I have reviewed so many insurance policies I cannot even estimate how many. After 15 years in this arena I still need to pause and rely on this experience to understand what is being covered and excluded. I can’t imagine what it would be like to read insurance policies without this experience. They are remarkably dense. To what extent does the law allow such complexity?
Regular readers of this blog note that any ambiguity in an insurance policy is resolved in favor of the insured in favor of coverage. American Commerce Ins. Brokers, Inc. v. Minnesota Mut. Fire and Cas. Co., 551 N.W.2d 224, 227-228 (Minn. 1996). That is a helpful principle and it is regularly applied in Minnesota courts. However, the next question is: what is ambiguous? Another principle followed by Minnesota courts is that policy terms must be read in context to effectuate the intent of the document. Eng’g & Constr. Innovations, Inc. v. L.H. Bolduc Co., 825 N.W.2d 695, 704 (Minn. 2013). Minnesota courts do not want to leave language in a policy unenforceable, so an effort is made to reconcile difficult phrases if reconciliation is possible. However, if reconciliation is impossible as there is too much ambiguity that should be resolved in favor of the property owner.
Perhaps one of the best statements of law endorsed by the Minnesota Supreme Court is as follows:
It is now firmly settled that insurance contracts are contracts of adhesion between parties not equally situated *** consequently, the insurer, as the dominant and expert party in the field, must not only draft such contracts in unambiguous terms but must bring to the attention of the insured all provisions and conditions which create exceptions or limitations on the coverage.
Canadian Universal Ins. Co. v. Fire Watch, Inc., 258 N.W.2d 570, 574-75 (Minn. 1977). A contract of adhesion is a contract with no negotiation, and the terms are required by one side of the deal, which is the insurer. The Supreme Court further stated:
The average layman who receives a “broad form” of a homeowners’ policy would normally expect personal liability coverage for accidental injuries suffered on his property. He has a right to rely upon reasonable anticipated coverage and should not be subject to hidden pitfalls. *** In fairness to the policyholders, exclusions must be “so prominently placed and so clearly phrased that “he who runs can read.” Any exclusionary or limiting provision conceived by reading collectively various clauses scattered throughout the basic policy, and the attached rider, would not bar [policyholders] from claiming the coverage they reasonably anticipated.”
Id. This this is another extraordinary statement of law applicable to property insurance policies of any kind.
I recently read a policy that clearly states hail is a covered peril, yet pages later the insurer excludes all “marring”, and the definition of marring effectively excludes any conceivable hail damage. That is just outrageous. How on earth does anybody, including a lawyer with years of experience in this field, reconcile the definition of marring and one page, the exclusion of marring on another page, with the express coverage of hail on another page? That’s just extraordinary for me and surely for any reasonable property owner.
I can help you understand an insurance policy and what is truly enforceable. While I’m happy to help, in the end, insurance policies should never be so dense an exclusion somewhere in the policy swallows whole coverage elsewhere. There is good legal authority to push back on a policy so constructed. You can email me at ed@beckmannlawfirm.com.