Insurance 101: Florida High Court’s Ruling on Policy Ambiguity in Washington National v. Ruderman
By Amy Elizabeth Stewart
In jurisdictions across the country, courts and practitioners alike grapple with issues of policy interpretation when the litigants disagree about the meaning of an insurance contract.
Courts typically apply generally applicable rules of contract interpretation in the insurance context. When the parties advance different policy interpretations in the context of a coverage dispute, issues arise. If the court agrees that competing interpretations are both reasonable, the policy is ambiguous as a matter of law. Then what?
The practical challenge for litigants and their counsel in any jurisdiction is determining how the court will approach conflicting interpretations of the insurance contract. Does the insurer automatically lose the ambiguity battle? Is the court confined to the policy’s terms in ascertaining the parties’ intent, or will the court admit extrinsic evidence of intent? Does it matter if the disputed provision is contained in an exclusionary clause? Or whether the ambiguity is latent or patent?
While the policyholders’ bar welcomed the Florida Supreme Court’s recent opinion in Washington National Insurance v. Ruderman with open arms, just as many practitioners (and one dissenting justice) scratched their heads, trying to make sense of the state’s earlier jurisprudence. Florida is not alone. Judicial opinions interpreting ambiguous policies are difficult to reconcile—from state to state and even within the same jurisdiction. Even the phrase contra proferentem presents conflict—some courts and authors opting to spell the phrase contra proferentum.
Coverage lawyers facing policy interpretation issues must then connect the dots and make sense of the outcomes, inconsistent as they are.
Washington National v. Ruderman
The Florida Supreme Court recently issued a definitive opinion addressing the interpretation of an ambiguous insurance policy in response to a certified question from the Eleventh Circuit. The case, Washington National Insurance v. Ruderman, involved the construction of limited-benefit home health care coverage insurance policies and, specifically, the effect of a policy provision that automatically increased benefits. The insurer argued that the automatic increase applied only to the maximum daily benefit; the insured argued that the increase applied to the daily benefit, the lifetime maximum benefit, and the per occurrence maximum benefit.
The federal district court concluded that the policy was ambiguous and granted summary judgment in favor of the insureds based on its understanding that Florida law required the court to construe an ambiguous policy against the insurer and in favor of coverage. On appeal, the Eleventh Circuit observed:
[The Florida Supreme Court] held in Anderson that “[a]mbiguous policy provisions are interpreted liberally in favor of the insured and strictly against the drafter who prepared the policy.” However,… “the correct approach under Florida law in resolving the ambiguity in the Policy is unclear.”
Seeking clarification from the Florida high court, the Eleventh Circuit posed the following inquiry:
- In this case, does the policy’s “Automatic Benefit Increase Percentage” apply to the dollar values of the “Lifetime Maximum Benefit Amount” and the “Per Occurrence Maximum Benefit”?
The court of appeals further identified three sub-questions(a) is the policy ambiguous; (b) if the policy is ambiguous, should courts first attempt to resolve the ambiguity by examining available extrinsic evidence; and (c) applying the Florida law principles of policy construction, does the policy’s “Automatic Benefit Increase Percentage” apply to the “Lifetime Maximum Benefit Amount” and to the “Per Occurrence Maximum Benefit,” or does it apply only to the “Home Health Care Daily Benefit”?
Finding the policy to be ambiguous, the Florida Supreme Court stated conclusively that the policy must therefore be construed against the insurer and in favor of coverage without resort to extrinsic evidence. In this area riddled with inconsistencies, the methodology applied by the Ruderman court may be more instructive than the outcome.
Rules of Contract Interpretation
The Ruderman court provided a succinct analytical framework for its interpretation of the policy provision at issue:
- Where the language in an insurance contract is plain and unambiguous, a court must interpret the policy in accordance with the plain meaning so as to give effect to the policy as written. In construing insurance contracts, “courts should read each policy as a whole, endeavoring to give every provision its full meaning and operative effect.” Courts should “avoid simply concentrating on certain limited provisions to the exclusion of the totality of others.” However, “[p]olicy language is considered to be ambiguous... if the language ‘is susceptible to more than one reasonable interpretation, one providing coverage and the other limiting coverage.’”
