Contradictions from “Separation of Insured” Clauses on “Any Insured” Exclusions

Many insurance policies contain provisions known as “separation of insureds” or “severability of interests” clauses. These clauses generally provide that coverage applies separately to each insured against whom a claim is made. Separation of insureds clauses can be construed to contradict exclusions that apply to “any insured,” as opposed to “the insured.”

In this context, the term “any insured” has become a lightning rod for litigation, with claimants arguing that the phrase is ambiguous when read in conjunction with separation of insureds clauses. Federal courts considering the issue are divided into two camps. The majority opinion holds that when “any insured” is found in an exclusion, the exclusion “expresses a contractual intent to create joint obligations and preclude coverage to innocent co-insureds, despite the presence of a severability clause.” See Allstate Ins. Co. v. Kim, 121 F. Supp. 1301, 1308 (D. Haw. 2000) (summarizing cases in which the majority view prevailed). In contrast, the minority opinion rules in favor of coverage, finding that separation of insureds clauses supersede exclusionary language. See Shelby Realty LLC v. Nat’l Surety Corp., 2007 WL 1180651, at *3 (S.D.N.Y. Apr. 11, 2007).