Clear Insurance Policy: A Closer Look At Document Language

Insurance companies are taking another rhetorical beating — this time as a part of President Obama’s promotional campaign for his health care reform proposals. Now a healthy dose of professional introspection can be valuable, if for no other reason than to remind members of the industry that insurance is ultimately about providing service and a sense of security to people and businesses.

The problem is that broad-brush public demonization of the industry gives the uninformed a false picture of many companies and their agents. Unfortunately, people tend to react strongly when that picture is ugly.

One way that some people react is to sue insurance companies based on a claim that the language of a policy is unclear, ambiguous, or misleading. In a couple of recent cases, insurance providers have been able to dodge the bullet. In Gallagher v. Scaduto, the Massachusetts Property Insurance Underwriting Association was vindicated in its refusal to pay a claim to a man whose housemate overdosed on drugs in his home. The burden of proof, according to a state appeals court was on the plaintiff to show the exclusion of a claim of bodily injury after using drugs should not apply in this particular case. The court claimed that it should; a key factor in the case was “common policy language.” The lesson: When policy language is clear and unambiguous, the company is in the most defensible position.

A well-written policy helped another carrier prevail—this time in a disability claim. Both the Supreme and Appellate courts of New York ruled that the compromised physical condition of a surgeon as a result of an arthritic hip ailment did not render him totally disabled. The language of the policy defining total disability had been carefully crafted and was not susceptible to the unreasonable interpretation suggested by the plaintiff.

Sometimes, however, it seems that care and crafting are the last things on the mind of whomever writes the policy. I see this often as in the recent case (in which I gave an expert forensic linguistic opinion) of a Montana boy who was killed while riding as a passenger in an ATV. The exclusion section of the policy was a semantic mess and justifiably set up the insurance company for a lawsuit.

One reason insurers sometimes get into trouble is that they draft the language of their policies from what I call the front end of the discursive pipeline. In other words, they know what they mean, phrase what they mean in a way they think represents that meaning, and then send it all into the pipeline of communication.

What they don’t realize is that knowing what you mean can be a trap. To policy language drafters, the language is as clear as can be because they already know what they mean. If you want to make policy language clear and unambiguous, it has to be so to the reader who is on the other end of the pipeline. That requires putting yourself in the position of someone who doesn’t know what you mean and imagining what way of phrasing things will best help them “get it.”

With all the anti-insurance company rhetoric flying around these days, it might be a good idea to have someone take a closer look at the standard contract forms being used. Have them analyzed from the perspective of the end user to see if what seems obvious, clear, and unambiguous to you might just be language that an angry policyholder with an attorney, bent on punishing “the insurance industry,” might want to make an issue for litigation.