ALWAYS ASK WHOSE INJURIES/LOSSES ARE BEING COVERED?
I. BASIC PRINCIPLES
a. Types of Insurance
i. First party
1. Covers insured’s own damages
a. Jimmy Durante insured his nose.
b. Homeowner’s insurance
c. Health insurance
ii. Third party (Liability insurance)
1. Insures 1st party for damage to 3rd parties.
b. Insurance Policy
i. An insurance policy is just a contract between the insurer and the insured.
1. Generally, the insurer chooses the language.
2. RULE OF CONSTRUCTION: When ambiguity appears in contract, language is construed against the drafter (insurer) — contra proferentum. BARNETT v. AETNA LIFE INS. CO., Tex. 1987
a. The court held that an exclusionary clause cannot be construed to include VA benefits when the clause does not expressly list VA benefits, and they are sufficiently different from the benefits listed.
b. Whether contract provision is ambiguous is a matter of law for the court to decide.
c. RULE OF CONSTRUCTION: Types of ambiguity.
i. Latent – words look like they could only mean one thing, but under a certain fact pattern could mean something else.
ii. Patent – ambiguous on its face.
d. STUDY THIS FOR THE EXAM
i. It is a fundamental rule of law that insurance policies are contracts and as such are controlled by rules of construction which are applicable to contracts generally.
ii. If the insurance contract is expressed in plain and unambiguous language, a court cannot resort to the various rules of construction.
iii. When language in a policy is susceptible to more than one reasonable construction, it is patently ambiguous.
e. Some courts construe insurance p
i. Declarations page(s)
1. Info specific to that policy
a. Policy #
b. Names of insureds
c. Duration of effect
d. Limit of liability
ii. Insuring agreement
1. What are we insuring?
2. Broad grant to cover categories of harm or damages (1st or 3rd party).
iii. Exclusions
1. What is specifically NOT being covered.
2. These would be covered under the insuring agreement, if not expressly excluded.
iv. Conditions
1. Catch-all for other provisions.
2. Duties of the insured.
a. Ex.: Notice to insurer.
v. Definitions
1. Defines special terms used later in the policy.
2. Where the policy defines a term, that definition controls.
Undefined terms are subject to “plain and ordinary meaning” by court.
