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Court frowns on insurer’s ambiguous wording in damage claim

On behalf of Mansell, Engel & Cole | Sep 19, 2018 | Denied Insurance Claims

Insurers love words. That is evident from scrutiny of virtually any insurance policy ever created. Drafters take fundamental clauses and expand them through clarifiers, exclusionary phrasing, footnotes and riders. They bury language in pages of fine print.

The intent of such wordsmithing is obvious, namely, to create maximum wiggle room to escape liability if possible when responding to a policyholder’s claim for damages.

Courts closely examine language in insurance disputes, of course. In fact, their rulings are often centrally tied to conclusions regarding studied interpretation of what a contract actually stated and provided for.

Unsurprisingly, and given the above-cited murkiness attendant in much policy language, a court’s mandate often follows its determination reached through analysis of what a lay person might reasonably conclude from policy language in question.

In other words, what did a policyholder reasonable expect to happen if a certain occurrence occurred?

Here’s a relevant example, taken from a recently concluded case. A ceiling partially gave way in a bowling alley, prompting city closure of the business. The owners filed an insurance claim for the collapse, which the company denied because it was not total, that is, a complete caving in to the floor. Notably, policy language provided that a collapse could be inferred when “the building cannot be occupied for its intended purpose.”

The court found for the business owners, stating that a policy must be interpreted in the manner that a reasonable person would attach to it. In the instant case, a dangerous sagging closed down and materially damaged the business. That fact outweighed any ambiguity in policy language, which the court held must be construed against the insurer.

The bottom line from the case is this: A policy should be interpreted in a common-sense way, with any existing ambiguities favoring the policyholder.

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