Thursday, September 25, 2008

contracts - insurance - interpretation - reasonable expectation of insured

Betz v. Erie Insurance Exchange - Superior Court - September 22, 2008

Trial court judgment in favor of the insured affirmed on appeal. The case involved a "sinkhole endorsement" to a homeowner's policy, which the court found ambiguous as a matter of law and "insufficiently clear to put the policyholder on notice of what the endorsement actually covered...."

Although the interpretation of insurance policies, like all contracts, depends on the intention of the parties, courts also consider all the circumstances, including the object to be accomplished. Contract principes have only limited application in insurance cases. Our courts have often observed that “‘normal’ contract principles do not apply to insurance transactions.”

The "proper focus regarding issues of coverage under insurance contracts is the reasonable expectation of the insured.” This rule of "reasonable expectations" is "not limited only to situations in which the insurance contract might be deemed ambiguous. Regardless of ambiguity or lack thereof, our courts have reviewed the totality of the underlying circumstances.