How to Read, Understand, and Interpret an Insurance Policy
Barry Zalma
Read the full article at https://lnkd.in/gtYAX6A8 and see the full video at https://lnkd.in/gpW9Kreh and at https://lnkd.in/gzjUZCxB and at https://zalma.com/blog plus more than 4400 posts.
To start off the New Year I published my newest insurance coverage and claims book entitled: A Compact Book on How Judges Read, Understand, Interpret and Rule on Insurance Policy Issues: Every Person Who is Insured Needs to Understand How Judges interpret Insurance Policies.
The book provides those who are insured, insurance claims people, insurance claims executives, underwriters, insurance agents, insurance brokers, insurance coverage lawyers and policyholders lawyers an ability to understand how they should emulate the courts when interpreting an insurance policy to avoid taking untenable positions with regard to claims.
Understanding the Terms and Conditions of an Insurance Policy
The challenge faced by every person insured when making a claim is to determine what was insured and what was not insured. Similarly, every insurance claim professional when faced with the need to resolve a claim presented by an insured is required to determine if the insurance policy, by its wording, provides coverage to indemnify the insured or does not. To do so the insured and the insurance claim professional must read, understand, and interpret the policy and apply the wording of the policy to the facts determined by the claims investigation.
To present or investigate a claim fairly both those insured and those representing the insurer must understand what insurance is and its history of indemnifying those who incur losses as a result of a fortuitous event.
An insurance policy is a contract. It is a written agreement between the person named as insured and the insurer. Each party to the insurance contract make promises to each other. The insured, for example, promises to pay the premium charged and in the event of a claim cooperate in the investigation of the insurer and will do nothing to deprive the insurer of the benefits of the policy. The insurer, on the other hand, promises to thoroughly investigate each claim presented by the insured fairly and in good faith and to do nothing that will prevent the other to obtain the benefits of the contract.
The Contract of Adhesion
Since insurance policies are often contracts of adhesion written by the insurer that are available to an insured who is given two choices: to accept or reject the policy as written. Adhesion contracts are usually interpreted carefully to favor the insured since the insured had no choice regarding the promises made by the policy.
Insurers believe that the contracts of insurance that they offer to the public are all clear, fair, and unambiguous. People insured, especially when their claim is rejected, consider the contracts to be unclear, ambiguous, confusing, and designed to avoid payments of legitimate claims. When the insurer and the insured fail to agree on the meaning of the policy wording, they take their disputes to the courts.
Since courts in the United States have been asked to interpret insurance contracts for more than two centuries, they have developed methods and rules to allow fair and appropriate interpretations of a policy of insurance. Everyone faced with the need to deal with an insurance claim must be able to fulfill the requirements of the contract of insurance. To do so they must be ready and able to read and understand the policy. This book will help the reader read, understand and interpret an insurance policy the same way that a judge does so to resolve any claim without the need to seek the assistance of a court of law.
Insurance is a Written Contract
An insurance contract is one where one undertakes to indemnify another against loss, damage, or liability, arising from an unknown or contingent event.
Regardless of the simplicity of the definition, insurance contracts are the most litigated type of contract effected in the United States. As a result, judges across the country are called upon to interpret the terms, conditions, and limitations of the policy to be able to resolve disputes over insurance coverage.
When an insured, a claims representative, a claims manger, a coverage lawyer, or an insurance executive are faced with a dispute over coverage they must attempt to resolve the dispute applying the same methodology used by the courts.
Since the interpretation of an insurance policy is primarily a question of law for a court, if the language of the policy is clear and unambiguous, the court should analyze the language of the policy interpreting the policy language, so that its plain and ordinary meaning controls.
The Rules for Interpreting an Insurance Policy
Trial and appellate courts have, over the last few centuries, set up methods and rules to read, understand, interpret, and apply the terms and conditions of a policy of insurance. The methods used by the courts should be emulated by every insured, policyholder lawyer, or insurance claim professional when faced with the obligation to determine if the policy provides coverage to indemnify the insured or not.
Because insurance policies are contracts, judicial interpretation of them, like any other contract, is a question of law. [AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 818; Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264]
While insurance contracts have distinctive features, they are still contracts to which the ordinary rules of contractual interpretation apply. The mutual intention of the parties at the time the contract was issued should govern its interpretation. Such intent is to be inferred, if possible, solely from the written provisions of the contract.
The words in the contract are understood by the trial or appellate court in their “ordinary and popular sense” unless “used by the parties in a technical sense, or unless a special meaning is given to them by usage.” Any ambiguous terms must be interpreted by the court in the sense the insurer believed the insured understood them at the time of formation, and ambiguities must be resolved in favor of coverage.
