within the insurance coverage market is important to making sure policyholders are adequately defending their pursuits. Policyholders could keep away from pricey errors and be ready to navigate the nuanced nature of insurance coverage insurance policies by contacting protection counsel who may also help them higher perceive their insurance coverage insurance policies.