Coverage by admission

There are probably three things from my first year of law school I could do without having to think about again.  One is the Rule Against Perpetuities.  The second is the Statute of Frauds.  The third is the parol evidence rule.  I’m pretty safe on the first one, and seldom have to worry about the second.  But the third lurks around insurance coverage law like some kind of heavy-breathing beast at the edge of the firelight.  It may not go by its rightful name, but questions dealing with the admissibility of extrinsic evidence to prove the meaning of terms in an insurance contract are in fact parol evidence rule questions. 

In contract law, the parol evidence rule states that extrinsic evidence, usually of prior negotiations, is not admissible in interpreting a fully integrated contract unless the language of the contract is ambiguous.  Everyone agrees on that. However, the meaning of the word "ambiguous" is subject to debate — you could say the word ambiguous is itself ambiguous — and has produced two main viewpoints. 

The traditional view, of Prof. Samuel Williston, is that an ambiguity must appear on the face of the document before extrinsic evidence is admitted.  This is sometimes called the "plain meaning" approach.  The competing point of view, associated with Prof. Arthur Corbin, is that it is not necessary for an ambiguity to appear on a document’s face: instead, extrinsic evidence can be used to show the existence of an ambiguity.  One more thing: even under the Williston approach, extrinsic evidence is allowed to resolve ambiguity once it is found.  A stricter view of contract interpretation exists, referred to as the "four corners" approach, which says that only what is within the four corners of the document should be used — no extrinsic evidence at all.  Insurance law, which Prof. Michelle Boardman has cogently referred to as "the odd but brilliant prodigy" of the contract law family, has significant differences from regular contract law when it comes to interpretation, particularly the use of the doctrine of contra proferentem. However, because I recently had to research and write a ton on this subject, I don’t feel like going into it in great depth here.  Suffice it to say that many jurisdictions use some version of the Williston or Corbin approach for the initial stages of insurance contract interpretation, and many instead use the four corners approach, including Oregon.  (By the way, I’m going to single Prof. Boardman out for praise for writing one of the relatively few law review articles I can honestly say I have enjoyed reading:  Boilerplate Versus Contract — Contra Proferentem: The Allure of Ambiguous Boilerplate, 104 Mich. L. Rev. 1105 (March 2006).  This article was not only informative, but entertainingly written). 

All of this is a long lead-in to a useful article in the GenRe Research publication Policy Wording Matters written by Randy Maniloff, who has a certain Forrest Gump ubiquitousness — he’s in nearly every publication there is. I wouldn’t be surprised to open up my church bulletin at Mass and find an article by Maniloff in there.  The article is on coverage by admission — examination of changes in policy wording, or perhaps the lack of change, to either show or decide ambiguity. Take a read on the article here — it’s on page 5. I was also impressed by the quality of the entire GenRe publication — and as you know, I don’t hand out praise for writing lightly, I struggle and suffer too much over writing to give anyone else a free pass. 

 

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