Ambiguity Resolved by Reading Total Policy
Insurance policies are the least read contract of all time. Even the people who write insurance policies – insurance companies – don’t read the entire policy.
In Scottsdale Insurance Company v. Hudson Specialty Insurance Company, No. 17-15785, United States Court Of Appeals For The Ninth Circuit (June 18, 2018) the Ninth Circuit made clear that it is essential to read the entire policy when interpreting coverage.
In a highly unusual brief opinion the Ninth Circuit resolved a dispute between two insurance companies concerning coverage of an underlying lawsuit in which a parking garage patron was severely injured.
Hudson Specialty Insurance Company (“Hudson”) insured the company that leased the parking garage on a primary level, and Scottsdale Insurance Company (“Scottsdale”) insured the same company on an excess level. This dispute centers upon whether the Hudson Policy coverage had a $1 million limitation on liability as stated in the policy or whether the Parking Operations Errors and Omissions Endorsement (“Endorsement”) added an additional $1 million.
The District Court held that Coverage A of the Hudson Policy unambiguously incorporates the Endorsement. The court further held that the Endorsement is subject to Coverage A’s $1 million limitation on liability for “each occurrence,” and that Hudson’s total liability for the occurrence involved in the underlying lawsuit is therefore limited to $1 million.
Scottsdale on appeal contends that the Endorsement created claims-made coverage that is separate from Coverage A’s occurrence-based coverage. The Endorsement, however, explicitly states that it “amend[s]” Coverage A “to include” the Endorsement. As Coverage A is occurrence-based coverage, the Endorsement is likewise occurrence-based coverage that is subject to a $1 million limitation on liability.
The Ninth Circuit concluded that the Hudson Policy, including the endorsements, must be read as a whole.
Even if the Hudson Policy were ambiguous, however, Scottsdale’s argument would nevertheless fail. Although the declarations page of the Hudson Policy states that the Endorsement covers “each claim” and that Coverage A covers “each occurrence,” when the policy, including the endorsements, conflicts with the declarations page, the policy language controls.
Any ambiguity in the declaration is resolved by the terms of the policy.
The language of the Endorsement and Coverage A resolve any ambiguity in the declarations page. Hudson is only required to pay its $1 million limit and Scottsdale is required to pay the difference between the primary limit and any verdict for the injured party.
This case teaches an important lesson about insurance contract interpretation: Read the entire policy! Although the declarations page was confusing and gave a basis for the Scottsdale argument reading the entire policy removed any and all confusion.
© 2018 – Barry Zalma
This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States. The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and firstname.lastname@example.org.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Books from Full Court Press
Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew insurance law treatises from consultant, expert witness, arbitrator, and mediator Barry Zalma.
Barry Zalma practiced law in California for more than 44 years as an insurance coverage and claims-handling lawyer, and has spent more than 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.
Insurance Law Deskbook: Learn the insurance basics that are essential to every civil practitioner. The Insurance Law Deskbook is intended to help law students, practitioners, insurance lawyers, professional claims personnel, insured persons, and anyone else involved in insurance. The book, published for the first time under Full Court Press, includes the full texts or digests of insurance-related decisions of the U.S. Supreme Court, the U.S. District Courts of Appeal, state appellate courts, and foreign courts that have molded the American insurance law, as well as vital explanatory chapters, historical context, form letters, and more.
California Insurance Law Deskbook: California has long led the way when it comes to insurance jurisprudence in the United States, and few know more about California insurance law than Barry Zalma. The California Insurance Law Deskbook is intended to help law students, practitioners, insurance lawyers, professional claims personnel, insured persons, and anyone else involved in insurance. Similar to Barry Zalma’s general Insurance Law Deskbook, this title focuses on the state where the author has long resided and practiced as an expert in California law. The book, published for the first time under Full Court Press, includes the full texts or digests of insurance-related decisions of the U.S. Supreme Court, the U.S. District Courts of Appeal, and California appellate courts, as well as vital explanatory chapters and historical context.
Insurance Bad Faith and Punitive Damages Deskbook: Understand the relationship between insurance, the tort of bad faith, and why punitive damages are awarded to punish insurers. Previously, a person suing an insurance company in the United States could only recover contract damages, but when the tort of bad faith was created by the courts contract law was enormously affected, allowing insureds to sue insurers for both contract and tort damages, including punitive damages. Read a thoughtful analysis of how punitive damages apply in the United States to insurance bad faith suits, and why some states allow judges and juries to award punitive damages against insurers in civil litigation.
An annual subscription to secondary content on the Fastcase platform includes new editions and updates published by the author as they are rolled out, so you can rest assured that your research is up to date. Go to fastcase.com for more detail and how to use the material on-line as part of your legal or insurance research or as stand-alone e-books. Details on the three new e-books are available at https://www.fastcase.com/product-category/fcp/ Subscribers to fastcase.com can search the three books as they do case law.
An annual subscription to secondary content on the Fastcase platform includes new editions and updates published by the author as they are rolled out, so you can rest assured that your research is up to date. Go to fastcase.com for more detail and how to use the material on-line as part of your legal or insurance research or as stand-alone e-books.
Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/
The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.