Last week I posted about Harvard 3L Chris Robertson’s post regarding ambiguity in insurance contracts. I didn’t buy his analysis that insurers intentionally make them vague as a form of consumer deception. When you’re up against a rule, as insurers are, that ambiguities will be decided against you, what sense does it make to place them in your policies intentionally? That’s like me throwing a punch at Superman. If I connect, all I do is break my hand.
Now Chris has a Part II out, about which he was kind enough to e-mail me earlier this week, so I took a read. Regrettably, I also fail to buy this post, but the thing I buy the least is the argument that ambiguities are present in insurance policies because insurers left them ambiguous when they couldn’t get their harsher terms past state regulators, who have to approve the language of insurance contracts sold in the state. In almost every coverage dispute I can think of, the ambiguity did not stem from any differences between the way the clause read in one state as opposed to another.
There simply are limits to human expression, especially when you have lawyers billing by the hour going over a policy trying to find ambiguity any way they can. I do this myself. When I represent policyholders and make an ambiguity argument, what I need to do is present an interpretation that is reasonable in the totality of the policy and contradicts the insurer’s interpretation. To win, my interpretation doesn’t have to be better or even as good. It just has to be reasonable. Then there is ambiguity, and it is decided against the drafter. What I see being found ambiguous are terms that are standard terms. I’m open to other evidence, but I simply have not seen it.
As far as things I don’t buy about the post, in a very close second place is the concept that the tort of bad faith should be extended to drafting of policies, because insurers know consumers may think they are covered but they really are not. This has some resemblance to the doctrine of reasonable expectations, which in the insurance coverage field has pretty much been bounced around like a Bobo doll. Instead of this reasonable expectations standard, courts say policies have some objectively reasonable meaning whether you read them or not, or whether you understand them or not. What, now bad faith is going to be extended to some undocumented, subjective belief people may have? What if they haven’t thought about it at all, does that mean the insurer acted in good faith, bad faith or in-between faith?