Ambiguities in Insurance Policies are Interpreted in Favor of the Policyholder

As an attorney representing policyholders in Texas, it should come as no surprise that I often disagree with the Texas courts’ rulings. However, sometimes the Texas courts get it right. One clear example is the manner in which Texas courts construe ambiguous provisions in insurance policies. On this issue, the courts have been very clear: insurance policy ambiguities are construed in favor of the policyholder.
One of the most cited cases for this proposition is the Texas Supreme Court case of Nat’l. Union Fire Ins. Co. of Pittsburgh, PA v. Hudson Energy Co., Inc., 811 S.W.2d 552 (Tex. 1991). Nat’l. Union dealt with an aircraft insurance policy, but the same principles apply to all insurance policies. Specifically, the Texas Supreme Court case stated the following regarding ambiguities in insurance policies:
Generally, a contract of insurance is subject to the same rules of construction as other contracts. . . . [I]f a contract of insurance is susceptible of more than one reasonable interpretation, we must resolve the uncertainty by adopting the construction that most favors the insured. The court must adopt the construction of an exclusionary clause urged by the insured as long as that construction is not unreasonable, even if the construction urged by the insurer appears to be more reasonable or a more accurate reflection of the parties’ intent. In particular, exceptions or limitations on liability are strictly construed against the insurer and in favor of the insured. This [sic] our inquiry is whether the construction advanced by [the policyholder] is a reasonable interpretation.
As long as a policyholder presents a reasonable interpretation of an ambiguous provision within his/her insurance policy, the Texas courts should rule in the policyholder’s favor. This rule applies even if the insurer presents a “more reasonable or more accurate reflection of the parties’ intent.
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