August 31, 2013 Articles

Insurance 101: Recent Cases Resolving Ambiguities in Insurance Contracts

Judicial opinions interpreting ambiguous policies are difficult to reconcile—from state to state and even within the same jurisdiction

by Amy Elizabeth Stewart

In jurisdictions across the country, courts and practitioners alike grapple with issues of policy interpretation when the litigants disagree about the meaning of an insurance contract. Without question, much has been written on the subject.

Few fields of the legal landscape. . . are as well-plowed as that pertaining to the interpretation and construction of insurance policies. It is axiomatic that insurance policies, like all contracts, must be interpreted “in accordance with the intention of the [contracting] parties gleaned from the words they have used in the document.”[1]

Courts typically apply generally applicable rules of contract interpretation in the insurance context. Issues arise, however, when the parties interpret the policy provisions differently in the context of a coverage dispute. If the court agrees that competing interpretations are both reasonable, the policy is ambiguous as a matter of law. Then what?

The practical challenge for litigants and their counsel in any jurisdiction is determining how the court will approach conflicting interpretations of the insurance contract. Does the insurer automatically lose the ambiguity battle? Is the court confined to the policy’s terms in ascertaining the parties’ intent, or will the court admit extrinsic evidence of intent? Does it matter if the disputed provision is contained in an exclusionary clause? Or whether the ambiguity is latent or patent?

While the policyholders’ bar welcomed the Florida Supreme Court’s recent opinion in Washington National Insurance v. Ruderman[2] with open arms, just as many practitioners (and one dissenting justice) scratched their heads, trying to make sense of the state’s earlier jurisprudence. Florida is not alone. Judicial opinions interpreting ambiguous policies are difficult to reconcile—from state to state and even within the same jurisdiction. Even the phrase contra proferentem presents conflict—some courts and authors spell the phrase contra proferentum.[3]

This article seeks to connect the dots and make sense of the outcomes, inconsistent as they are.

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