INSURANCE LAW OUTLINE
I. Rules of Construction
1. Insured – entitled to coverage under the policy
2. Policy holder (aka “the named insured”) – the person/business who purchased the policy
a) Generally, insured and policy holder have the same rights under the policy
3. Coverage – governed by the language of the policy
B. contract PRINCIPLES
1. contra proferentem: ambiguities are construed against the drafter (the insurance company)
a) manuscript policy – negotiated by the parties so not construed against the drafter—custom written for the insured; not very common.
2. Contract of adhesion: treat policy as a K of adhesion–insured in weaker bargaining position,/ take it or leave it. Construed against drafter or insurance company or Insurer
a) The department of insurance will approve the language of most policies that are contracts of adhesion. Therefore, most policies are standard form based contracts.
(1) Each insurance co might have a different form, but they are still approved. However, all of them are very similar.
3. Doctrine of reasonable expectations: ambiguous/uncertainty in policy then the terms in a policy are resolved according to the reasonable expectation of the insured. Construe the policy in harmony with the average insured’s reasonable expectations of what the policy covers (Not adopted in TX).
a) Ask: what did the insured expect when he bought the policy
b) TX: every insured has a reasonable duty to read their policy.
4. *Ambiguous. More than one reasonable construction equals ambiguous (may be latent or patent). Ambiguity is determined as a matter of law by the court.
a) patent – ambiguous on face (language can read two different ways)
b) latent – have to look at fact pattern before becomes manifest; has more than one reasonable meaning under the facts of the particular case but reads OK at 1st.
C. 7 RULES OF CONSTRUCTION – Can only apply if there is a finding that policy is ambiguous. If policy uses plain language and is not ambiguous, cannot use various rules of construction. (Barnett, Hudson Energy)
A. Contra Proferentem
Ambiguity construed against drafter since insurance is a Kx of adhesion
B. Contract of Adhesion
1. Generally the insured does not have a say in the terms of the Kx.
a. large commercial policies may be negotiated
b. in Texas, the policies are not really drafted by the companies, they are required by the TDI to use standard policies.
s and other motor-poweredvehicles, “vehicles” would not include airplanes, since the list was of land-based transportation.
1. In construing Kx, court should avoid a construction that makes another provision meaningless or does violence to the laws of construction – they should give effect to all parts of policy if possible.
NOTE: a term is always given its plain/ordinary meaning if not otherwise defined in the policy
D. *Overview of INSURANCE policy parts
1. Declarations: statements specific to that policy (e.g. name of insured, amounts, policy #, limits of liability, premium, etc.)
2. Insuring agreement: broad grant of coverage for a broad category of harm– promise of coverage, broad construction. Normally says property and bodily injury that results from accidents (
3. Exclusions. Limit and exclude things which would otherwise be covered under the insuring agreement (e.g., intentional injury, workers comp stuff, ownership of motor vehicle…) – strict construction.