United States: Torturing Insurance Policy Language To Find Ambiguity

The most important doctrine in insurance coverage law is that ambiguity in the forms drafted by an insurer will be construed against it as drafter: contra proferentem. The flipside to this doctrine is that courts should not torture contractual language to produce ambiguity where none exists. Two recent nonaviation insurance coverage cases address the battle between these two principles.

Cummings Props. LLC v. Public Serv. Ins. Co., involved a landlord's claim to additional insured coverage under tenant's policy. Cummings had leased office space to tenant. The lease provided landlord would make reasonable efforts to clear snow and ice from exterior common areas. An employee of tenant, one Joyce Barresi, sued landlord for personal injuries following a slip-and-fall in the parking lot. Landlord sought defense and indemnity from tenant's insurer.

Cummings was made an additional insured "but only concerning liability arising out of [tenant's] operations or premises owned by or rented to [tenant]." Thus, the issue for the court was whether the alleged liability of Cummings for Barresi's slip-and-fall arose out of tenant's operations or premises. Cummings argued for coverage insofar as Barresi would not have been in the parking lot but for her work at the leased space and she was arriving at the building to conduct tenant's operations.

The court rejected Cummings' arguments. The endorsement requires a connection between the liability and tenant's operations or premises. The court held no such connection existed. "Arriving in the parking lot and walking to work has nothing to do with [tenant's] operations." Likewise, the court held that the fall did not arise out of tenant's premises. "[T]he mere fact that Barresi was injured in a common area while en route to the rented premises does not automatically make her claim one arising out of the rented premises." An appeal was filed in the case on January 15, 2019.

Barlow v. State Farm Mut. Auto. Ins. Co. went the other way. The issue was whether underinsured coverage on a business automobile policy could be stacked. Barlow, an employee of EnviroTech, was severely injured in an accident while driving one of EnviroTech's 16 insured vehicles. The declarations page of the State Farm policy stated:



It also showed "W $58.95" as the premium for underinsured motorist coverage on the accident vehicle and 15 other "W"s with corresponding premiums for the other 15 vehicles insured under the policy. The policy also provided that underinsured coverage was provided "if 'W' is shown under 'SYMBOLS' on the Declaration Page." The body of the policy provided under "Limits"

1. The Underinsured Motor Vehicle Coverage limits are shown on the Declarations Page under 'Underinsured Motor Vehicle Coverage—Bodily Injury Limits—Each Person, Each Accident.'

* * *

3. These Underinsured Motor Vehicle Coverage limits are the most we will pay regardless of the number of:

a. insureds;

b. claims made;

c. vehicles insured; or

d. vehicles involved in the accident.

Barlow argued the policy was ambiguous and that stacking should be allowed. State Farm argued the policy unambiguously precluded stacking by providing the limits apply "regardless of the number of vehicles insured." Acknowledging that "we should only consider reasonable alternative interpretations and not strain to find an ambiguity where none exists," the Fifth District Appellate Court nonetheless found the policy ambiguous and allowed stacking, resulting in $2,000,000 of underinsured coverage. To get to this result, the court discussed Bruder v. Country Mutual Insurance Co., 156 Ill. 2d 179, 193 (1993).

In Bruder, the Supreme Court had ruled against stacking uninsured motorist coverage where the policy at issue insured two pickup trucks and provided for $100,000 each person uninsured coverage. The state high court had noted in dicta that a different result might be had if there were multiple listings of policy limits on the declarations page. "It could easily be interpreted that an insured should enjoy a total limit of $200,000 in coverage because a figure of $100,000 would be shown for each pickup truck."

Relying on Bruder, the Fifth District had allowed stacking in other cases where the liability limit was repeated on the declarations page. But that was not the case on the State Farm policy. It repeated the code "W" and premium for each vehicle; it did not repeat the liability limit. Nonetheless, relying on Bruder and cases applying the Bruder dicta, the court allowed stacking.

While the line between torture and reasonableness can be a close one, Barlow seems like it reached a tortured result. I would more readily—but would not—have found that the liability of Cummings in the Massachusetts case arose out of the tenant's premises. Cummings Props. LLC v. Public Serv. Ins. Co., No. 1711256RWZ, 2018 U.S. Dist. LEXIS 199546 (D. Mass. Nov. 26, 2018); Barlow v. State Farm Mut. Auto. Ins. Co., No. 5170484, 2018 Ill. App. (5th) 170484 (Ill. App. Nov. 29, 2018).

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