Claims Commandment Number IV
Thou Shall Understand The Policy In this the fourth of Fifteen Claims Commandments we deal with the need for every insurance claims professional to read and understand the terms and conditions of the policy that made promises to an insured who is presenting a claim.
Insurance Policies are Contracts Insurance policies are contracts. To understand insurance claims the adjuster must understand how all contracts, and specifically insurance contracts, are interpreted. Rules of contract interpretation have developed over the last 300 years and are applied by courts with the intent to fulfill the desires of all parties to the contract. People and judges who are not conversant in insurance and the interpretation of insurance contracts believe that the insurance policy is difficult to read and understand. They are wrong. However, as one court said in Delancy v. Rockingham Farmers Mutual, 52 N.H. 581 (1873): This [policy], if read by an ordinary man, would be an inexplicable riddle, a mere flood of darkness and confusion … should some extremely eccentric person attempt to examine the involved and intricate net in which he was to be entangled, he would find that it is printed in such small type and in lines so long and crowded as to make the perusal of the document physically difficult, painful and possibly injurious. Since 1873 insurance policies are printed in large print and in language, by statute, that anyone with a fourth grade education can understand. Still, there seem to regularly be disputes taken to court about the meaning of terms, conditions and limitations of the policy of insurance.
The following rules govern the construction of contracts of insurance: If the terms of a promise are in any respect ambiguous or uncertain, it must be interpreted in the sense in which the promisor believed at the time of making it, that the promisee understood it. If a written contract is so worded that it can be given a definite or certain legal meaning, then it is not ambiguous. However, if the language of a policy or contract is subject to two or more reasonable interpretations, it is ambiguous. When a policy is interpreted, the provisions of an endorsement control the interpretation over the body or declarations of a policy when the two are in conflict.
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