Have you ever read an insurance policy? A normal person would read their insurance policy only when they need to make a claim or have their insurance company deny it. If you did read your policy, did you understand all of it? Was any part of the policy ambiguous?
We are told how important it is to have insurance. Insuring your home, car, possessions, and life is critically important. Most of us are covered by health insurance. We need insurance coverage to protect us against risk.
Don’t let ambiguous insurance policy language leave you with uncovered losses. Schedule a free consultation with our expert attorneys today to ensure you understand your policy and receive the coverage you deserve. (312) 766-1000.
Insurance Has Limitations
The fact is that most insurance coverage has conditions, limitations, and exclusions that diminish or eliminate your coverage. Insurance policies are often likened to a piece of Swiss cheese. The coverage is the cheese. The conditions, limitations, and exclusions are the holes. The problem is when the coverage (the cheese) is eliminated or diminished by the conditions, limitations, and exclusions (the holes).
Reading an insurance policy can be an exercise in mental gymnastics. It contains technical jargon, awkward phraseology, and indecipherable verbiage, making deciphering a basic meaning difficult. Is any document more riddled with vague, mystifying, and confusing language than an insurance policy?
Fortunately, some wise and fair-minded judges have recognized the difficulty, or impossibility, of the average person understanding an insurance policy. The law has developed a rule, or doctrine, that prohibits insurers from relying on ambiguous policy provisions to deny a claim.
The denial may be invalid if your insurance company denies your claim based on ambiguous policy language. The legal rule is that ambiguous policy terms are “construed against the drafter.” What does that mean? “Construed” means interpreted. The “drafter” is whoever wrote the document.
Examples of court rulings on ambiguous policy language follow:
Ambiguous provisions or equivocal expressions whereby an insurer seeks to limit its liability will be construed most strongly against the insurer and liberally in favor of the insured. Wolf v. American Cas. Co. of Reading, Pa., 2 Ill.App.2d 124, 118 N.E.2d 777 (1st Dist. 1954).
The test is not what the insurer intended its words to mean but what a reasonable person in the position of the insured would understand them to mean, and the ambiguity will be resolved against the insurer. Insurance Co. of Illinois v. Markogiannakis, 188 Ill.App.3d 544 N.E.2d 1082 (1 Dist. 1989).
In these cases, the insured claimant requested their insurer to cover a loss. The insurers denied the claims based on purported conditions, limitations, or exclusions. The courts decided that the insurance policy language was ambiguous in both cases. Because the insurance policy language was ambiguous, the courts found coverage favoring the insurance consumer.
The test of insurance policy language is supposed to be not what the insurance company intended but what the insured understood them to be. This is an important rule. By looking at insurance policies from the perspective of the average insurance consumer who needs help, the courts are doing their job of protecting the relatively unsophisticated insured against the savvy insurer. This is a proper purpose of our justice system.
Types of Insurance Policies Prone to Ambiguity
While ambiguity can occur in any insurance policy, certain types of insurance are more susceptible to unclear language. Here’s an overview of common ambiguities in auto, home, health, and life insurance policies:
Auto Insurance
Auto insurance policies often contain ambiguous terms related to:
- Definition of “accident” or “collision”
- Coverage for rental cars or borrowed vehicles
- Exclusions for specific driving behaviors (e.g., “reckless driving”)
- Interpretation of “reasonable” repair costs
Home Insurance
Home insurance policies frequently have ambiguities concerning:
- Definition of “sudden and accidental” damage
- Coverage for water damage (e.g., flood vs. seepage)
- Interpretation of “dwelling” vs. “other structures”
- Exclusions for “earth movement” or “acts of God”
Health Insurance
Health insurance policies may be ambiguous about:
- Definition of “medically necessary” treatments
- Coverage for experimental or alternative therapies
- Interpretation of “pre-existing conditions”
- Network provider status and out-of-network coverage
Life Insurance
Life insurance policies can have ambiguities regarding:
- Definition of “accidental death”
- Exclusions for certain causes of death (e.g., suicide clauses)
- Interpretation of “material misrepresentation” in applications
- Beneficiary designations and policy ownership
In all these cases, ambiguous language can lead to disputes between policyholders and insurers. Courts often interpret ambiguities in favor of the policyholder, following the principle of contra proferentem. However, it’s important to carefully review your policies and seek clarification on any unclear terms before signing or making a claim. (312) 766-1000.