When Policies Are Ambiguous

What do Texas Courts do when a policy is ambiguous?  Guidance on the answer is provided in a 2009, Texas Supreme Court opinion styled, Progressive County Mutual Insurance Company v. Regan Kelley.

Regan Kelley was struck by a car while riding her horse.  Medical expenses for her injuries are alleged to exceed $1 million.  After receiving $100,000 in benefits from the motorist’s insurer, Kelley made a claim with Progressive for underinsured benefits under a policy issued to her parents, which also covered Kelley.  Progressive paid the policy limits of $500,025  to cover the remaining damages.  Kelley then made a claim under an alleged second policy with a limit of $500,025, also issued by Progressive.  At the time of the accident, Progressive insured five of the Kelleys’ vehicles.  Four vehicles were listed on a two page document, and the fifth was listed on a separate two page document.  However, the documents had separate policy numbers.  Nevertheless, Progressive denied there was a second policy and refused to make any additional payments.

Kelley sued Progressive for breach of contract and Insurance Code violations, while Progressive sought a declaratory judgment requiring it to pay the maximum policy limit amount under only one policy.

Progressive argues it is entitled to judgment as a matter of law because it met its obligations under the single policy by paying its maximum limits, or alternatively, that the “Two or More Auto Policies” provision limits Kelley’s recovery to a single policy.  It argues that the documents clearly and unambiguously demonstrate Progressive issued one policy to the Kelleys with a maximum coverage of $500,025.  In support, Progressive directs the Court’s attention to the multi-car discount reflected in the second document, and the affidavit of Debra Henry, Progressive’s Litigation Underwriting Specialist, who explained that Progressive has specific procedures for “5+ Car” policies.  According to Henry, “5+ Car” policies are split into two pages because Progressive’s computer software only allows four vehicles per page, and that the two separate policy numbers generated are a product of Progressive’s computer program, not an indication of two separate policies.  Henry stated that had there been two policies, Progressive could have charged Kelley two policy fees, rather than the one that it did charge.  Also, Henry stated that the multi-car discount reflected on the second document was applicable only because the car listed was the fifth overall under the single policy.  Conversely, Kelley argues there is no fact question as to whether two policies were issued, and that refusing to stack the two policies in these circumstances is prohibited under Texas law.  In support, Kelley points to the separate policy numbers and premiums on each document, as well as Progressive’s own “Product & Underwriting Guide.”

Although this question deals with the interaction of two documents, the rules of construction for insurance contracts apply.  Here, the written instrument consists of two pages, and standing alone, contains the information necessary to be an insurance policy.  It makes no reference to another related document or policy.  In the top right corner, the document states “Page 1 of 2″ and Page 2 of 2,” respectively, indicating that those are the only two pages related to that policy.  These characteristics suggest the document is a single policy.

Progressive’s argument only creates ambiguity.  Texas Courts have said that where there is ambiguity, in other words where an insurance contract can be interpreted either way, the interpretation in favor of coverage will be adopted.