SUPREME COURT CHANGES DIRECTION ON EMPLOYERS’ LIABILITY EXCLUSION AFTER 48 YEARS

The Supreme Court of Pennsylvania has effectively overruled its 48 year old decision in Pennsylvania Manufacturers’ Association Insurance Co. v. AETNA Casualty & Surety Insurance Co., 426 Pa. 453, 233 A.2d 548 (1967) (PMA), at least in the context of commercial insurance policies. Mutual Benefit Insurance Company v. Politsopoulos, No. 60 MAP 2014 (May 26, 2015).

PMA had concluded that an employers’ liability exclusion limiting claims brought by an employee of “the” insured applied to every insured, even where an insured did not employ the claimant. In Politsopoulos, the Supreme Court overruled this decision, at least in certain contexts: “Upon consideration of the broader range of authorities and the reasoning which they provide — which were not overtly considered in PMA — we decline to extend PMA’s expansive construction of the term ‘the insured’ to an instance in which a commercial general liability policy variously makes use of the terms ‘the insured’ and ‘any insured.’”

Further, “we are persuaded that, at least where a commercial general liability policy makes varied use of the definite and indefinite articles, this, as a general rule, creates an ambiguity relative to the former, such that ‘the insured’ may be reasonably taken as signifying the particular insured against whom a claim is asserted.”

The Court concludes: “In summary, we conclude that the employer’s liability exclusion in the umbrella policy is ambiguous. Application of governing principles of insurance policy construction yields the understanding that the ambiguous exclusionary language pertains only to claims asserted by employees of ‘the insured’ against whom the claim is directed, which understanding gains further support by reference to the policy’s separation-of-insureds provision.”

Despite the last reference to the separation-of-insureds provision, the majority earlier made clear that its ruling was based upon its interpretation of the employers’ liability exclusion language alone. Thus, the separation of insureds provisions plays the role of supporting actor, but not co-star.

Further, while the Court did not have the issue in front of it, it did comment on the language of those employers’ liability exclusions that exclude claims brought by the employee of “any” insured, rather than “the” insured. It noted: “Parenthetically, in terms of ‘any insured’ exclusions, the main controversy appears to center, not on whether the term unambiguously implicates any or all insureds, but upon whether such meaning should be narrowed to the insured against whom a claim is asserted in light of a separation-of-insureds clause. See, e.g., Allan D. Windt, 3 Ins. Claims and Disputes §11:8 (6th ed. 2014) (framing the different lines of authority).

The great majority of courts, however, merely apply the rule that a separation-of-insureds clause does not negate the effect of a plainly worded exclusion. Accord id. (citing cases and explaining that, ‘as applied even independently to each insured, an ‘any insured’ exclusion unambiguously eliminates coverage for each and every insured’).” Thus, using the methodology of interpreting the plain language of the employers’ liability exclusion itself in the first instance, independent of the separation of insureds provision, the Court indicates that an exclusion as to the employee of “any” insured will apply to all insureds, whether they are the actual employer or not.