Interpreting Insurance Policies Again

Understanding how insurance policies are interpreted by the courts is one of the more important aims of an insurance law attorney.

Here is some more information to be kept in mind.

An insurance policy is a contract, generally governed by the same rules of construction as all other contracts. This is told to us by the Texas Supreme Court in the 2010, opinion styled, Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd’s London. When construing a contract, our primary concern is to ascertain the intentions of the parties as expressed in the document according to the Texas Supreme Court 2014, opinion styled, Amedisys, Inc. v. Kingwood Home Health Care, LLC.  In the Gilbert opinion the court stated that, we begin our analysis with the language of the contract because it is the best representation of what the parties mutually intended.  Unless the policy dictates otherwise, we give words and phrases their ordinary and generally accepted meaning, reading them in context and in light of the rules of grammar and common usage.  We strive to give effect to all of the words and provisions so that none is rendered meaningless.  In quoting from a 1938, opinion, the court said, “No one phrase, sentence, or section [of a contract] should be isolated from its setting and considered apart from the other provisions.”

In the 1997, Texas Supreme Court stated in Trinity Universal Ins. Co. v. Cohan: When construing an insurance policy, we are mindful of other courts’ interpretations of policy language that is identical or very similar to the policy language at issue.  In the 1995, Texas Supreme Court opinion styled, Nat’l Union Fire Ins. Co. of Pittsburg, Pa. v. CBI Indus., Inc., the court stated, “Courts usually strive for uniformity in construing insurance provisions, especially where . . . the contract provisions at issue are identical across the jurisdictions.”

Yet another Texas Supreme Court opinion stated, RSUI and Lynd offer conflicting constructions of the Scheduled Limit of Liability endorsement.  If only one party’s construction is reasonable, the policy is unambiguous and we will adopt that party’s construction.  But if both constructions present reasonable interpretations of the policy’s language, we must conclude that the policy is ambiguous.

And then the words an insurance lawyer wants to hear from the court were: We must resolve the uncertainty by adopting the construction that most favors the insured, and because we are construing a limitation on coverage, we must do so even if the construction urged by the insurer appears to be more reasonable or a more accurate reflection of the parties’ intent.  This widely followed rule is an outgrowth of the general principle that uncertain contractual language is construed against the party selecting that language, and is justified by the special relationship between insurers and insureds arising from the parties’ unequal bargaining power.