We’ve Got You Covered: PA Superior Court Distinguishes Longstanding Interpretation of “Severability” Clauses

Recently, the Pennsylvania Superior Court narrowly construed the “Separations of Insureds” clause of a commercial umbrella policy to overcome the presumption in PMA v. Aetna Casualty and Surety Ins. Co. that Employer’s Liability Exclusions are applicable to all insureds.

In Mutual Benefit Ins. Co. v. Politopoulos, property owners who leased space to a restaurant in which they were also corporate officers demanded coverage for an employee’s slip and fall as additional insureds under a commercial umbrella policy. Shortly thereafter, the insurer sought a judicial determination that no coverage was owed, arguing that under the Supreme Court’s precedent in PMA, all insureds were subject to the policy’s Employer’s Liability Exclusion. The trial court, albeit reluctantly, agreed with the insurer’s reliance on PMA and granted summary judgment in its favor.

Nevertheless, the owners appealed to the Superior Court and invited it to overrule or otherwise reinterpret PMA in light of more than forty years of intervening case law. Although declining the overture, the Court explained that the law in PMA was distinguishable insofar as the insurance contract at issue contained a materially different “Separation of Insureds” clause. Specifically, the Court explained that PMA operates to transpose the Employer’s Liability Exclusion to all remaining insureds even where the terms of the insurance contract provide coverage for each “severally and not collectively.” In contrast, the policy in Politopoulos stated that coverage applies “as if each named insured were the only named insured” and “separately to each insured against who a claim is made or suit is brought.” While similar in intent, the Court explained that the first provision’s use of “severally” legally implies a connection between the insureds whereas the second directs the courts to evaluate coverage as if the other parties did not exist. As a result, the Court reversed, concluding that the precise policy language in Politopoulos overcame the presumption in PMA such that coverage for the owners was entirely unrelated to the Employer’s Liability Exclusion.

By all accounts, PMA has long stood for the proposition that an exclusion or limitation of coverage applicable to one insured may inure to the detriment of another. However, the Superior Court, by way of Politopoulos, seems to have suggested that precise policy language reigns over all in coverage disputes notwithstanding oft-quoted rules of construction.

Thanks to law graduate Adam Gomez for his contribution to this post.  If you have any questions, please email Paul at pclark@wcmlaw.com.