Vlastos v. Sumitomo Marine & Fire Ins. Co. - 707 F.2d 775 (3d Cir. 1983)

Rule:

A provision of an insurance policy is ambiguous if reasonably intelligent persons on considering it in the context of the entire policy would honestly differ as to its meaning. If terms of an insurance policy are reasonably susceptible to more than one interpretation, they are regarded as ambiguous. In determining whether there is any ambiguity, the court need not confine its attention to the "four corners" of the contract but may consider external evidence. The court may consider whether alternative or more precise language, if used, would have put the matter beyond reasonable question.

Facts:

Plaintiff Evelyn Vlastos owned a 20' x 80' four-story building at 823 Pennsylvania Avenue, Pittsburgh, Pennsylvania. The second and third floors were leased to Spartacus, Inc., which conducted a massage parlor on the second floor. Evidence was introduced at trial tending to show that the massage parlor also utilized at least a portion of the third floor. The building was insured by a group of European insurance companies; the insurance policy contained a section, stating in part, that the insured “warranted that the 3^rd floor was occupied as Janitor’s residence.” After the building and its contents were destroyed by the fire, the insurers refused to pay the claim, citing an alleged breach of the warranty. Applying Pennsylvania law, the district court declared that plaintiff had unambiguously warranted that the third floor of her building was occupied exclusively as a janitor's residence. Based on this ruling by the court, the jury found that plaintiff had breached her warranty. On appeal, plaintiff contended that the jury was incorrectly instructed that the warranty was unambiguous.

Issue:

Did the plaintiff unambiguously warrant that the third floor would be occupied as a janitor’s residence, thereby, rendering the said warrant breached when the third floor was used as a massage parlor?

Answer:

No.

Conclusion:

The court held that plaintiff did warrant that the floor would be occupied as a janitor's residence. Yet, the warranty was found to be ambiguous since it was susceptible to more than one interpretation. While defendant's view, that the floor would be occupied exclusively by a janitor, was a possible construction, a reasonable person could have understood plaintiff has having warranted merely that the janitor lived there. Accordingly, the court reversed the judgment of the trial court insofar as it instructed the jury that plaintiff made an unambiguous warranty in the insurance policy.