Debating Ambiguities in Insurance Contracts BY: CHRIS BOGGS
Debating coverage, as an academic exercise, is weirdly fun at least for geeks like me. But on the backside of the debate are real coverage situations and real expenses that may or may not be covered by the subject insurance policy. In short, lives and finances are at stake in the debate. Insurance policies are contracts. Although this appears to be a Duh" statement, many insurance practitioners seem to forget this simple fact. As a contract, the insurance policy is subject to the law of contracts which requires the policy be interpreted in specific ways. Many of not most insurance contract coverage debates revolve around the concept of ambiguity. Is the policy (contractual) provision ambiguous? A contractual provision is considered ambiguous if it is reasonably susceptible to more than one interpretation. Specific requirements apply when deciding if a particular provision is ambiguous. In short: A contractual provision is ambiguous when the provision can be interpreted
differently, is reasonably susceptible to more than one understanding, or may have two or more meanings. Contractual provisions are NOT ambiguous simply because the parties disagree on the meaning. To be ambiguous, the provision MUST be reasonably susceptible to more than one meaning with nothing in the contract to clarify which meaning is intended. However, this gauge of ambiguity does not readily apply when an insurance policy is involved because the insured is not expected to be knowledgeable about the trade or business of insurance. When an insurance contract (policy) provision is reviewed, the court focuses on the reasonable expectations of the average insured. One court said it this way, "[A] contract of insurance, drawn by the insurer, must be read through the eyes of the average man on the street or the average housewife who purchases it." (Lacks v. Fidelity & Cas. Co. of New York, 306 N.Y. 357, 363 (N.Y.1954).) Regardless what we, as insurance practitioners, think a term means (or understand it to mean from our training and experience), the court
