§17.4 - Principles of Insurance Contract Interpretation and Construction

• Jurisdiction: Washington

§17.4 Principles of Insurance Contract Interpretation and Construction

Insurance policies are construed as contracts, and their construction is a question of law. State Farm Gen. Ins. Co. v. Emerson, 102 Wn.2d 477, 480, 687 P.2d 1139 (1984). Insurance policies are construed as a whole, and given a fair, reasonable, and sensible construction. Polygon Nw. Co. v. Am. Natl Fire Ins. Co., 143 Wn.App. 753, 766-67, 189 P.3d 777 (2008), review denied, 164 Wn.2d 1033 (2008) (quoting Kitsap Cnty. v. Allstate Ins. Co., 136 Wn.2d 567, 575, 964 P.2d 1173 (1998)). In considering the policy as a whole, the court gives effect to every clause in the policy. Polygon, 143 Wn.App. at 767; Kut Suen Lui v. Essex Ins. Co., 185 Wn.2d 703, 710, 375 P.3d 596 (2016).

If terms are defined in a policy, the term should be given its policy definition. Id. Terms that are not defined are given their plain, ordinary, and popular meaning, Tyrrell v. Farmers Ins. Co. of Wash., 140 Wn.2d 129, 133, 994 P.2d 833 (2000), and courts sometimes consult a standard English dictionary as a part of this analysis. Id. If the court is to give a word a technical, as opposed to plain, meaning, it must be clear that both parties intended that word to have a technical meaning. Polygon Nw. Co. v. Am. Natl Fire Ins. Co., 143 Wn.App. at 787-88 (citing Boeing Co., 113 Wn.2d at 882).

Drafting Tip: If an average consumer would not understand a term or condition, the insurer should assume the court may define the term in favor of the insured. As the court held in Boeing Co. v. Aetna Casualty & Surety Co., 113 Wn.2d 869, 881, 784 P.2d 507 (1990): In Washington state, legal technical meanings have never trumped the common perception of the common man. [T]he proper inquiry is not whether a learned judge or scholar can, with study, comprehend the meaning of an insurance contract but instead whether the insurance policy contract would be meaningful to the layman .... Dairyland Ins. Co. v. Ward, 83 Wn.2d 353, 358, 517 P.2d 966 (1974).

Where the language is clear and unambiguous, the court must enforce it as written. Public Util. Dist. No. 1 v. Intl Ins. Co., 124 Wn.2d 789, 797, 881 P.2d 1020 (1994). Further, clear and unambiguous language should be enforced regardless of the policyholders expectations, because Washington has declined to adopt the reasonable expectations doctrine. See Findlay v. United Pac. Ins. Co., 129 Wn.2d 368, 378, 917 P.2d 116 (1996).

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