When Courts Really Have To Reach To Find Ambiguity

Versaw v. American Family Insurance (Mo. App. August 3, 2006) is a remarkable piece of work.  The Missouri Court of Appeal, Southern District, had to bend over so far backwards to find ambiguity, the justices must be visiting a physical therapist to straighten out the kinks.  Here is a link to the case so you can see for yourself. Hat tip:  Show Me Blawgs.

The case is about the so-called "household exclusion" in an auto policy on a car owned by Judy and Larry Versaw.  One day Judy was driving and Larry was a passenger, and the car crossed over the center line, hit another vehicle, and tragically, Larry was killed.  His parents sued Judy and the driver of the other car for wrongful death.  The trial court made a number of strange rulings about coverage, most of which are not necessary to discuss because the Court of Appeals reversed the trial judge on every ruling but the one on the household exclusion.

See if you agree with the analysis of the appeals court in finding the exclusion ambiguous.  The wording of the exclusion was:

             "This [liability] coverage does not apply to:  . . . .   

    "10. Bodily injury . . . to any person related to and residing in the same household with the operator."

Countless cases exist in which the meaning of "residing" has been debated, but that was not the problem here.  Instead, the trial court found the words "any person" to be ambiguous, because the words are not defined by the policy, but the policy does define the words "you" and "your" as meaning the policyholder and his/her spouse.  Therefore, the trial court said, because exclusion 10 did not use the words you or your, a reasonable person might think the exclusion did not apply to the policyholder and spouse.  Do you buy that? 

The appeals court apparently felt that explanation was somewhat embarrassing, because it added to it by pointing out the policy also defined "insured person," and that this phrase was also not used in exclusion 10.  Thus all the key phrases defined in the policy as signifying the policyholder and those insured by the policy were absent from exclusion 10.  This analysis makes no sense if one pauses to consider whether the words "any person" need a definition:  unlike "you," "your" and "insured person," they are not being used as terms of art and no special meaning attaches to them.  Instead, they simply refer to any person in the common, ordinary sense of the words.

Here is another interesting thing about this case: it flies in the face of a 1990 Missouri Supreme Court case on the same policy language, although the appeals court danced around this by saying the same issue was not presented and therefore the Supreme Court’s statements were dicta.  Apparently the hope of the appeals court is that the composition of the Supreme Court has changed sufficiently that it will take a different view this time.

As a bonus, I offer a blog post from North Carolina on a related subject: the household exclusion in umbrella policies.  This post is a call to arms against this exclusion — sort of the French National Anthem of insurance coverage ("To arms O citizens of France") — and I can’t say I particularly agree, but I did find this post to be well-written and interesting.


Filed under Liability Policies

3 Responses to When Courts Really Have To Reach To Find Ambiguity

  1. Thanks to Insurance Coverage Blog for the mention

    Well folks, a momentous day for the NC Trial Law Blog….this Blog was actually mentioned and linked in another legal Blog, Insurance Coverage Blog. A positive review Here is the specific post from Insurance Coverage Blog that starts with an

  2. David,
    Thanks for the mention on your Blog. I think you do a fantasic job of covering insurance issues. I do agree that the court in the case you cited was doing a bit of reaching calling the exclusion language “ambiguous”, I’d rather have seen the court declare the language “void as against public policy.”
    In NC we keep seeing people buy Umbrellas, think they are covering their family, lowering their liability limits, and coming up short when accidents happen. At the very least, policies sold with these exclusions should carry a large red stamp on the top saying “This policy will not provide coverage for your injured family mamebers if the listed insured causes the injury or death.”
    I mean, aside from us lawyers, who really reads their policy (or better yet, understands it)?

  3. Chris, your point is well taken: almost no one understands many parts of some insurance policies, such as the so-called Business Risk exclusions in a Commercial General Liability policy. When courts take on these exclusions, usually the judge is reduced to a incoherent babbler. However, (and I’m not necessarily a rock-solid 24/7 pro-insurer guy because I represent policyholders quite successfully too) I’m not a big proponent of the plain language thing in insurance policies because extra language will just be interpreted against the drafter anyway.
    That being said, I don’t know any average person or even most lawyers who have any clue what their insurance policies say. I myself have some idea about my own policies, and I’ve read them, but there are a lot of different kinds of policies out there and almost every day I learn something new. I’m not sure adding plain language would make a difference because I suspect most people still wouldn’t read their policies anyway.