By James R. Murray and Kristin C. Davis
For every oft-used legal rule is a forgotten Latin phrase. The principles of contract interpretation are no exception.
Contra proferentem, literally translated to "against the one bringing forth or proffering," refers to the doctrine of contract interpretation directing that ambiguous terms in a contract are to be construed against the drafter. That is, when interpreting a provision of a contract, if a phrase or term is ambiguous (meaning the word or phrase is reasonably susceptible to different interpretations, even if one is preferred), the term will be interpreted in the manner most favorable for the party who did not draft the contract.
Although this rule applies to all types of contracts, it is particularly apposite in the context of interpreting insurance policies. Insurance companies rely on standard form policies, using (and filing with the state insurance commissioners) the same contract forms and provisions over several years and for different types of clients.
These standard policies, if well written, control for variation in terms and allow insurance companies to reduce their risk that the policy will be interpreted to provide coverage beyond what they foresee and allow them to determine the resulting price they will charge for the insurance. However, a one-size-fits-all approach over several decades and industries leads to uncertainty as well.
Even sophisticated clients across different industries may seek different types of coverage and may interpret provisions of insurance policies as meeting a different need. Because the standard language of the insurance policies is not negotiated, the burden is on the insurance company, as the drafter of the policy, to be as clear and explicit as possible.
It is this desire for unambiguous and consistent interpretation of policy language that drives courts, including Washington courts, to apply the rule of Contra proferentem against insurance companies using standard policies or language. Not only should the drafter be as precise as possible, but it also should use policy language broad enough as to include all foreseeable scenarios where coverage could be invoked.
Because the insurance company so often imposes its standard policy language upon even sophisticated insureds, the parties rarely engage in a meaningful negotiation of terms. Bargained-for endorsements and riders added to policies also come in standard forms. Indeed, even with "manuscript" policies (negotiated policies written for a specific type of coverage or client), insurance companies draw on standard language found in standard policies. Ultimately, individuals and large corporations alike are faced with the same dilemma: either accept the standard form language or be left without insurance.
Courts, fully aware of the unequal bargaining power and realizing that the insurance company is more often than not the drafter of the policy language at issue, often rely on the doctrine of Contra proferentem to interpret disputed policy language or provisions. By construing any ambiguities in a policy against the insurance company, the court is able to mitigate the unfair position the policyholder was initially placed in when purchasing the policy. Likewise, the court is able to recognize that the ambiguous language does not reflect a meeting of the minds or a product of both minds.
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