In Raner v. Security Mutual Insurance Company, the First Department found an insurance policy exclusion for “liability…resulting from premises owned, rented or controlled by an insured other than the insured premises” ambiguous because the policy provided that the “insured premises” includes “that part of any premises occasionally rented to an insured for other than business purposes.” Of significance, the policy did not define the term “occasionally rented.”
In this case, the premises at issue was a beach club cabana rented by the insured for 20 successive summers, albeit under separate yearly membership agreements. The First Department found that since the term “occasionally rented” could apply in this context, the exclusion was ambiguous and must be construed against the insurer.
In Raner, the First Department cautions that policy terms must be clearly defined or subject to only one reasonable interpretation or else it will have no effect. If the terms can be open to more than one reasonable interpretation, proceed with caution.
Thanks for Alison Weintraub for her contribution to this post. If you have any questions, please email Paul at firstname.lastname@example.org
In the recent case of Adamitis v. Erie Insurance Exchange, the Pennsylvania Superior Court enforced an insurer’s “Regular Use” exclusion despite the plaintiff’s argument that the provision violates public policy.
In early October 2005, plaintiff Adamitis was involved in a serious motor vehicle accident with an underinsured motorist while in the course and scope of his employment as a bus driver for the Berks Area Reading Transit Authority. As a result, Adamitis sought UIM coverage from Erie, but his claim was ultimately denied on the basis of a “Regular Use” exclusion which bars coverage for “bodily injury arising from the use of a non-owned motor vehicle or a non-owned miscellaneous vehicle regularly used by the insured” though not specifically identified in the policy. Unsurprisingly, Adamitis disagreed with his insurer’s coverage decision and brought suit against Erie in the Philadelphia Court of Common Pleas. The lower court, however, affirmed Erie’s decision in a bench trial citing the exclusion’s clear and unambiguous language.
On appeal, Adamitis argued to the Superior Court that, among other things, the “Regular Use” exclusion violates public policy and conflicts with the Motor Vehicle Financial Responsibility Law of Pennsylvania. However, the Superior Court was likewise unconvinced by Adamitis’ contention and instead explained that the public policy behind UIM benefits is driven by the correlation between premiums paid and the coverage the claimant should reasonably expect to receive— nothing more. Accordingly, the appellate court reasoned that failure to enforce the “Regular Use” exclusion would run afoul of Pennsylvania’s public policy by requiring insurers to underwrite unknown risks for which theyhave not been paid.
Thus, at least with respect to UIM insurance coverage, the Adamitis court reiterated that you get what you pay for in Pennsylvania.
Thanks to Adam Gomez for his contribution to this post. If you have any questions, please email Paul at email@example.com