In Rapp v. Penn National Mutual Casualty Ins. Co., the Pennsylvania Superior Court was asked to opine on whether an undefined term in the insurance contract rendered it ambiguous.

Plaintiff was injured as a passenger in a two car motor vehicle accident.  Her husband was the driver of the car she was in.  Initially, plaintiff attempted to recover under the other driver’s policy.  However, the other driver’s policy had limited coverage.  Consequently, plaintiff filed an underinsured motorist claim under her husband’s policy with Pennsylvania National Mutual Casualty Company.  Plaintiff’s husband was the only named insured under the policy, but the policy also provided coverage to the named insured’s spouse, if the spouse was a resident of the named insured’s household.  Specifically, the policy stated, “[t]hroughout this policy, ‘you’ and ‘your’ refer to: ‘the named insured’ shown on the Declarations” and “[th]e spouse if a resident of the same household.”

Pennsylvania National denied coverage to plaintiff, since, at the time of the accident, she no longer resided with her husband.  In response, plaintiff filed a declaratory judgment action seeking coverage under the policy.  Pennsylvania National moved for summary judgment, and the plaintiff opposed arguing that the policy was ambiguous since the declarations page only listed plaintiff’s husband as the “insured” not the “named insured”.  As such, Pennsylvania National’s failure to have the policy’s declarations page identify plaintiff’s  husband as the “named insured” (as opposed to just the “insured”) rendered the policy’s definition of “you” and “your” ambiguous, since “named insured” was not defined under the policy.

In determining that the policy was not ambiguous, the court reasoned that the declarations page had several boxes titled “insured”, in which plaintiff’s husband’s name was listed.  Thus, the court concluded, that notwithstanding the fact that the declarations page did not explicitly define the policy’s “named insured” the policy was unambiguous as to who the named insured was.

This case illustrates that an insurance policy’s failure to define a term may not result in a carte blanche ruling that the policy or its provisions are ambiguous.  However, a policy’s failure to unequivocally define referenced terms may, under certain circumstances, result in a court finding a policy ambiguous (and thus finding coverage) where the insurer may not have intended coverage to apply.  Therefore, insurers should attempt to ensure that all referenced terms are defined as to avoid courts potentially finding ambiguities where none should exist.

Thanks to Colleen Hayes for her contribution to this post.