By Andrew Noble, Meyer, Unkovic & Scott
A recent court battle in Pennsylvania over the meaning of the word “the” in an insurance contract should prompt insurance companies and businesses to start going over their insurance contracts with a fine-tooth comb to ensure that the meaning of every word is clear.
In
Mutual Benefit Insurance Company v. Politsopoulos, Leola Restaurant leased a property from Christos Politsopoulos and Dionysios Mihalopoulos. As part of the standard lease agreement, the property owners required the restaurant to add them as additional insureds on the restaurant’s commercial general liability (CGL) policy from Mutual Benefit Insurance Company.
In 2007, one of the restaurant’s employees fell on an outside set of stairs on the property. Suffering injuries from the fall, the employee began to pursue legal action claiming that the stairs were unsafe and not properly maintained.
However, the employee could not file a personal injury claim for negligence against the restaurant. Like most other states, Pennsylvania’s Workers Compensation Act generally bars employees from filing personal injury lawsuits against their employers because an injured employee is already eligible to receive workers’ compensation benefits. There are only a few exceptions to the rule, such as if the employer intentionally causes the accident.
While injured workers can’t sue their employer, they can sue other companies that contributed to their injuries, such as their employer’s landlord or the business that hired their employer to perform contracted work. Thus, the Leola Restaurant employee decided to file a negligence claim against the property owners. The property owners, who were listed as additional insureds on the restaurant’s CGL policy, then filed a claim for coverage from Mutual Benefit Insurance. Mutual Benefit Insurance denied the claim, citing the employer exclusion in the insurance contract.
A common part in most CGL policies, the employer exclusion typically states that the insurer will not cover a business if an employee files a personal injury lawsuit against the company. In Leola Restaurant’s CGL policy, Mutual Benefit Insurance stated that the policy did not provide coverage for injury to “an employee of the insured” arising out of the course of employment. The insurance company argued that “the insured” was a plural term and, therefore, barred coverage for claims by any insured arising out of an injury to an employee of any insured. The property owners, on the other hand, argued that the term was singular, and only barred coverage for claims arising out of injuries to employees of the specific insured seeking coverage.
Eventually, the case ended up before the Pennsylvania Supreme Court. Although the language was ambiguous, the court said that the term “employees of the insured” could reasonably imply that only the direct employer was excluded from coverage, not all of the insured parties covered by the policy. The property owners were not the injured worker’s employer, and therefore could reasonably expect coverage. Because long-standing U.S. court principles of insurance policy state that ambiguity in an insurance contract should be resolved in favor of the insured, the court ruled that Mutual Benefit Insurance had to cover the property owners’ claim.
Insurers have long used the employer liability exclusion to deny coverage when an additional insured on the policy submits a claim for a personal injury lawsuit filed by an employee of another party covered by the policy. The Pennsylvania Supreme Court’s decision, however, should remind insurers and businesses that language in contracts needs to be precise: If the insurer had meant to deny coverage to all parties on the policy, it should have said “any insured,” not “the insured.” Insurers and businesses should carefully review every word in their contracts – even seemingly minor words such as “the” – to ensure that the language clearly communicates the terms without any ambiguity. Anything left open to interpretation may mean that one of the parties – usually the insurer – will unintentionally find itself on the hook for payment.
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Andrew Noble is a partner at Pittsburgh-based law firm Meyer, Unkovic & Scott where he has a broad business & tort litigation practice. He can be reached at [email protected] |
