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Legal Memorandum: "Undefined Terms" in an Insurance Policy

Issue: How are undefined terms in an insurance policy construed?

Area of Law: Insurance Law
Keywords: Undefined Terms; Insurance Policy
Jurisdiction: Federal
Cited Cases: 160 F.2d 599
Cited Statutes: None
Date: 05/01/2007

Applications for insurance and other documents collateral to the policy are drafted by the insurer and, thus, like the policy itself, are construed against the insurer in doubtful cases and in favor of coverage.  Gaunt v. John Hancock Mut. Life Ins. Co., 160 F.2d 599, 602 (2d Cir. 1947) (“[I]nsurers who seek to impose upon words of common speech an esoteric significance intelligible only to their craft must bear the burden of any resulting confusion” and thus, words of policy application are construed against insurer and in favor of coverage if there is any doubt); Mfg’rs Life Ins. Co. v. Capitol Datsun, Inc., 566 F.2d 354, 358 (D.C. Cir. 1977) (“The insurance company which writes the policy and accompanying documents has the power to articulate clearly the meaning of the terms and provisions used.  Any confusion which results from the wording chosen by the company will be resolved in favor of the insured.  Thus, the ambiguous phraseology of the application in question here must be construed [in favor of coverage].”); Johnson v. Equitable Life Assurance Soc’y, 275 F.2d 315, 318 (7th Cir. 1960) (“Insurers write their own applications, receipts, policies, etc. and if in doing so they burden the language used with dual interpretations, each equally reasonable, they must be chargeable with the confusion and ambiguity created by such dual meaning.”).

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