1.6 Principles of Strict and Liberal Construction That Enhance Coverage and Limit Forfeiture

• Jurisdiction: Arizona

In resolving a policy ambiguity, the court will "most favorably" construe the policy to protect the insured, and will "most strictly" construe the policy against the carrier.^[82] This rule has been applied to policy applications^[83] and to insurance coverage binders.^[84] The rule applies with greater force to exclusionary clauses,^[85] and to cancellation clauses^[86] that may affect a forfeiture of the policy. The rule of strict or liberal construction applies only to the language of the policy and not to the facts of the case.^[87]

Policy provisions that define the extent of coverage under the policy will be broadly interpreted^[88] to maximize coverage^[89] so that the underlying beneficent purposes of the policy will not be rendered nugatory.^[90] However, the court in Heard v. Farmers Insurance Exchange Co.^[91] made the following cautionary pronouncement: "[C]ourts should exercise extreme care to make certain that the stated principle is applied only when there is in truth and in fact an actual ambiguity in the language of the policy as applied to the facts before the court."^[92]

Exceptions or exclusions to the insurance policy will be narrowly interpreted.^[93] The discussion of this principle in Arizona Fire Insurance Co. v. Dillingham^[94] is illuminating. The court stated that although the Arizona courts will universally strive to uphold the right of the insured to recover and avoid a forfeiture, and place the burden upon the insurance carrier to point out wherein the terms of the policy have...