The opinion of the court was delivered by: EDMUND V. LUDWIG
This declaratory judgment action, which involves the construction of a health club liability insurance policy, was remanded by our Court of Appeals, 93 F.3d 1158, 1166 (3d Cir. 1996). The complaint, filed by plaintiffs 12th Street Gym, Inc. and Robert Guzzardi, sought a determination as to coverage of a claim occasioned by the expulsion from the health club of a club member who had AIDS. Silverman v. 12th Street Gym et al., No. 94-CV-5038. In disclaiming coverage, insurer, defendant General Star Indemnity Co., asserted the policy's Sexually Transmitted Disease Exclusion.
On defendant's appeal, following the grant of plaintiff's summary judgment motion,
a divided panel of the Court of Appeals held the exclusion to be ambiguous.
It remanded for the consideration of extrinsic evidence that might clear up the ambiguity.
In concluding that the exclusion was "reasonably susceptible to more than one interpretation," 12th Street Gym v. General Star Indemnity Co., 93 F.3d 1158, 1165-66 (3d Cir. 1996), the appellate decision identified three areas of inquiry: 1) the term "sexually transmitted disease" might encompass all diseases that conceivably could be sexually transmitted, or it could be limited to diseases that have actually been transmitted through sexual conduct; 2) the intended scope of the exclusion is undefined - is the mere existence of a sexually transmitted disease sufficient to trigger the exclusion or is exposure or fear of exposure to the disease required?; and 3) most importantly, what was the intended nexus between a claim and a "sexually transmitted disease"? Id.
The decision also noted the insurance company's position, taken on appeal, that claims with even a "remote" connection to a sexually transmitted disease were excluded from coverage. Id. In support of its motion for summary judgment defendant had submitted an affidavit from the policy underwriter, which represented that "it was the underwriter's intention to exclude from coverage claims such as those which are stated in [Silverman's complaint] . . . ." Ex. 5 at P 9. However, the affidavit delimited the exclusion in that "it was not [the underwriter's] intention . . . to exclude coverage for claims in which the involvement of a sexually transmitted disease was irrelevant or purely incidental to the claim . . . ." Id. at P 8. The opinion characterized the distinction between a "remote" and an "incidental" connection as potentially "significant." 93 F.3d at 1166.
Upon remand, a hearing was held to consider additional extrinsic evidence in regard to the exclusion. The following facts were set forth in a stipulation:
1. Plaintiff 12th Street Gym, Inc., is a health and exercise club located in Philadelphia. In February and March, 1994, plaintiff Guzzardi was an owner and the president of 12th Street Gym, Inc.
2. General Star Indemnity Company is an excess and surplus lines insurer that provides third-party liability insurance to commercial entities, including health and tennis clubs.
3. General Star Indemnity Company provided commercial liability insurance to 12th Street Gym and Guzzardi in accordance with the terms and conditions of General Star Policy No. IMA 212509.
4. In February, 1994, Irving Silverman was a member of 12th Street Gym. In 1990, Silverman had been diagnosed as having AIDS.
5. On August 17, 1994, Silverman instituted a lawsuit against the gym and Guzzardi in response to incidents in February and March, 1994, that allegedly occurred at the gym because Silverman had AIDS. The amended complaint, filed September 16, 1994, asserted causes of action for discrimination under the Americans with Disabilities Act, 42 U.S.C. § 12181, as well as stated claims for intentional and negligent infliction of emotional distress; invasion of privacy; fraudulent misrepresentation; and civil conspiracy and defamation.
6. The policy issued to 12th Street Gym provided coverage for, among other things, "personal injury" liability in accordance with the following:
PERSONAL AND ADVERTISING INJURY LIABILITY
a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "personal injury" or "advertising injury" to which this coverage part applies. We will have the right and duty to defend any "suit" seeking those damages. We may at our discretion investigate any "occurrence" or offense and settle any claim or "suit" that may result.
b. This insurance applies to:
(1) "Personal injury" caused by an offense arising out of your business, excluding advertising, publishing, broadcasting or telecasting done by or for you;
7. The policy defined the term "personal injury" as follows:
10. "Personal injury" means injury, other than "bodily injury," arising out of one or more of ...