115 A.3d 844
Pa.2015Background
- Leola Restaurant held an umbrella commercial liability policy from Mutual Benefit that included an employer’s liability exclusion barring coverage for injury to "an ‘employee’ of the insured arising out of and in the course of ... employment by the insured."
- The policy also contained a separation-of-insureds clause stating the insurance "applies separately to each insured against whom claim is made or suit is brought."
- Leola leased premises from Property Owners (Politsopoulos and Mihalopoulos); the lease required the owners to be named as additional insureds, and the umbrella policy extended coverage to persons the named insured agreed in writing to insure.
- During the policy period, Marina Denovitz, an employee of Leola, was injured on the leased property and sued the Property Owners for negligence.
- Mutual Benefit acknowledged the Property Owners were insureds under the umbrella policy but denied defense/coverage based on the employer’s liability exclusion, arguing ‘‘the insured’’ includes the named insured (Leola) and thus bars coverage for injuries to its employees even when suit is against a different insured.
- The trial court granted summary judgment for Mutual Benefit relying on Pennsylvania Manufacturers’ Ass’n Ins. Co. v. Aetna (PMA). The Superior Court reversed, applying the separation-of-insureds clause to limit the exclusion to employees of the particular insured sued. The Supreme Court affirmed the Superior Court’s judgment but on grounds different from the Superior Court’s reasoning.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the employer’s liability exclusion (referring to injury to an employee of "the insured") bar coverage for a suit against an additional insured who is not the employee’s employer? | (Property Owners) The exclusion is ambiguous; with a separation-of-insureds clause the phrase "the insured" means the particular insured sued, so it does not bar coverage for injuries to employees of a different insured. | (Mutual Benefit) "The insured" in the exclusion includes the named insured (Leola); PMA controls and the exclusion bars coverage for injuries to employees of the named insured even when suit is against another insured. | The exclusion is ambiguous in context (policy uses both "the insured" and "any insured"); construed for the insured and read with the separation-of-insureds clause, the exclusion applies only to employees of the insured against whom the claim is made. Coverage available to Property Owners. |
Key Cases Cited
- Pennsylvania Manufacturers' Ass'n Ins. Co. v. Aetna Cas. & Sur. Ins. Co., 233 A.2d 548 (Pa. 1967) (PMA construed "the insured" broadly in an employer-exclusion context and influenced trial court rulings)
- Patton v. Patton, 198 A.2d 578 (Pa. 1964) (household exclusion in motor vehicle policy construed in automobile context)
- Great Am. Ins. Co. v. State Farm Mut. Auto. Ins. Co., 194 A.2d 903 (Pa. 1963) (automobile liability/household exclusion precedent relied on in PMA)
- Ohio Cas. Ins. Co. v. Holcim (US), Inc., 744 F. Supp. 2d 1251 (S.D. Ala. 2010) (separation-of-insureds does not negate clear exclusions but affects interpretation of exclusions using "the insured")
- Postell v. Am. Family Mut. Ins. Co., 823 N.W.2d 35 (Iowa 2012) (recognizes that article choice—"the" v. "an/any"—can signal different meanings for "insured")