Recent Texas Insurance Policy Interpretation

The Texas Supreme Court ruled on an insurance policy interpretation case on October 30,2009. This case is, Chrysler Insurance Company v. Greenspoint Dodge of Houston, Inc.

This case involves an insurance coverage dispute, the topic of which is liability policies insuring a corporation and its officers and others. The corporation was sued for defamation. One key here is that the policies at issue excluded coverage for defamatory statements made by the insured, that the insured knew to be false. The lower court said that the employees involved may not have been “principles”, but were “vice-principles” and thus were covered under the policy.

Some facts here are that a Noe Martinez was fired by Greenspoint after the Greenspoint’s general manager, comptroller, and used car sales manager defamed and disparaged Martinez. The general manager’s nephew was hired to take Martinez’s place. Martinez sued and won.

One of the issues here got into language in the policies regarding who was insured under the policies. In other words, who qualified as an insured. If the Greenspoint people were insured under the policies then the insurance company would have to pay the judgment in this case. If the Greenspoint people were not insured under the policies then Greenspoint would have to pay the judgment themselves.

The Supreme Court in reaching its decision in this case cited well established law as it relates to insurance. 1) The interpretation of an insurance contract is generally subject to the same rules of contract construction as other contracts. (This was stated in National Union Fire Insurance Company of Pittsburg, PA v. Crocker), 2) Contract language that can be given a certain or definite meaning is not ambiguous and is construed as a matter of law.(This was stated in DeWitt County Electric Coop., Inc. v. Parks), 3) The primary objective is to determine the parties’ intent as reflected in the policy’s terms. (This was stated in Don’s Bldg. Supply, Inc. v. OneBeacon Insurance Co.)

The Court ultimately decided that the terms of the insurance policies were such that atleast one of the persons named in the lawsuit was not a covered person under the terms of the contracts. Then the Court found that the statements made against Martinez, were false statements when they were made and that the people making the statements knew they were false when they were made. As such, the policy exclusion applied, releasing Chrysler Insurance from liability under the policy.

These insurance contract interpretation cases can be very hard to understand even for an experienced Insurance Law Attorney. Whenever there is a dispute about what the insurance contract says or means, an attorney who handles there insurance matters should be consulted. Never just rely on what the insurance company says.