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).

Ruling on Ambiguous Exclusions in the Eleventh Circuit

A recent Eleventh Circuit decision demonstrates the hazards of using such divisive policy language. In James River Insurance Company v. Ultratec Special Effects Inc., the Eleventh Circuit Court of Appeals found ambiguous an exclusion's use of "any insured" when read in conjunction with the separation of insureds clause and imposed upon an insurer the duty to defend. 22 F.4th 1246 (11th Cir. 2022).

James River stems from a pyrotechnic explosion at a factory outside of Huntsville, Alabama, which killed two employees and severely injured another. Id. at 1249. The employees were employed by Ultratec Special Effects HSV, Inc. (Ultratec HSV), a subsidiary of Ultratec Special Effects, Inc. (Ultratec). Id. at 1250. The surviving employee, and representatives of the deceased employees, filed suit in state court against Ultratec HSV, Ultratec, Mike Thouin, an Ultratec employee, and an associated business called MST Properties, LLC (collectively referred to as "Ultratec entities"), alleging claims of negligence and wantonness. Id. The Ultratec entities tendered the claim to their insurer, James River Insurance Company. Id.