An ambiguous employer’s liability exclusion in an umbrella commercial liability policy pertained only to claims asserted by employees of “the insured” against whom the claim was directed, the Pennsylvania Supreme Court held in Mut. Benefit Ins. Co. v. Politsopoulos, __ A.3d __ (No. 60 MAP 2014, filed May 26, 2015). Leola Restaurant maintained the subject policy, which required the owners of the property leased by the restaurant to be named as additional insureds. Property Owners were not, however, listed on the declarations page. During the policy period, Marina Denovitz, a restaurant employee, fell on a set of stairs and commenced a negligence action against Property Owners. Property Owners sought defense and indemnification under the umbrella policy. The insurer, Mutual Benefit, disclaimed coverage, citing an exclusion of coverage for claims of “
Mutual Benefit commenced a declaratory judgment action, and the trial court awarded summary judgment in Mutual Benefit’s favor, albeit reluctantly. The trial court explained that it was bound by Pennsylvania Manufacturers’ Ass’n Ins. Co. v. AETNA Cas. & Sur. Ins. Co., 233 A.2d 548 (Pa. 1967) (PMA), which held that the term “the insured” in an employer’s liability exclusion encompasses claims of employees of the named insured, regardless of whether coverage was sought by a different insured. Thus, in this case, the exclusion precluded coverage of the personal injury claim because Denovitz was an employee of the named insured (Leola Restaurant), even though the suit was brought against additional insureds (Property Owners).
On appeal, the Superior Court reversed, reasoning that (1) Property Owners were named insureds on the policy, and (2) under the “severability of insureds” clause, coverage was to be evaluated as though there were only one insured, i.e., the one as to which coverage was to be determined – in this case the Property Owners. Because Denovitz was not an employee of the Property Owners, the exclusion did not apply. Mut. Benefit Ins. Co. v. Politopoulos, 75 A.3d 528 (Pa. Super. 2013).
Mutual Benefit appealed, and the Supreme Court affirmed on different grounds. Writing for the majority, Chief Justice Saylor rejected the Superior Court’s premise that the Property Owners were named insureds since, under the terms of the policy, they were additional insureds. The majority observed that the appropriate focus was less upon the specific wording of the “separation of insureds” clause than on the terms of the employer’s liability exclusion, particularly the use of definite and indefinite articles in association with the word “insured.” The Court held that where a policy makes varied use of definite and indefinite articles, it creates an ambiguity relative to the former, such that “the insured” may be reasonably interpreted as signifying the specific insured against whom a claim is asserted. Because Mutual Benefit’s employer’s liability exclusion was ambiguous, it pertained only to claims asserted by employees of “the insured” against whom the claim was directed. The exclusion did not apply to Denovitz’s claim since she was not Property Owners’ employee.
In a concurring opinion, Justice Eakin opined that the policy language was not ambiguous because both parties agreed that Property Owners were “insureds” and the clear language of the policy separates each “insured” from the others. Because Denovitz’s employer was distinct from Property Owners, Justice Eakin reasoned, the employer’s liability exclusion was not applicable to a claim against Property Owners.