May 28, 2019 Articles

Context Matters: Broad Exclusions and Narrow Coverage Grants

When an insurance company tries to erroneously limit its obligations, fails to consider all available coverages under a policy, or neglects to review exceptions to policy exclusions, policyholders should consider fighting back

by Joseph D. Jean and Janine M. Stanisz

Insurance policies do not always have exhaustive definition sections, and often pivotal terms are left undefined. When faced with insurance coverage interpretation questions, such as ambiguities or undefined terms, courts consistently apply well-known contract interpretation principles to determine an insurance company’s coverage obligations: (1) Clear and unambiguous terms are given their plain and ordinary meaning; (2) where there are ambiguities, the policy should be interpreted against the insurer and in favor of coverage; and (3) exclusions must be narrowly construed.

While these standards are adopted and applied across the country, courts face no shortage of coverage litigation. Instead, insurance companies attempt to limit their exposure and set forth coverage positions that cannot be reconciled with the policy’s language and the parties’ reasonable expectations. While an insurance company may adopt a very narrow meaning of a term when it appears in a coverage grant or insuring agreement, it often adopts a very broad meaning of a term when it appears in a policy exclusion. Context matters!

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