In December 2007, an employee of a restaurant in Leola, Pennsylvania, suffered injuries when she fell on a set of stairs. She brought a negligence suit against the property owners, who were additional insureds under the restaurant’s policy. The owners, in turn, sought a defense and indemnification from the insurer, but the insurer disclaimed coverage under the policy’s employer liability exclusion. That exclusion precluded liability for injuries to “[a]n ‘employee’ of the insured arising out of and in the course of…[e]mployment by the insured[.]” The insurer contended that, because the plaintiff was an employee of the insured restaurant – the named insured under the policy – there was no coverage for claims by employees of any insureds under the policy.

This coverage position was squarely in accord with 48-year-old Pennsylvania Supreme Court precedent, Pennsylvania Manufacturers’ Association Insurance Co. v. Aetna Casualty & Surety Insurance Co., (PMA). The trial court, in accordance with PMA, granted summary judgment in favor of the insurer. The trial court correctly explained that under PMA, the term “the insured” encompassed the named insured, regardless of whether coverage was sought from a different insured and, thus, in this case, the exclusion prevented coverage from extending to plaintiff’s injuries.

On appeal, the appellate court reversed the decision, and the Supreme Court affirmed. Focusing on the scope of the policy’s employer’s liability exclusion, the Supreme Court found the exclusion to be ambiguous. The Court declined to extend PMA’s application 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.” The Court found that where a policy makes varied use of the definite and indefinite articles – i.e., “the insured” versus “an or any insured” – it creates an ambiguity, such that “the insureds” may reasonably be taken as signifying the particular insured against whom a claim is asserted. The Court went on to find that this ambiguity is further evidenced by the “separation of insureds” provision in the policy.

It is unclear how many Pennsylvania cases this decision will impact. However, under policies written similarly to the one at issue in this case, it appears this decision will expand coverage beyond what was intended, and provides additional insureds more coverage than actually available to the named insured employer under this fact pattern.