Once an insurance policy is determined to be ambiguous, the pertinent rules of interpretation generally disfavor the insurer, with many courts applying the doctrine of contra proferentem. In Ruderman, the court affirmed the rule in Florida:
- [W]here the provisions of an insurance policy are at issue, any ambiguity which remains after reading each policy as a whole and endeavoring to give every provision its full meaning and operative effect must be liberally construed in favor of coverage and strictly against the insurer.
As Ruderman confirms, the rule of contra proferentem applies in Florida insurance cases not as a rule of “last resort” when extrinsic evidence fails to illuminate the parties’ intent, but as an automatic consequence of ambiguity in the policy.
Practitioners and commentators have observed that the order in which the rules of interpretation are applied may affect the outcome, urging the application of an algorithm in which steps are taken in a particular order. The Ruderman court, for example, considered whether to admit extrinsic evidence in connection with its ambiguity determination, rather than after finding the policy to be ambiguous. This may have been more a function of the court’s efforts to reconcile seemingly inconsistent Florida law than deliberate application of an algorithm. Specifically, the insurer offered extrinsic evidence to demonstrate the insureds’ understanding of which benefits would increase annually.
The methodology applied by the Ruderman court stems from the widely held notion that the insurer is in the best position to ensure that the parties’ intent is stated with clarity in the written instrument. If that is the case, the insurer should not benefit from the confusion that ensues when the parties’ intentions are not clearly expressed in the policy.
While litigants facing policy interpretation disputes governed by Florida law have some clearly enunciated guidelines for evaluating the potential outcomes, both sides of the insurance coverage bar can be expected to continue pushing for the application of rules—and exceptions to those rules—that best serve the interests of their clients. Courts, meanwhile, will strive to reach the right outcomes based on the parties’ intentions. While the results seem far from consistent in some jurisdictions, the underlying principles and motivating factors are instructive, as demonstrated by the court’s analysis in Ruderman.
 No. SC12-323, 2013 Fla. LEXIS 1388 (Fla. July 3, 2013).
 Contra proferentem appears to be, by far, the more prevalent spelling. But see Marquette Gen. Hosp. v. Goodman Forest Indus., 315 F.3d 629, 633 n.1 (6th Cir. 2003).
 Washington Nat’l Ins. Corp. v. Ruderman, No. SC12-323, 2013 Fla. LEXIS 1388.
 Washington Nat’l Ins. Corp. v. Ruderman, 2013 Fla. LEXIS 1388, at *7.
 Washington Nat’l Ins. Corp. v. Ruderman, 2013 Fla. LEXIS 1388, at *8, quoting Ruderman ex rel. Schwartz v. Wash. Nat’l Ins. Corp., 671 F.3d 1208, 1211 (11th Cir. 2012).
 Ruderman ex rel. Schwartz v. Wash. Nat’l Ins. Corp., 671 F.3d 1208, 1212 (11th Cir. 2012).
 Washington Nat’l Ins. Corp. v. Ruderman, 2013 Fla. LEXIS 1388, at *22.
 Washington Nat’l Ins. Corp. v. Ruderman, 2013 Fla. LEXIS 1388, at *10–11 (internal citations omitted).
 Washington Nat’l Ins. Corp. v. Ruderman, No. SC12-323, 2013 Fla. LEXIS 1388, at *15–16 (Fla. July 3, 2013).
 Robert Friedman, “Florida Supreme Court to 11th Circuit on Policy Ambiguities: “We Meant What We Said and Said What We Meant,” Ins. L. Fla. Blog, July 9, 2013.
 R. Brent Cooper et al., Algorithm for Construction of Insurance Policies under Texas Law (presented at the Tenth Annual Insurance Law Inst., Dec. 8–9, 2005).
 Ruderman, 2013 Fla. LEXIS 1388, at *9–10.