In general, insurance policies in Texas are interpreted according to the same rules that govern the construction of contracts. 1 Insurances must be interpreted by reading all parts of the document together. 2 This stems from the courts' main interest – to enforce the stated intention of the parties. 3 “No phrase, sentence or paragraph [of the policy] should be isolated from its position and considered as disregarding the other provisions. 4 If part of a policy was read separately from the rest of the document, it would counteract the intention of the parties by excluding the other provisions.
The terms of the contract are given their ordinary meaning unless the policy stipulates that the terms are intended in a technical or other sense. 5 Under Texas law, there is ambiguity in an insurance policy only if the language is susceptible to two or more reasonable interpretations. 6 This means that a policy is not considered ambiguous just because it can be interpreted in more than one way. 7
Ambiguity in a policy depends on whether the language is receptive to two or more reasonable [1
Conversely, “a contract is ambiguous only when the application of relevant rules of interpretive construction to the surface of the instrument really leaves it uncertain which one of two or more meanings is the correct meaning. ” 10 Only disagreement about the meaning does not create ambiguity. 11 If two interpretations remain, the court may use external evidence to resolve the ambiguity. 12 Under Texas law, the use of external evidence cannot be used to prove the existence of or create an ambiguity. 13 In other words, facts or information not included in a written agreement are not permitted for the purpose of creating an ambiguity. Instead, this evidence is only allowed after the court has ruled that there are ambiguities in the document itself.
The courts have not limited the type of external evidence that may be permissible. This reason is to promote the primary objective of the Court – as mentioned above – to determine the intention of the parties. 14 If permission of external evidence does not resolve the ambiguity, contra proferentem applies. This rule means that all ambiguity in the document is interpreted towards the draftsman. In State Farm Life Insurance Company v. Beaston the Texas Supreme Court adopted this rule for interpreting insurance contracts. 15 “Only if an insurance policy remains ambiguous despite these canons of interpretation, courts should interpret their language against the insurer in a way that favors coverage. 16 In other words, when it comes to ambiguity in your insurance and the rules for contract construction do not resolve the ambiguity, courts must adopt the interpretation that reads against the carrier and in favor of the policyholder.
1 Nat & # 39; l Union Fire Ins. Co. of Pittsburgh, Pa.; Mot Crocker 246 S.W.3d 603, 606 (Tex. 2008); State Farm Life Ins. Co. Beaston 907 S.W.2d 430, 433 (Tex. 1995).
2 Am. Manufacturer Mut. Ins. Co. v. Schaefer 124 S.W.3d 154, 157 (Tex. 2003).
3 Forbau v. Aetna Life Ins. Co. 876 S.W2d 132, 133 (Tex. 1994).
4 Id. at 134
5 Gonzalez v. Mission Am. Ins. Co. 795 S.W.2d 734, 736 (Tex. 1990).
6 Texas Farm Bureau Mut. Ins. Co. v. Sturrock 146 S.W.3d 123, 126 (Tex. 2004).
8 Don & # 39; s Bldg. Supply, Inc. v. OneBeacon Ins. Co. 267 S.W.3d 20, 23 (Tex. 2008).
9 Universal C.I.T. Credit Corp. v. Daniel 243 SW2d 154, 157 (Tex. 1951).
11 Kelly-Coppedge, Inc. v. Highlands Ins. Co. 980 S.W.2d 462, 464 (Tex. 1998).
12 United Founders Life Ins. Co. v. Carey 363 SW2d 236, 241-43 (Tex. 1962).
13 K elly-Coppedge, Inc. 980 SW2d at 464 (Tex. 1998).
14 Nat & # 39; l Union Fire Ins. Co. of Pittsburg, Pa.; V. C.B.I. Industries, Inc. 907 S.W.2d 517, 520 (Tex. 1995).
15 State Farm Life Ins. Co. v. Beaston 907 S.W.2d 430 (Tex. 1995).