Differences Between Insurance Contracts and Other Types of Contracts
We’ve written in the past about lawsuits and court decisions which involve careful interpretation of terms and conditions written into insurance contracts. But are insurance contracts the same as every other contract, such as one that you would sign in the course of business or employment? How do insurance contracts differ from other kinds of contracts when it comes to how they are legally interpreted?
Take it Or Leave It
As you probably know, you have no room for negotiation in insurance contracts. Unlike other contracts, you have little (really, no) ability to negotiate terms. Whatever the insurance company gives you as an insurance contract, you can either accept or reject. It’s their way or the highway.
These are known as adhesion contracts. Because of this, the law requires that insurance contracts be written in plain language, that an ordinary person can understand. In some cases, insurance contracts have been interpreted the way that the insured thinks the policy should be interpreted, even if the language actually says otherwise, if the policy language is not written in a way that the average consumer can understand.
This, of course, won’t mean that a court can or will alter the terms of a contract so long as the insurance contract is written clearly. When it is plain and clear, the contract is interpreted as written, regardless of what is fair.
Interpreting Ambiguities in the Contract
Sometimes, the language in the policy is written clearly, in a way that the everyday person can understand, but the contract is ambiguous.
Perhaps a term is not properly or fully defined. For example, “water damage” “wildlife” “vermin” or “plague” are all terms that often appear in insurance contracts (usually excluding coverage to some extent), but those terms often have differing meanings.
There may be different parts of the contract that contradict each other, leading to confusion. As insurance contracts get larger and longer, this internal contradiction is a common problem in insurance law cases.
As some courts have said, an ambiguity exists when there is more than one reasonable interpretation to the term or provision in the contract.
Whereas in non-insurance contracts, the court can look to evidence outside the contract to determine the parties’ intent and thus resolve the ambiguity, with insurance contracts, a court cannot do this—it must interpret the contract (that is, the ambiguous provision or term in the contract) in favor of the insured or in favor of coverage.
Insurance companies cannot offer up internal policies to resolve ambiguities. In other words, showing some corporate document that demonstrates what a term was “supposed” to mean, will not be allowed by a court.
If you have a homeowners’ insurance problem, we can help you. Contact the Miami property damage insurance attorneys at Velasquez & Associates P.A. today for help.