Insurance policies are a type of contract and auto insurance policies are no exception. Therefore, the principles of contract interpretation apply. However, the courts, the legislature, and the public have been uneasy about applying standard contract to insurance policies.
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It’s all about the Policy
An auto insurance policy is a contract. 25 Wash. Prac., Contract Law And Practice § 5:8. So, the first thing you must do is read the policy. Reading an insurance policy is an art. It is very easy to overlook important clauses, so it is important to be thorough and purposeful in reviewing a policy. I suggest the following process:
• Identify the potentially applicable coverage language
• After examining the grant of coverage, go through the exclusions and conditions
• Carefully apply all of the definitions in the policy
• Be precise and thorough, and mark all potentially applicable language
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Principles of Policy Interpretation
After reading the policy you need to interpret what it means. If the language of the policy is clear and unambiguous then it controls and the court may not modify the contract. 25 Wash. Prac., Contract Law And Practice § 5:11. If the language is not clear and ambiguous you would next look to the mutual intent of the parties, however, in insurance contracts courts will rarely if ever do this because insurance contracts are contracts of adhesion. 25 Wash. Prac., Contract Law And Practice § 9:19. Words should be given their plain and ordinary meaning. Daley v. Allstate Ins. Co., 135 Wn.2d 777, 784 (1998); 25 Wash. Prac., Contract Law And Practice § 5:11.The clauses in the policy should be considered as a whole with the policy given its fair, reasonable, and sensible meaning. Weyerhaeuser Co. v. Commercial Union Ins. Co., 142 Wn.2d 654, 665-66 (2000).
The language, or a clause, in the policy is ambiguous if it is susceptible to two or more different but reasonable interpretations.
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Rules of Construction Checklist:
1. Read the Policy -- language controls if it's clear and unambiguous
2. If not, look to parties' mutual intent at drafting (there usually is not any in auto insurance contract because they are contracts of adhesion)
4. Give words their plain and ordinary meaning
5. Consider policy clauses as a whole to give it its fair, reasonable, and sensible meaning
5. Construe ambiguities in favor of the insured
6. Determine what the insured could reasonably expect, because some courts will consider it
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Commonly Overlooked Clauses that can Provide much Needed Relief
Insurance policies are complex and have many different facets. Most policies generally provide coverage for a wide variety of injuries that are not immediately obvious. In auto insurance policies this type of coverage can often be found in the “Personal Injury Protection Coverage” or “Medical Payments” section. These sections often provide coverage for things most people do not realize and can provide much needed relief for your client. Auto insurance policies almost always contain medical payment sections and often provide coverage for items such as: injuries to an insured if they are hit as a pedestrian, income continuation, and if the most tragic circumstances arise, funeral expenses (some jurisdictions require proof the deceased was wearing a seat belt at the time of death). Whenever you are faced with a case involving a vehicle, obtain certified copies of all the applicable auto insurance policies and carefully review them. Your client may have coverage and not even realize it.
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Common Issues
An issue on policy interpretation most often arises when an insurance company denies a claim. When an insurance company denies a claim it usually does so for one of three main reasons: (1) there is no coverage, (2) you have coverage but you are not in compliance with the requirements of the policy so you are not covered, and (3) you have coverage but your claim falls into an exclusion.
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