Insurance Policy Interpretation

I’m David Holub, an attorney focusing on personal injury law in northwest Indiana.

Welcome to Personal Injury Primer, where we break down the law into simple terms, provide legal tips, and discuss personal injury law topics.

Today’s question comes from a caller concerned that a provision in his fire insurance policy is being interpreted against him and in favor of the insurance carrier in a way that severely limits his benefits under the policy. He wanted to know if his interpretation would prevail in court if he sued.

The provision he was questioning says that the insurance company is to pay for him to stay in a hotel for up to 120 days while the home is being repaired, but is ambiguous as to whether that time can be extended if the repairs are delayed due to the insurance carrier dragging its feet on evaluating the damage.

In Indiana, insurance contracts are treated the same as any other type of contract. However, if there is ambiguity in a particular provision of the policy, the ambiguity is usually interpreted against the insurance carrier that drafted the policy.

What makes a provision ambiguous you might ask?

An insurance contract provision is ambiguous if after reading it reasonably intelligent people would have honest differences as to the meaning of the language.

When there is a disagreement between an insured and an insurance carrier, where the insurance policy is found to be ambiguous, Indiana courts will normally construe the terms in favor of the insured and against the insurer responsible for drafting the language of the contract.

The reason Indiana courts construe a policy against the insurance carrier where there is ambiguity is to permit the insurance policy to be broadly interpreted to provide benefits to the insured where possible.

However, if the dispute is between an insurance carrier and a third-party beneficiary of the policy, then the courts treat the question of how to interpret ambiguous language in a more neutral view.

How does this work in a practical sense?

Let’s say Tom buys car insurance and is a named insured on the policy. Sally is a passenger who was in the car when a crash occurred. A dispute arises over an ambiguous provision in the policy as to whether coverage extends to someone hurt trying to get into the car.

If Tom sues, the ambiguity is to be construed in Tom’s favor. If Sally sues, the courts treat Sally and the insurance carrier more neutrally.

Additionally, courts generally interpret ambiguous language so has to harmonize the disputed provision with other provisions in the policy that are more clear.

I hope you found this information helpful. If you are a victim of someone’s carelessness, substandard medical care, product defect, work injury, or another personal injury, please call (219) 736-9700 with your questions. You can also learn more about us by visiting our website at DavidHolubLaw.com – while there, make sure you request a copy of our book “Fighting for Truth.”