How do courts interpret insurance policy language?
Insurance policy interpretation is generally a question of law for the courts. In construing an insurance policy, the court’s purpose is to give effect to the parties’ intent. In determining the parties’ intent, an insurance policy must be read as a whole and, where a policy’s language is clear and unambiguous, courts must interpret the policy according to its plain meaning. See State Farm Mut. Auto. Ins. Co. v. Menendez, 70 So. 3d 566, 569 (Fla. 2011).
Unique issues arise, however, in the context of insurance coverage disputes where parties disagree as to the meaning of policy provisions—particularly where the insurer interprets policy language to exclude coverage. These issues commonly arise thanks to the ubiquitous “ambiguity.”
Policy language is considered ambiguous if the language has more than one reasonable interpretation. State Farm v. Menendez, 70 So. 3d at 570. As a general rule, insurance coverage must be construed broadly in favor of the insured, whereas exclusions of coverage—provisions limiting an insurer’s liability—are construed narrowly against the insurer. See Flores v. Allstate Ins. Company, 819 So. 2d 740, 744 (Fla. 2002). The Florida Supreme Court, in Washington National Insurance Corporation v. Ruderman,definitively established that when an insurance policy provision is ambiguous, the provision must be strictly construed against the insurer and in favor of coverage, without considering extrinsic evidence that could be used to possibly clarify the ambiguity. 117 So. 3d 943, 95 (Fla. 2013).
The Florida Supreme Court’s Washington National decision underscores the uneven playing field against insurers that is used to resolve insurance policy disputes arising from ambiguous language and serves as a reminder that Florida’s legal framework for interpreting policy language is designed to advantage the policyholder. Proper resolution of coverage decisions in these murky waters becomes particularly important because a wrong coverage decision may lead to expensive consequences for an insurer, including the imposition of attorney’s fees, bad faith exposures, and the potential for having to pay stipulated judgments that may well exceed the real damages exposure. Given this insured-protective environment, it is imperative for insurers to obtain competent representation from a law firm with a proven track record in properly navigating insurance company clients through the potential whitewaters surrounding coverage questions.