Insurers should think more like judges when drafting insurance contracts

Insurers and brokers need to think more like judges when they read or draft insurance policy contracts, because judges will ultimately determine whether or not policy coverage exists in a claim situation, a litigator told brokers attending an education session at the 88th annual convention of the Insurance Brokers Association of Ontario.
Tom Donnelly, a founding partner of Thomas Gold Pettingill LLP, an insurance law firm in Toronto, made his remarks as part of his speech entitled ‘Insurance Coverage Update: Think like a Judge.’
Donnelly’s firm defends insurers, but it also acts against insurance companies in coverage disputes.
Donnelly noted there are two ways to interpret insurance policies: one represents the insurers’ approach; the other is the approach used by judges. The two approaches are very, very different, he said.
“How many times have you had a claim,” Donnelley asked brokers attending the session, “where the insurance company said: ‘That claim is not covered. The policy never intended to cover that type of risk.’
“The key thing in the insurers’ mind is: ‘We drafted this policy. We know what’s supposed to be covered.’ The easiest thing to say is, they’re half-right.”
The part where insurers are wrong, Donnelley said, is that it’s not just their interpretation that matters. “The court is also going to look at what the policyholders’ intent was.”
Strictly speaking, do policyholders have “intentions” when it comes to finding an insurance policy? Aren’t they simply looking for maximal coverage and cheap insurance?
“From a legal standpoint, the courts see it very much as a two-sided contract,” Donnelly said. “Not what the insurer intended, but what did the parties intend?”
And so it is very important for brokers and insurers not to assume they already know what is contained in a certain type of policy that comes under dispute. “I suggest to you it is important to read the entire policy from cover to cover,” Donnelly advised when a claim arises. “When the parties think more like a judge, it will result in a fairer disposition for both parties.”