How New York Courts Interpret Ambiguous Insurance Policy Language
Insurance policies are dense and complex, filled with industry-specific terminology that can lead to disputes between policyholders and insurers. When policy language is unclear, courts play a critical role in determining coverage. In New York, the interpretation of ambiguous insurance policy language follows well-established legal principles that generally favor policyholders. Understanding how courts resolve these disputes can be crucial for litigants. For help with insurance coverage matters in New York City, contact the Law Offices of Richard A. Fogel, P.C., to speak with a knowledgeable and experienced New York insurance coverage litigation attorney.
The Principle of Contra Proferentem
One of the fundamental doctrines governing the interpretation of insurance policies in New York is contra proferentem, which means that ambiguous language in an insurance policy is construed against the insurer and in favor of the policyholder. Since insurers draft policy terms, they bear the responsibility for any unclear language. If a term is subject to multiple reasonable interpretations, courts will typically adopt the one that favors coverage.
Determining Ambiguity in Insurance Policies
New York courts consider an insurance policy provision ambiguous if it is susceptible to more than one reasonable interpretation. The ambiguity must be genuine, meaning that both interpretations must be reasonable in the context of the entire contract. Courts do not consider language ambiguous merely because the parties disagree on its meaning.
For instance, in Matter of Viking Pump, Inc., the New York Court of Appeals analyzed ambiguous policy language related to allocation methods for long-term environmental damage claims. Because the policy did not clearly specify the method, the court ruled in favor of the policyholder, allowing a pro-policyholder approach to claim allocation.
Extrinsic Evidence and Insurance Policy Interpretation
When ambiguity exists, New York courts may look to extrinsic evidence, such as underwriting materials, communications between the insurer and policyholder, or industry standards, to determine the parties’ intent. However, if extrinsic evidence does not clarify the ambiguity, the policyholder-friendly contra proferentem doctrine applies.
Commonly Litigated Ambiguous Terms
Certain insurance policy terms frequently give rise to litigation due to their vague wording, including:
- “Occurrence” vs. “Claims-Made” Triggers: Courts assess whether a claim falls within the policy’s coverage period based on how an “occurrence” is defined.
- “Pollution Exclusion” Clauses: These exclusions have been the subject of many New York cases, with courts often requiring insurers to demonstrate clear intent to deny coverage for specific environmental damages.
- “Business Interruption” Coverage: Ambiguities in business interruption clauses, particularly post-pandemic, have led to disputes regarding whether events like COVID-19-triggered shutdowns qualify for coverage.
Recent Case Law on Ambiguous Insurance Provisions
New York courts continue to shape the legal landscape surrounding insurance disputes. In J.P. Morgan Securities Inc. v. Vigilant Insurance Co., the Court of Appeals held that an insurer was obligated to cover a settlement payment despite ambiguous policy language. The court emphasized that when ambiguity exists, interpretations favoring coverage are preferred unless the insurer can provide clear evidence to the contrary.
Contact Attorney Richard Fogel for Help With Insurance Coverage Disputes in New York
Given New York’s extensive case law regarding ambiguous insurance language, litigants should seek experienced legal counsel when dealing with disputes over policy terms. At the Law Offices of Richard A. Fogel, P.C., our focus on insurance coverage litigation means we can help parties navigate disputes with skill and expertise. If you’re dealing with an insurance contract dispute denial based on policy wording, contact us today to discuss your legal options.