Ambiguity in Auto Insurance Policy Language

Ambiguity in Auto Insurance Policy Language

Policies of motor vehicle insurance are detailed documents that cover numerous aspects of the business relationship between an insurer and its insured. When this fact is matched up with the great variety of ways in which incidents can occur that may give rise to claims under a policy, it will not be considered surprising that the insurer and the insured will sometimes hold differing views of the meaning of a particular policy provision. When a party to a contract of motor vehicle insurance asserts that potential ambiguities exist in the language of an auto insurance policy, courts are often called upon to decide the meanings of the disputed policy terms and rule on related issues of coverage under the policy.

When a court analyzes the language of an auto insurance policy for possible ambiguity, its first task is to determine if the language is so clear and unambiguous that one party’s interpretation of the policy necessarily prevails over that of the other. If the language in question does contain a potential ambiguity and thus may be subject to more than one interpretation, the court will be called upon to decide between the interpretations offered by the insurer and the insured. Some courts will tend to find ambiguities if the disputed language is merely susceptible of more than one reasonable interpretation, while others will conduct a more detailed analysis to determine which of the two interpretations is the more persuasive. In making such determinations courts will sometimes rely on a principle called contra proferentem, which is a Latin term meaning “against the one who brings it forth,” and will accordingly interpret ambiguous terms against the insurer, the party that wrote the contract and presumably could have more clearly drafted a policy provision in support of its position in the dispute, and in favor of the insured.

The business of insurance in the United States, including that of motor vehicle insurance, has traditionally been governed by the separate laws of each of the states rather than by a single unified body of federal law. As a result, the legal standards governing the interpretation of potential ambiguities in the language of auto insurance policies will vary from state to state, and will be found in the state statutes regulating the business of insurance and in the decisions of courts dealing with issues of insurance law.

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