Intent of a Contract’s Language Explored in Insurance Dispute

The method by which a contract’s ambiguous language is interpreted can decide who wins the case. A slight difference in statutory interpretation can acquit or convict a person charged with a serious felony or a petty misdemeanor. There are two main theories of interpretation: textualism and purposivism. Proponents of the textualism theory, or textualists, look to the precise language of the code, statute, contract, etc., in order to apply it to the facts. Pure textualists look solely to the four corners of the
document to aid them in interpretation.

Proponents of the purposivism theory, or purposivists, look to understand the legislative history and intent of the parties who drafted the language, to decide how to apply the law. Purposivists believe that this method of interpretation is the most effective way to ensure that the law is applied the way the lawmakers (legislative branch) would have wanted it. Usually, however, interpretation of language comes about through utilizing a combination of texualist and purposivist approaches.

In this case, the proper application of an insurance contract hinges on the language of the contract drafted by Safeway Insurance Company. Safeway issued a policy of automobile liability insurance to Lawrence E. Metz effective November 16, 2008, through May 16, 2009, which only listed his 2003 Chevrolet Avalanche as an insured vehicle. Although Metz paid in full for his policy covering auto insurance for his Avalanche, he attempted to add another vehicle, his 2008 Chevrolet Uplander, on the
same day he made his final payment for the Avalanche.

In response, Safeway sent a bill to Metz for the additional premium owed for coverage on the additional vehicle, which Metz denies ever receiving. After issuing a notice of cancellation to Metz when Safeway did not receive the additional premium, Safeway canceled Metz’s entire policy ten days after.

Just two days after Safeway had canceled Metz’s policy, Metz got into an accident in Bossier City, Louisiana, while driving his Avalanche. The question in this case: is Safeway responsible for covering Metz’s payments from the accident? Safeway argues that since Metz did not pay the additional premium for the Uplander, the entire policy was canceled, which meant Safeway was no longer Metz’s automobile insurance company. Metz argues that he had paid in full to have his Avalanche (the vehicle involved in the accident) covered, so Safeway should therefore cover the damages.

The Court of Appeals states that ambiguous policy provisions are generally construed against the insurer in favor of coverage. The court looks to a paragraph under the “CONDITIONS” portion of the Safeway policy to conclude that the terms of the policy apply separately to each of Metz’s vehicles. The policy states “when two or more automobiles are insured hereunder, the terms of the policy shall apply separately to each.” Therefore, the Court of Appeals held that the trial court was not manifestly erroneous in finding there was coverage on Metz’s Avalanche at the time of the accident.

There is, however, a dissent, arguing that when it comes to the paying of premiums, the terms of the Safeway policy does not apply separately to each vehicle. The dissenter argues that parsing of the premium coverage is “logically untenable.” His argument is further explored in the rehearing given to reconsider the majority opinion in this case, which is detailed in the next entry.

Interpreting language and looking to the intent of the parties involves meticulous work which attorneys at the Berniard Law Firm are highly capable of doing. Call the Berniard Law Firm at (504) 527-6225 to speak with an attorney if you are facing a complex legal matter and require assistance.

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