In its recent decision in Mutual Benefit Insurance v. Politsopoulos, No. 60 MAP 2014, May 26, 2015, the Pennsylvania Supreme Court resolved a longstanding issue concerning the continued viability of the holding in Pennsylvania Manufacturers’ Association Insurance v. Aetna Casualty and Surety Insurance, 426 Pa. 453 (1967), regarding the interpretation of the term “the insured” and the applicability of “separation of insureds” language to that analysis. The Politsopoulos case also serves as a good reminder of the importance of making certain when drafting agreements involving indemnification provisions and insurance requirements that the obligations are clearly spelled out. This makes it much easier to obtain insurance that is sufficient to satisfy the needs of the parties and is co-extensive with the indemnification requirements in the agreement.
The PMA case involved a “severability of insureds” clause that provided in relevant part that “the term ‘the insured’ is used severally and not collectively.” This was a precursor to separation of insured provisions that are common in current policies and typically provide that the insurance applies separately to each insured against whom a claim is brought. The issue is then how these provisions interact with other policy provisions. One of the more common questions, and what was at issue in both PMA and Politsopoulos, is how the severability provision interacts with the “employer liability exclusion.” Employer liability exclusions are designed to exclude situations that implicate workers’ compensation laws and insurance. They typically exclude coverage for any claims made by or on behalf of an employee of the insured. However, where an unrelated party is added to an insurance policy as an additional named insured, the interplay of the definition of “insured,” the separation of insured provision and the employer’s liability provision is often unclear.
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