Someone in Dallas, Fort Worth, Grand Prairie, Arlington, Carrollton, Garland, Mesquite, De Soto,Duncanville, Burleson, Benbrook, or anywhere else in Texas may ask: How do I know what my insurance policy says?
Insurance companies spend lots of money paying lawyers to draft and write insurance policies that they issue to their insureds. And the insurance company knows what they are trying to write. The problem is, what they mean to write and what the insured person reads it to mean can often times be very different. So what happens?
What happens depends on whether or not the insurance policy is ambiguous.
Wikipedia defines ambiguity as a condition where information can be understood and interpreted in more than one way and is distinct from vagueness, which is a statement about the lack of precision contained or available in the information.
The context in which something is written can be important.
Speaking from a legal context: If an insurance policy is subject to more than one reasonable interpretation, it is ambiguous and the interpretation that most favors coverge for the insured will be adopted, as a matter of law. This was stated by the Texas Supreme Court in 1997, in the case styled, Grain Dealers Mutual Insurance Company v. McKee. This is still good law.
Here are rules that several courts have adopted for determining whether or not an insurance policy is ambiguous.
1. Whether a policy is ambiguous is a legal question to be decided by examining the entire contract in light of the circumstances present when the parties entered into the contract.
2. If a contract is worded so that it can be given a definite or certain legal meaning, then it is not amiguous.
3. An ambiguity does not arise merely because the parties offer different interpretations.
4. If after appling general rules of construction the policy is still subject to two or more reasonable interpretations, it is ambiguous.
5. When a policy is subject to more than one reasonable interpretation, the court must adopt the construction most favorable to the insured.
6. A court must adopt the construction urged by the insured, as long as that construction is not unreasonable.
7. The court must adopt the insured’s reasonable interpretation, even if the construction urged by the insurer appears to be more reasonable or a more accurate reflection of the parties intent.
8. These rules are an outgrowth of the general principle that uncertain contractual language is construed against the drafter.
9. These rules are justified by the special relationship between the insurer and the insured arising from their unequal bargaining power.
As long ago as 1976, the Texas Supreme Court ruled in a case using some of the above guiding rules of interpretaion. The style of the case is Rotha Ramsay v. Maryland American General Insurance Company.
The issue for the court in the Ramsey case was, what does the term “commercial automobile” mean in the exclusionary clause of the policy issued by Maryland American General Insurance Company. The facts of what happened in this case were undisputed. Scott Ramsey was killed in an accident while driving a pickup truck owned by the United States Navy. He was an air-conditioning mechanic employed by the government. He had completed a job and was on the way back to his office to pick up a compressor to go to another job when the accident occurred. This pickup was used solely to transport employees, tools, and equipment.
The policy covering this pickup contained an exclusion clause which excluded commercial automobiles. The term “automobile” as used in the policy clearly included a pickup truck. It also had a $10,000 death benefit that was at issue.
The issue became; what does “commercial” mean? The term commercial is defined in dictionaries as “for profit” which the Ramsey attorney pointed out to the court. Maryland attorneys pointed out that the government was using the pickup in a “private” commercial way.
The court found both these interpretaions to be reasonable, so the policy was ambiguous and had to be construed in favor of coverage. This case serves as a good example for getting an experienced Insurance Law Attorney involved when an insurance contract can be read in more than one way. What the insured person needs to be aware of is that they may not know when a policy can be interpreted in more than one way and again illustrates why an attorney should be involved any time a claim is denied.
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