Case Bulletin – Pennsylvania Supreme Court declines to apply umbrella insurance policy’s employee exclusion to non-employer additional insureds
On May 26, 2015, the Pennsylvania Supreme Court in Mutual Benefit Ins. Co. v. Politsopoulous held that the employee liability exclusion section of a commercial liability insurance policy did not apply to non-employer additional insureds. Specifically, the Court found the specific language of the policy to be dispositive in that it referred to “the insured” when referring to the policyholder and “an” or “any insured” with regard to any entity covered by the policy. The Court held that the employee liability exclusion did not apply to the additional insureds as the language of that exclusion was only with regard to “the insured”.
In 2007, the Leola Restaurant (“restaurant”) was insured by the Mutual Benefit Insurance Company through an umbrella commercial liability policy (“policy”). The restaurant’s property was leased from property owners, Christos Politsopoulos and Dionysios Mihalopoulos (“owners”), who required by the terms of the lease that they be named as additional insureds to the restaurant’s insurance policies. Notably, the policy contained an exclusion for coverage pertaining to liability for an injury “to an employee of the insured arising out of and in the course of employment by the insured”.
In December of 2007, during the applicable period of the policy, Marina Denovitz, an employee of the restaurant fell down a set stairs while outside the restaurant sustained injuries. As a result of these injuries, she brought suit against the owners, asserting that the owners negligently maintained the stairs. Following Ms. Denovitz’ suit, the Mutual Benefit Insurance Company denied liability on the grounds of the employee liability exclusion provisions. Thereafter, a declaratory judgment action was initiated to determine whether or not Ms. Denovitz’s claims were excluded, as per the policy. The Court of Common Pleas of Lancaster County entered summary judgment in favor of the insurer and against the additional insured property owners declaring that the umbrella policy was not applicable to the additional insured property owners due to the exclusion.
The owners filed an appeal arguing that the policy exclusion applies only to entity who took out the policy, in this instance, the restaurant, and not to all entities which might be cover under the policy. Further, it was argued that the insurance policy contains a “Separation of Insureds” clause, which must be evaluated to determine if the coverage for the potential insureds is separate or joint. The Superior Court reversed and remanded the case after the appeal in ruling in favor of the additional insured property owners and the insurer then sought appeal to the Pennsylvania Supreme Court.
The Pennsylvania Supreme Court agreed to hear this case on appeal to determine the scope of the exclusion clause at issue in this matter, particularly in light of the separation-of-insureds clause. The Court noted that the owners, while covered as additional insureds, are not denominated as named insureds under the policy.
In analysis of the language of the policy, the Court found that specific language has been used when referring to the named insured policy holder versus coverage for entities whom are covered under the policy. Specifically, the policy refers to the policy holder as “the insured” whereas it discusses all potential insureds under the policy as “an insured” or “any insured.” In applying these definitions to the employee exclusion section, the Court found that the policy refers to “the insured”, which it has interpreted to refer only to the restaurant policy holder.
Significantly, the Court held that when commercial general liability insurance policies use various 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 again whom a claim is asserted.” Since the owners are not Ms. Denovitz’s employers, the Court ruled that the employee liability exclusion was inapplicable and the owners were entitled to coverage under the policy for her claims.