Resolving Insurance Coverage Ambiguities: Discovery and Use of Extrinsic Evidence to Clarify Coverage

Ambiguity in insurance policies can be costly to insurers regardless of the type of policy. Moreover, parties can end up in expensive discovery disputes in coverage litigation over whether extrinsic evidence of meaning is discoverable.

Courts in different jurisdictions take various positions on core issues such as whether extrinsic evidence can be used to find ambiguity, distinguishing between obvious and latent ambiguities, and whether and what kind of extrinsic evidence can resolve ambiguities. Some states only allow such evidence in cases of fraud but encounter similar issues in establishing fraud.

Parties often argue over what types of interpretive materials are acceptable and if trade practices and other business practices are relevant. The definitions section of policies gives rise to ambiguity, but often, everyday terms are not defined at all.

Listen as this experienced panel explores how to approach claims and coverage resolution by focusing on the policy language.

1. Short overview of general rules of interpretation
   • The intent of the parties
   • Reasonable expectations
2. Extrinsic evidence of intent
   • Industry materials, bulletins
   • Underwriting, claims materials, advertising brochures
   • Prior claims handling practices or inconsistent interpretations of the same provision
   • Related documents: application, binder, declarations
   • Eligibility vs. coverage and use of underwriting standards to assess coverage
3. Key jurisdictions

The panel will review these and other issues:

• When will courts allow the use of extrinsic evidence to resolve policy ambiguities?
• What coverage disputes are best suited for motions for summary judgment and cross-motions?
• What special rules apply to interpreting exclusions and resolving ambiguities?
• What types of extrinsic evidence are most litigated?