Clear Insurance Policy: A Closer Look At Document Language

Insurance companies are taking another rhetorical beating—this time as a part of President Obama’s promotional campaign for his health care reform proposals. Now a healthy dose of professional introspection can be valuable, if for no other reason than to remind members of the industry that insurance is ultimately about providing service and a sense of security to people and businesses. The problem is that broad-brush public demonization of the industry gives the uninformed a false picture of many companies and their agents. Unfortunately, people tend to react strongly when that picture is ugly.

One way that some people react is to sue insurance companies based on a claim that the language of a policy is unclear, ambiguous, or misleading. In a couple of recent cases, insurance providers have been able to dodge the bullet. In Gallagher v. Scaduto, the Massachusetts Property Insurance Underwriting Association was vindicated in its refusal to pay a claim to a man whose housemate overdosed on drugs in his home. The burden of proof, according to an appeals court in Massachusetts, was on the plaintiff to show that the exclusion of a claim of bodily injury after using drugs should not apply in this particular case. The court claimed that it should; a key factor in the case was “common policy language” in the MPIUA document. The lesson is that when policy language is clear and unambiguous, the company is in the most defensible position.

A well-written policy helped another carrier prevail—this time in a disability claim. Both the Supreme and Appellate courts of New York ruled that the compromised physical condition of a surgeon as a result of an arthritic hip ailment did not render him totally disabled. The language of the policy defining total disability had been carefully crafted and was not susceptible to the unreasonable interpretation suggested by the plaintiff.

Sometimes, though, it seems that care and crafting were the last things on the mind of whoever who wrote the policy. In a recent case in which I gave an expert forensic linguistic opinion, the exclusion section of the policy was a grammatical and semantic mess and justifiably set up the insurance company for a lawsuit. Here’s the story:

A 10-year old Montana boy was killed while riding as a passenger on an ATV. The driver was one of the insureds under a mobile home owner’s policy against which the boy’s parents made a claim. The insurer denied the claim, citing an exclusion of coverage for any injury involving the use of motor vehicles. One would think that it would be a fairly straightforward matter to make this exclusion clear and unambiguous, but such was not the case with this policy. Here is the language in its exact original form. The policy excluded coverage for bodily injury arising out of the use of (among other things):

Any motor vehicle, licensed or not for use on or off public roads, except golf carts while used for golfing, or equipment while engaged in the maintenance of your Mobile Home premises.

Does this refer to any motor vehicle—period? Or a motor vehicle in one of two categories: 1) licensed or 2) not for use on or off public roads? Or any motor vehicle or equipment while engaged in the maintenance of a mobile home? Or something else?

A major source of difficulty in interpreting the clause comes from—of all things—the punctuation. There are all these qualifying phrases, and it’s hard to tell how they fit together and what they’re talking about. A bit of head-scratching does make it fairly clear that a comma is needed after “licensed or not,” but if golf carts and equipment are being lumped together as exceptions to the motor vehicle definition, why the comma between them? Secondly, if it’s motor vehicles and equipment that we’re talking about, the punctuation makes it look like both of these are items that trigger an exclusion—yet only while used in mobile home maintenance.

Now a bit of reflection, of course, would raise the question of why a motor vehicle being used in the maintenance of a mobile home would be excluded but not a motor vehicle generally, and common sense would tell us that it wouldn’t. So, in the final analysis, the exclusion is undoubtedly intended to include all motor vehicles, and the insurance company should prevail. But why, in the first place, set up a situation in which a reader of the exclusion section has to go through the wording over and over, trying to figure out what it means and what the insurer was intending to exclude? Why not just say that coverage is excluded arising out of the use of:

Any motor vehicle, licensed or not, for use on or off public roads.

Additional language could then be added saying, “Exceptions to this definition of ‘motor vehicle’ are 1) golf carts while used for golfing and 2) equipment while engaged in the maintenance of your Mobile Home premises.”

One reason insurance companies (and the lawyers who write their documents) sometimes get into trouble is that they draft the language of their policies from what I call the front end of the discursive pipeline. In other words, they know what they mean, phrase what they mean in a way they think represents that meaning, and then send it all into the pipeline of communication. What they don’t realize is that knowing what you mean can be a trap. To policy language drafters, the language is as clear as can be because they already know what they mean. If you want to make policy language clear and unambiguous, it has to be so to the reader who is on the other end of the pipeline. That requires putting yourself in the position of someone who doesn’t know what you mean and imagining what way of phrasing things will best help them “get it.”

With all the anti-insurance company rhetoric flying around these days, it might be a good idea to have someone take a closer look at the standard contract forms being used. Have them analyzed from the perspective of the end user to see if what seems obvious, clear, and unambiguous to you might just be language that an angry policyholder with an attorney, bent on punishing “the insurance industry,” might want to make an issue for litigation.