Last week I wrote a somewhat snide post about a Superior Court decision in Caron v. Horace Mann Ins. Co., a decision that was reported in Massachusetts Lawyers Weekly but that I have not seen. The judge apparently held that an insurance company is bound by a mutual mistake between an insured and an agent over the terms of the policy.
My knee-jerk reaction was that the terms of the policy always trump, and that an insured is presumed to have read and understood the policy. But I can certainly see how a case could be made that if an insured believes that he or she is purchasing certain coverage, and the insurance agent, acting on behalf of the insurer, believes that he or she is selling that coverage, such coverage should be read into the policy.
Such a result could only apply in specific circumstances. Take, for example, Welch Foods, Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA, __ F.3d __, 2011WL 5027445 (1st Cir.), the other case I discussed in last week's post.
If the insured had said to the agent prior to purchasing the policy, "I want to make sure that there is coverage for claims of deceptive trade practices," and the agent, speaking on behalf of the insurer, had looked at the policy and said, "Yep, there's no exclusion for that," but there actually was such an exclusion hidden under a label "AntiTrust Exclusion," then it would be fair that the insurer be bound by the mutual mistake. And maybe as the insurer is suing the agent for negligence, it could send a memo to its underwriting department to label the policy provisions more accurately.
Showing posts with label policy interpretation. Show all posts
Showing posts with label policy interpretation. Show all posts
Wednesday, November 9, 2011
Tuesday, November 1, 2011
Disagreement between First Circuit and Superior Court on whether terms of insurance policy control coverage
Welch Foods was sued by a competitor and by consumers for placing a label on a three juice blend bottle that pictured mainly pomegranates, even though the juice blend consisted primarily of apple and grape juice. A jury in California found that the label had a tendency to deceive a substantial number of customers. (Really? You really think that a three juice blend will consist primarily of pomegranate juice?)
Welch requested insurance coverage from National Union Fire Insurance Co. of Pittsburgh, PA. National Union denied the claim on the basis of an exclusion labeled "Antitrust Exclusion," which, in addition to excluding antitrust claims, also excluded coverage for unfair competition and deceptive trade practices.
In Welch Foods, Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA, __ F.3d __, 2011WL 5027445 (1st Cir.), the United States Court of Appeals for the First Circuit found that although the exclusions for unfair competition and deceptive trade practices were listed under the antitrust exclusion, the claims were effectively excluded. The court noted that the policy provided, "the description in the headings of this policy are solely for convenience, and form no part of the terms and conditions of coverage."
The court quoted the familiar language, "an insurance contract is to be interpreted according to the fair and reasonable meaning of the words in which the agreement of the parties is expressed. . . . Every word in an insurance contract must be presumed to have been employed with a purpose and must be given meaning and effect whenever practical."
By contrast, this week's Massachusetts Lawyers Weekly has a cover story on a Superior Court decision drafted by Judge Cornetta, Caron v. Horace Mann Ins. Co., which apparently held that an insurance company is bound by a mutual mistake between an insured and an agent over the terms of the policy, even if -- quoting Eric Parker, who represented the plaintiffs -- "some 50- or 75- page boilerplate policy they've been printing for years says [that different terms apply]. It's going to be changed to reflect the understanding of the parties."
Welch requested insurance coverage from National Union Fire Insurance Co. of Pittsburgh, PA. National Union denied the claim on the basis of an exclusion labeled "Antitrust Exclusion," which, in addition to excluding antitrust claims, also excluded coverage for unfair competition and deceptive trade practices.
In Welch Foods, Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA, __ F.3d __, 2011WL 5027445 (1st Cir.), the United States Court of Appeals for the First Circuit found that although the exclusions for unfair competition and deceptive trade practices were listed under the antitrust exclusion, the claims were effectively excluded. The court noted that the policy provided, "the description in the headings of this policy are solely for convenience, and form no part of the terms and conditions of coverage."
The court quoted the familiar language, "an insurance contract is to be interpreted according to the fair and reasonable meaning of the words in which the agreement of the parties is expressed. . . . Every word in an insurance contract must be presumed to have been employed with a purpose and must be given meaning and effect whenever practical."
