Broad Policy Exclusions Are Vulnerable to Reasonable Expectations (PA)
On November 2, 2022, in Atain Insurance Company v. V2 Properties LLC, the Eastern District of Pennsylvania, Judge Padova issued a memorandum decision denying Atain Insurance Company’s (“Atain”) motion for judgment on the pleadings, arguing that its policy issued to V2 Properties (“V2”) provided no coverage for losses sustained in connection with a personal injury judgment entered against V2. The personal injury judgment resulted from a decedent’s fall from scaffolding while performing masonry work at a home construction site in Philadelphia. In the underlying action, it was alleged V2 was the general contractor for the project, responsible for the safety of all work performed. Based on an allegation in the underlying complaint stating that the decedent was a business invitee and construction worker performing masonry work at the site, Atain asserted that the decedent fell under “one or more of the several types of workers identified in the Employer’s Liability Exclusion,” and therefore, sought a judicial declaration stating it did not owe V2 a defense or indemnification in respect of the underlying action. In response to the declaratory judgment complaint, V2 asserted, among other things, an affirmative defense stating the policy did not reflect the reasonable expectations of the insureds and asserted the policy should be reformed to do so. Specifically, the policy’s Employer’s Liability Exclusion, barred coverage to, any insured to indemnify or contribute with another because of damages arising out of “bodily injury” to an “employee”, subcontractor, employee of any subcontractor, “independent contractor”, employee or any “independent contractor”, “temporary worker”, “leased worker”, “volunteer worker” of any insured or any person performing work or services for any insured arising out of and in the course of employment by or service to any insured for which any insured may be held liable as an employer or in any other capacity.
In arguing against Atain’s judgment on the pleadings, V2 asserted that the exclusion is ambiguous as applied because it is unclear if “it is limited in its application to only those injuries sustained by direct employees of [V2]” or “vitiates all insurance coverage for the insured’s most common and foreseeable liability risk—liability for injuries to any workers on the construction job site.” This was rejected by the court because the language does not give rise to multiple meanings; however, the question of whether the language is reasonable in light of V2’s expectations, as an affirmative defense, was an issue on which the court was unwilling to rule. Specifically, it stated that the totality of the insurance contract had not been established and therefore it was not possible to ascertain the reasonable expectations of the insured. Accordingly, the court denied Atain’s motion and determined the question of reasonableness should be resolved on a full factual record.
Thanks to Richard Dunne for his contribution to this article. Should you have questions, contact Matthew Care.