How many times have we had difficulty parsing the incomprehensible language of an insurance policy? Now there is judicial validation for our struggles.
The Travelers Insurance Company is one of several carriers providing General Liability and Hospital Malpractice Coverage to the St. Francis Hospital in Hartford, Conn. over a period of years during which it was alleged a doctor at the hospital sexually assaulted children. In a related case in Federal District Court, insurers are litigating the extent of their respective liabilities and, even within single policies, the extent to which defense costs should be allocated to reduce General Liability exposure limits or Malpractice exposure limits. Complex suits such as these present no small challenge even for the most dedicated jurist. Verifying what many of us have had numerous occasions to suspect, Judge Mark Kravitz, calls it as he sees it. Referring to the principal argument of the insurer, Kravitz opined,
The Court remains unconvinced. For one thing, Travelers' reading runs up against the fact that the Special Endorsement No. 1, specifically Section B.2, is written in gibberish.... Suffice it to say that the Connecticut Supreme Court must not have encountered Special Endorsement No. 1 when it observed, in reference to insurance contracts, that "parties ordinarily do not insert meaningless provisions in their contracts." (citations omitted).
How does this implicate the well established principle that ambiguous provisions in an insurance contract should be interpreted in favor of the insured? Judge Kravitz rejects that rule on the basis that the language is not ambiguous - it is nonsense.
When a provision is incomprehensible rather than simply vague, the more applicable interpretive principle is to give operative effect to every provision of an insurance policy that is susceptible to a reasonable construction (citations omitted). Provisions which are meaningless - despite having been negotiated and accepted by two sophisticated parties, as here - must necessarily be ignored. Rather than drawing inferences for any party based on phrases that are unparsable, the Court will simply give operative effect to as much of the policy language as it can.
Here is the gibberish:
Special Endorsement No. 1 section B.2
For all reasonable expenses incurred in connection with the investigation, settlement, or defense of such claims or suits and the Company's reimbursement obligation for the settlement of all damages imposed on and expenses incurred by the insured shall be limited to the amount stated in the policy as the applicable limit of the Company's liability for damages that the company may, at its discretion, participate, in, in the defense or settlement of such claims or suit. (emphasis added).
Read Judge Kravitz's full opinion, here.
Video regarding the underlying sexual abuse claims against St. Francis Hospital: