Insurance policies are contracts. In the world of contract law, one of the fundamental tenets of contract interpretation by courts is generally stated as the terms of the contract are to be interpreted by their plain meaning within the contract.
Most insurance policyholders in Hawaii would probably be surprised to find that there is any plain meaning buried within the dozens of pages of their insurance contracts, but remarkably, the Sixth Circuit Court of Appeals found one.
Contract interpretation by courts often has to resort to definitions and court interpretations from other places when the terms of a contract are ambiguous. Legal battles often ensue over questions of whether a term is ambiguous, as that permits either side in a dispute to attempt to locate definitions or cases that are beneficial to their arguments.
In a case from the Sixth Circuit, a woman was injured in a car accident when she was hit by a car when walking her dog. She claim for medical expense coverage from the driver’s policy, and the company denied her coverage. The trial court agreed with the company, because she was not an occupant of the vehicle.
The policy defines one as “occupying” a vehicle as being “in, on, entering or alighting from.” The Court of Appeal found that there was no need to resort to any outside arguments or definitions, because the woman rolled up on the hood of the car when she was hit, and therefore was “on” the vehicle, meaning she was covered by the policy.
Contract drafters have a great deal of power, because they get to define the terms in the contract. This case underlines the importance of those definitions and understanding what they mean.
Source: Claims Journal, “Sixth Circuit Highlights the Importance of Policy Definitions,” Burke Coleman, October 2, 2013