How simple a statement is this: In Insurance Policies, Words Matter? This seems pretty easy. However, sometimes insurers interpret the words of their policies in manners that defy logic and harm their policyholders. Interpretation of words and language opens the door to argument, but in the insurance context, there are rules related to interpretation of insurance policies and exclusions.
Recovery under an all-risk policy generally extends to all losses not resulting from misconduct or fraud, unless the policy contains a specific provision expressly excluding the loss from coverage.1 Generally in Florida, an insured seeking to recover under an all-risk policy has the burden of proving only that a loss occurred to covered property while the policy was in force. Once the insured establishes a loss within the terms of an all- risk policy, the burden shifts to the insurer to prove the loss resulted from an excluded cause. The insurer’s burden to prove an excluded cause and avoid coverage under an all-risk policy has been characterized as “heavy.”2
If any of the terms of the insurance policy create an ambiguity (ambiguity in this context means capable of being reasonably interpreted in at least two ways), Florida courts accept the interpretation that would favor the insured and construe the ambiguity strictly against the carrier.3 One of the primary reasons that courts construe insurance policies in favor of the policyholder, is that the insurer drafted the policy, and if a different meaning had been intended, the insurer could have inserted such language into the policy. If an insurer fails to define a policy term and if the relevant language is susceptible to different interpretations, the policy must be construed in favor of the interpretation affording coverage in favor of the insured.
This is a crash course on some of the applicable rules related to interpretation of property insurance policies in Florida. The underlying theme comes back to the simple statement from the beginning. The words used by insurance companies in an insurance policy matter. Insurers monitor case law interpretations and and modify their policies accordingly. When there is the real possibility for differing interpretations of policy terms, policyholders should consult insurance professionals.
1 Phoenix Ins. Co. v. Branch, 234 So.2d 396, 398 (Fla. 4th DCA 1970).
2 Wallach v. Rosenberg, 527 So.2d 1386, 1389 (Fla. 3d DCA 1988).
3 Auto-Owners Ins. Co. v. Anderson, 756 So. 2d 29 (Fla. 2000).