The Rules for Contract Interpretation
The California Supreme Court set forth rules for the interpretation of insurance policies, which is similar to that of almost every other state. As a result, courts must consider:
Any ambiguity or uncertainty in an insurance policy is to be resolved by the court to favor the insured.
If semantically permissible, the contract will be resolved by the court with a construction that will fairly achieve its manifest object of securing indemnity to the insured for the losses to which the insurance relates.
A court faced with any reasonable doubt as to uncertain language must resolve the language against the insurer whether that doubt relates to the peril insured against or other relevant matters.
The policy should be read as a layman would read it and not as it might be analyzed by an attorney or an insurance expert.
An exclusionary clause must be conspicuous, plain, and clear and must be construed strictly against the insurer and liberally in favor of the insured.
The policy should be read as a layman would read it and not as it might be analyzed by an attorney or an insurance expert.
The book is available at Amazon.com as a hardcover here; a paperback here; and as a Kindle Book here.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.
Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma
Write to Mr. Zalma at [email protected]; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library
Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.
Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and [email protected]
Write to Mr. Zalma at [email protected]; http://www.zalma.com; http://zalma.com/blog; daily articles are published at
Zalma on Insurance
Insurance, insurance claims, insurance law, and insurance fraud .
By Barry Zalma
. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-librarySubscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://lnkd.in/gfFKUaTf.
Go to substack at https://lnkd.in/gEEnV7Dd Consider subscribing to my publications at substack at https://lnkd.in/gEEnV7Dd
Barry Zalma, Esq., CFE is available at http://www.zalma.com and [email protected], Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://lnkd.in/gWVSBde
Notice of Claim Later than 60 Days After Expiration is Too Late
Post 5089
Injury at Massage Causes Suit Against Therapist
Read the full article at https://lnkd.in/gziRzFV8, see the full video at https://lnkd.in/gF4aYrQ2 and at https://lnkd.in/gqShuGs9, and at https://zalma.com/blog plus more than 5050 posts.
Hiscox Insurance Company (“Hiscox”) moved the USDC to Dismiss a suit for failure to state a claim because the insured reported its claim more than 60 days after expiration of the policy.
In Mluxe Williamsburg, LLC v. Hiscox Insurance Company, Inc., et al., No. 4:25-cv-00002, United States District Court, E.D. Missouri, Eastern Division (May 22, 2025) the trial court’s judgment was affirmed.
FACTUAL BACKGROUND
Plaintiff, the operator of a massage spa franchise, entered into a commercial insurance agreement with Hiscox that provided liability insurance coverage from July 25, 2019, to July 25, 2020. On or about June 03, 2019, a customer alleged that one of Plaintiff’s employees engaged in tortious ...
ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Posted on June 2, 2025 by Barry Zalma
Post 5087
See the full video at and at
Read the full article and the full issue of ZIFL June 1, 2025 at https://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-06-01-2025.pdf
Zalma’s Insurance Fraud Letter – June 1, 2025
See the full video at https://lnkd.in/gw-Hgww9 and at https://lnkd.in/gF8QAq4d, and at https://zalma.com/blog plus more than 5050 posts.
ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Read the full article and the full issue of ZIFL June 1, 2025 at https://lnkd.in/gTWZUnnF
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at ...
No Coverage if Home Vacant for More Than 60 Days
Failure to Respond To Counterclaim is an Admission of All Allegations
Post 5085
See the full video at https://lnkd.in/gbWPjHub and at https://lnkd.in/gZ9ztA-P, and at https://zalma.com/blog plus more than 5050 posts.
In Nationwide Mutual Insurance Company v. Rebecca Massey, Civil Action No. 2:25-cv-00124, United States District Court, S.D. West Virginia, Charleston Division (May 22, 2025) Defendant Nationwide Mutual Insurance Company's (“Nationwide”) motion for Default Judgment against Plaintiff Rebecca Massey (“Plaintiff”) for failure to respond to a counterclaim and because the claim was excluded by the policy.
BACKGROUND
On February 26, 2022, Plaintiff's home was destroyed by a fire. At the time of this accident, Plaintiff had a home insurance policy with Nationwide. Plaintiff reported the fire loss to Nationwide, which refused to pay for the damages under the policy because the home had been vacant for more than 60 days.
Plaintiff filed suit ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
Professional Health Care Services Exclusion Effective
Post 5073
See the full video at https://lnkd.in/g-f6Tjm5 and at https://lnkd.in/gx3agRzi, and at https://zalma.com/blog plus more than 5050 posts.
This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.
In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:
Insurance Coverage Dispute:
Travelers issued a Commercial General Liability ...
A Heads I Win, Tails You Lose Story
Post 5062
Posted on April 30, 2025 by Barry Zalma
"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the Perpetrators than any Other Crime."
Immigrant Criminals Attempt to Profit From Insurance Fraud
People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.
The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...