By contrast, this week's Massachusetts Lawyers Weekly has a cover story on a Superior Court decision drafted by Judge Cornetta, Caron v. Horace Mann Ins. Co., which apparently held that an insurance company is bound by a mutual mistake between an insured and an agent over the terms of the policy, even if -- quoting Eric Parker, who represented the plaintiffs -- "some 50- or 75- page boilerplate policy they've been printing for years says [that different terms apply]. It's going to be changed to reflect the understanding of the parties."
Friday, September 17, 2010
Appeals Court holds that policy endorsement does not have to be grammatically correct to be effective; underwriters dance in streets
Michael Daigle was hired to put a new roof on a building in Maine, and to seal two windows. Lavigne visited the job site and, looking for Daigle, climbed up on scaffolding that Daigle's crew used to access the roof. When a portion of the scaffolding snapped, Lavigne fell and broke his neck.
Daigle had a general liability policy with Penn-America. Penn-America denied coverage for Lavigne's claim, and a declaratory judgment lawsuit followed. At issue whether an endorsement effectively precluded coverage for claims arising from roofing.
The endorsement contained preprinted language at the top of the form offering three introductory phrases, each with a box for a checkmark. The phrase that was checked read, "In consideration of the premium charged, it is understood and agreed that . . ."
The form then listed nineteen items, such as "premium" and "coverage," none of which were checked in their corresponding boxes. Below that were four alternative actions, such as "is corrected to read as listed below" and "is amended and changed to read as listed below." None of those boxes were checked.
Finally, typed in bold was the phrase "EXCLUDING ANY AND ALL CLAIMS ARISING FROM ROOFING."
Below that phrase were spaces for a date and initial, both of which were blank.
In Penn-Am. Ins. Co. v. Lavigne, __ F.3d __, 2010 WL 3307367 (1st Cir.), the United States Court of Appeals for the First Circuit held that under the law of Maine the endorsement effectively excluded coverage for claims arising from roofing.
The checked and added phrases read in their entirety, "In consideration for the premium charged, it is understood and agreed that EXCLUDING ANY AND ALL CLAIMS ARISING FROM ROOFING[.]" The court noted that that language is not a complete sentence nor a comprehensible fragment of one.
The court held, however, that the test for interpretation of an insurance policy is not whether the policy is grammatically correct, but whether it is reasonably susceptible of different interpretations. The court held that disregarding the endorsement, as urged by Lavigne, would not "construe the endorsement strictly against the insurer, but rather [] render it meaningless." It held that an ordinary person in the shoes of the insured would understand that the endorsement excluded coverage for claims arising from roofing.
Daigle had a general liability policy with Penn-America. Penn-America denied coverage for Lavigne's claim, and a declaratory judgment lawsuit followed. At issue whether an endorsement effectively precluded coverage for claims arising from roofing.
The endorsement contained preprinted language at the top of the form offering three introductory phrases, each with a box for a checkmark. The phrase that was checked read, "In consideration of the premium charged, it is understood and agreed that . . ."
The form then listed nineteen items, such as "premium" and "coverage," none of which were checked in their corresponding boxes. Below that were four alternative actions, such as "is corrected to read as listed below" and "is amended and changed to read as listed below." None of those boxes were checked.
Finally, typed in bold was the phrase "EXCLUDING ANY AND ALL CLAIMS ARISING FROM ROOFING."
Below that phrase were spaces for a date and initial, both of which were blank.
In Penn-Am. Ins. Co. v. Lavigne, __ F.3d __, 2010 WL 3307367 (1st Cir.), the United States Court of Appeals for the First Circuit held that under the law of Maine the endorsement effectively excluded coverage for claims arising from roofing.
The checked and added phrases read in their entirety, "In consideration for the premium charged, it is understood and agreed that EXCLUDING ANY AND ALL CLAIMS ARISING FROM ROOFING[.]" The court noted that that language is not a complete sentence nor a comprehensible fragment of one.
The court held, however, that the test for interpretation of an insurance policy is not whether the policy is grammatically correct, but whether it is reasonably susceptible of different interpretations. The court held that disregarding the endorsement, as urged by Lavigne, would not "construe the endorsement strictly against the insurer, but rather [] render it meaningless." It held that an ordinary person in the shoes of the insured would understand that the endorsement excluded coverage for claims arising from roofing.
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