" American States v. Maryland Casualty, 427 Pa. Super. 170, 183, 628 A.2d 880, 887 (1993).
Here, unfortunately, the extrinsic evidence presented is insufficient to resolve the exclusion's ambiguities. The term "sexually transmitted disease" is not defined in the policy, nor does the extrinsic evidence illuminate its meaning. Moreover, the scope of the provision does not appear to have been discussed by the parties in negotiating the insurance contract.
The underwriter's intention was to have the exclusion apply broadly, so as to bar all claims even remotely related to sexually transmittable diseases - regardless how the disease, in a given instance, may have actually been transmitted. However, the policy language does not articulate such intent or provide a reasonable basis for plaintiffs to have reached that conclusion. In order to have probative value in construing an ambiguous contract, extrinsic evidence must relate to the mutual intent of the parties. Aspplundh Tree Expert Co. v. Pacific Employers Ins. Co., 1992 U.S. Dist. LEXIS 19171, 1992 WL 382373 (E.D. Pa. Dec. 8, 1992) ("Extrinsic evidence of undisclosed or unilaterally expressed intent is immaterial"); State Automobile Ins. Assoc. v. Anderson, 365 Pa. Super. 85, 89, 528 A.2d 1374, 1376 (1987) ("Our law has never indicated that one party's subjective intent or understanding of a contractual obligation controls that obligation").
As between the present policyholder and the insurer, it is evident that there was no mutual understanding of the meaning of the exclusion. In such a case, the law requires that the exclusion be interpreted according to the reasonable expectations of a similarly situated insured. State Automobile, 365 Pa. Super. at 89, 528 A.2d at 1376 ("If there is not an actual understanding of the contractual obligation, then it is considered to be that which a reasonable person in similar circumstances would understand the contract to be"); see Dibble v. Security of America Life Ins., 404 Pa. Super. 205, 210, 590 A.2d 352, 354 (1991) (the reasonable expectation of the insured is the proper focus regarding issues of coverage under insurance contracts) (citing Collister v. Nationwide Life Ins. Co., 479 Pa. 579, 388 A.2d 1346 (1978)). To do so, it is necessary to examine "the totality of the insurance transaction involved to ascertain the reasonable expectations of the consumer." Dibble, 404 Pa. Super. at 210, 590 A.2d at 354.
Plaintiff Guzzardi's expectation was that only claims arising out of the actual transmission or fear of sexually transmitted diseases on the premises would be excluded. That understanding of the exclusion was not unreasonable. It is well known that the AIDS virus can be transmitted non-sexually, such as by blood transfusion and other non-sexual exposure, as well as sexually. This distinction is important in defining the universe of claims intended to have been excluded. The first sentence of the exclusion, which describes its scope, refers to "sexually transmitted diseases, including. . . (AIDS)." This phrase can be read to mean either diseases that have actually been transmitted by sexual contact or diseases that are capable of being sexually transmitted. 12th Street Gym, 93 F.3d at 1165. This equivocal provision could have been easily clarified by the use of the word "transmissible," Webster's II New Riverside Dictionary at 1227 (1994) ("Able to undergo transmission"). Or, it could have been drafted, in so many words, with no ambiguity, "diseases that were sexually transmitted or are capable of being sexually transmitted."
It is notable that the third sentence of the exclusion contains "an example" of "no coverage." It speaks of "premises where the Insured knew, or should have known, diseases might be sexually transmitted." Ex. 5 at 14. This phraseology is plainly equatable with actual transmission - and not transmissibility. To the extent that it refers back to the same verbiage used in the first sentence, it strengthens the conclusion that "sexually transmitted" denotes actual transmission. Given that the exclusion here is to be construed against the insurer as drafter, the narrower reading appears to be proper. See Reliance Insurance Co. v. Moessner, 121 F.3d 895, 1997 WL 434866, *5 (3d Cir. 1997) (citing Standard Venetian Blind, 503 Pa. at 305, 469 A.2d at 566); Ready Food Products, Inc., v. Great Northern Ins. Co., 417 Pa. Super. 643, 648, 612 A.2d 1385, 1388 (1992) (language of insurance exclusion construed against drafter where "definitions are nowhere contractually provided for the terms in question"). This view is consistent with objectively ascertainable intent. Excluded are claims for "personal injury" and "bodily injury" that arise from allegations of actual sexual conduct in establishments where diseases, such as AIDS, are transmitted on the premises. Not excluded are claims arising simply and solely because persons on the premises have a sexually transmissible disease.
Conclusions of Law
1. The language of the exclusion, drafted by the insurer, is ambiguous in that it is reasonably susceptible to more than one construction.
2. The extrinsic evidence is insufficient to resolve the ambiguity, and, since a mutual understanding of the exclusion is lacking, the provision should be construed in favor of the insured.
3. Defendant has not sustained its burden of proving the applicability of the exclusion to the underlying case.
4. Coverage for Silverman's claims for personal injury was not excluded, and defendant insurer is, therefore, not entitled to reimbursement for the amounts paid in defending and settling the underlying suit.
On the parties' respective cross-motions for summary judgment, a decision will be entered in favor of plaintiffs 12th Street Gym and Robert Guzzardi and against defendant General Star Indemnity Co.
Edmund V. Ludwig, J.
AND NOW, this 7th day of October, the motion of plaintiffs 12th Street Gym and Robert Guzzardi for summary judgment is granted; and the motion for summary judgment of the defendant General Star Indemnity Co. is denied.
Edmund V. Ludwig, J.