California insurance law is complicated and contains many intricate statutes and court decisions. However, we can set out some basic rules and principles by which insurance cases are often decided in the courts. If your claim is a life, health, or disability claim involving insurance that is obtained from your employer, special, very restrictive laws may apply. (Click here for more on ERISA.)
The Insurance Policy
Most policies are broken into various parts:
- Table of Contents: Often policies have a table of contents to assist in locating the various provisions.
- Declarations page: This page normally identifies the policy as yours and is usually found at the very beginning of the policy. It generally sets forth the names of the person(s) to whom the policy is issued, the effective date of issuance, the policy number, the specific amounts of insurance provided, and other general pertinent information. It often includes a list of policy "endorsements" or "riders" which are very important because they change the standard terms of the insurance policy.
- Insuring Provisions: These provisions generally provide a description of what you are insured for. These sections may all be in one location of the policy or may be spread throughout the policy.
- Definitions: Most policies use certain terms or phrases, which are identified in the policy by bold letters, italics, initial caps, or some other particular marking. Each of these words or phrases is defined in the definitions section of the policy.
- Exclusions: What is promised in the Insuring Provisions may well be taken away in the section where exclusions are listed. The exclusions describe what the policy does not cover. These definitions can be very important and can sometimes define the scope of coverage.
- General Provisions: These are typically toward the end of the policy and contain general provisions applicable to most claims, such as an arbitration clause if it is in the policy, provisions incorporating applicable state statutes, provisions relating to when one can file a lawsuit, provisions relating to cancellation and termination of the policy, and provisions setting forth when and how to submit claims.
- Endorsements and Riders: Insurance policies are often written on standard forms. The insurance company may issue a policy that modifies the standard forms to either add to or take away coverage. These terms are attached to the policy as endorsements or riders and are generally found at the end of the policy. Usually they have a form number at the bottom of the page that is listed on the declarations page so there is a record of what endorsements are contained in the policy.
10 Basic Rules the Courts Will Apply When Interpreting an Insurance Policy
- The words in the contract are to be interpreted according to their ordinary meaning and not in a technical sense unless otherwise stated in the policy.
- An insurance policy must be interpreted in accordance with the objectively reasonable expectations that a policyholder would have for insurance protection, given the language of the policy.
- The policy must be interpreted in light of the contract as a whole, without looking at one particular provision in isolation.
- Provisions that provide coverage are interpreted broadly; provisions that limit coverage are construed narrowly.
- Provisions that restrict coverage must be set forth in the policy in clear, plain, and unambiguous terms; otherwise, they are not enforceable.
- If the policy is ambiguous, it is interpreted against the insurance company and in favor of the policyholder.
- California law requires certain policies, such as homeowners, auto, and disability policies, to contain certain mandatory provisions. Even if your policy does not contain such provisions, it will be interpreted as if it does contain them.
- The policyholder is entitled to rely on what the insurance company's agent told him/her about what was covered at the time the insurance was purchased regardless of what the policy says.
- A policyholder has the burden of proof to establish a claim that comes within the broad coverage provisions.
- The insurance company generally has the burden of proof to prove that a claim is excluded under a particular provision of the policy.
