Liability insurance policies generally include an exclusion entitled “Employer’s Liability.” In standard Insurance Service Office Commercial General Liability forms (and many other policies), the exclusion states that coverage does not apply to claims for “bodily injury” to “an employee of the insured arising out of and in the course of … employment by the insured.” In most jurisdictions, the exclusion has been interpreted to apply when an insured is sued by its own employee, but not when the insured is sued by the employee of another insured.
Until now, Pennsylvania has been the exception to the general rules pursuant to the Pennsylvania Supreme Court’s decision in Pennsylvania Manufacturers Association Insurance Company v. Aetna Casualty & Surety Insurance Company, 233 A.2d 548 (Pa. 1967). In that case, the Court found that the exclusion applied to a claim brought by an employee of the named insured under an auto liability policy against another insured, even though the plaintiff was not an employee of the insured he was suing. In PMA, the Supreme Court held that the term “the insured” meant the named insured, and that the policy’s “separation of insureds” provision did not mandate a different conclusion. Based on PMA, for the past 48 years Pennsylvania courts have applied, albeit sometimes unwillingly, the Employer’s Liability Exclusion to claims brought by a named insured’s employee against any other insured. See e.g. Brewer v. U.S. Fire Ins. Co., 446 F. App'x 506, 509 (3d Cir. 2011); Roosevelt's Inc. v. Zurich Am. Ins. Co., 2005 WL 1240698 (Pa. Com. Pl. May 23, 2005); Brown & Root Braun, Inc. v. Bogan, Inc., 54 Fed. Appx 542 (3rd Cir. 2002). This state of affairs has now changed as a result of the Supreme Court’s decision in, Mutual Benefit Ins. Co. v. Politsopoulos, Docket No.: 60 MAP 2014, 2015 Pa. LEXIS 1126 (May 26, 2015), in which Pennsylvania has now joined the majority of jurisdictions in applying the exclusion only where an insured is sued by its own employee.
In Politsopoulos, the named insured was a restaurant which operated on leased property. The landlord was an additional insured on the restaurant’s liability insurance policy. In December 2007, one of the restaurant’s employees fell on an outside set of stairs. She sued the landlord alleging it was negligent in the maintenance of the property. The landlord sought coverage as an additional insured under the restaurant’s umbrella liability policy. The insurer acknowledged that landlord was an additional insured but denied coverage based on the Employer’s Liability Exclusion.
Overturning the longstanding law in Pennsylvania, the Supreme Court held that the Employer’s Liability Exclusion is ambiguous. Application of governing principles of insurance policy construction yields the understanding that the ambiguous exclusionary language pertains only to claims asserted by employees of "the insured" against whom the claim is directed. Since the landlord was not the employee’s employer, the Employer’s Liability Exclusion was inapplicable.
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