Maryland High Court to Decide Whether Insurance Companies Get Benefit of Doubt in Policy Disputes
When an insurance policy contains terms that are open to interpretation, whose opinion countsthe insurance company’s or the policyholder’s Since 1837, Maryland has given insurance companies the benefit of the doubt as long as the insurer is acting in good faith. The plaintiffs in a case currently before the Maryland Court of Appeals hope to change that.
Try as they might to define important terms in an insurance policy, lawyers cannot define every single one; if they did so, the document would be endless. Thus, some terms are left undefined, for the parties to construe in a reasonable way. Disagreements are inevitable.
In Peoples Insurance Counsel Division v. State Farm Fire and Casualty Co., Greg and Moira Taylor had filed a claim when their carport collapsed because of an accumulation of snow and ice. The Taylors’ State Farm homeowners policy covered the collapse of a building, but it left the word “building” undefined
To the Taylors, a carport was a building. State Farm disagreed and denied the claim, explaining that the carport, supported by ten poles, had no walls. To qualify as a building, they said, it needed to have at least three walls. The Maryland insurance commission, a state Circuit Court, and the Court of Special Appeals all sided with State Farm, holding that the insurer was acting in good faith when it rejected their claim and that the company’s understanding of the word “building” was reasonable.
The Taylors maintain that Maryland’s deference to insurance company interpretations of policies is unfair and anti-consumer. The Taylors’counsel has argued that, in the vast majority of states, undefined terms in insurance policies are interpreted in favor of the policyholder. Forty-four states take an approach that is more favorable to policyholders than Maryland’s.
Contracts are often construed “against the drafter,” particularly when the contract is a standardized form created by one of the parties. According to this approach, it is the responsibility of the company creating the standard contract to insure that its interests are protected. Maryland generally does not follow this approach in insurance policy disputes, but the court could approve a change in the balance of power and give more deference to policyholders.
If you are involved in a dispute that hinges on the meaning of a contractual provision, whether in an insurance policy or any sort of commercial agreement, qualified counsel can advise you on the best way to ensure that your interpretation prevails. The commercial litigation attorneys at Longman & Van Grack have experience handling all types of commercial contract disputes. For a consultation on your situation, call (301) 291-5027.
