The Texas Supreme Court stated in 2008 that insurance policies are contracts. This was stated in the case Ulico Casualty Company v. Allied Pilots Association. This is not new in Texas. In the Ulico case the court cited earlier Texas case law. The earlier case law was a Texas Supreme Court case styled Barnett v. Aetna Life Insurance Company and was decided in 1987.
What this means is that rights and obligations arising from an insurance policy, and the rules used to construe them, are those rules generally pertaining to contracts. One relevant concept here is that when a court construes or tries to interpret a contract and that contract can be read to mean more than one thing, then the interpretation is suppose to be in favor of the party who did not draft the contract. The burden is on the party drafting the contract to make it clear. Since an insurance company is always the party who drafts the insurance policy, the result is that if the reading of the policy can be interpreted in more than one way, the court is supppose to interpret it in such a way as to find coverage under the policy.
When an insurance contract covers certain risks, such as liability, but the policy contains exclusions or limitations of coverage, then when the insured customer makes a claim for coverage benefits, the insurance company must assert any applicable exclusion or limitation to avoid liability. This would be called an avoidance or in the Texas Rules of Civil Procedure it is called an affirmative defense. The burden of proof here then falls on the insurance company. This law is found in the Texas Insurance Code, Section 554.002.
The insurance company has neither a “right” nor a burden to assert noncoverage of a claim until the insured policy holder shows that the claim is covered by the terms of the policy. Once the insured policy holder does so, then it becomes incumbent on the insurance company to assert any limitations or exclusions as an affirmative defense. This is done using rules pertaining to contract interpretation.
All of this can be confusing and convoluted even if it is something you are used to dealing with on a regular basis. An experienced Insurance Law Attorney knows how to read an insurance policy and apply that policy to the other issues in the claim and then provide proper advice on the best way to proceed with a case.