An Understanding Of How Exclusions Work In An Insurance Policy

Insurance policy holders in Arlington, Grand Praire, Fort Worth, Weatherford, or Dallas, will all notice something called “Exclusions” in their policies. Maybe most people don’t look at their insurance policy’s until they have a reason to make a claim, but when they do they may read something they do not like. This something will usually be in the section of the policy titled “Exclusions.”
When Courts in Texas are called upon to read and interpret an insurance policy, the rule is, they are going to look at and interpret exclusions very narrowly. Their construction of the policy provisions are going to be very liberal with the aim being to favor coverage for the insured policy holder.
The Texas Supreme Court case, Puckett v. United States Fire Insurance Company, was decided in 1984, and states that insurance policies are strictly construed in favor of the insured to avoid excluding coverage. A historically long line of cases says that exceptions or limitations (exclusions) on liability are strictly construed against the insurer and liberally in favor of the insured. Here are a few of those Texas Supreme Court cases, National Union Fire Insurance Company v. Hudson Energy Company, decided in 1991. Barnett v. Aetna Life Insurance Company, decided in 1987. A 1982 case, Blaylock v. American Guarantee Bank Liability Insurance Company. Glover v. National Insurance Underwriter, was decided in 1977. And here is one, Brown v. Palatine Insurance Company, decided in 1896.
When it comes to exclusions in an insurance policy, the Texas Supreme Court, in the case, State Farm Fire & Casualty Company v. Reed, said, “An intent to exclude coverage must be expressed in clear and unambiguous language.”
An experienced Insurance Law Attorney can give good advice to a client on how a Court would potentially read the interpretation of an “exclusion” in an insurance policy and how the rule of interpretation would apply. This rule of interpretation does not apply when the term in question is susceptible of only one reasonable construction.
Here is an example taken from the above case, National Union Fire Insurance Company v. Hudson Energy Company. In this case, an airplane crashed. It was unclear who was piloting — the instructor, the student, or both. The policy excluded the student, covered the instructor, and was unclear if they were both piloting. The Court found the policy was ambiguous and covered the loss if they were simultaneously piloting. The court reasoned that an intent to exclude joint piloting must be expressed in clear and unambiguous language. The insurer knew the plane had dual controls. If the insurer wanted to exclude simultaneous piloting, it was incumbent on the insurer to state the exclusion expressly and clearly.