When Keeping it Bold Goes Wrong: Recent Case Construes Insurance Policy Against Insurer Based, in Part, on a Bold Ambiguity

By Justin Wiser and Sebastian Spears

One of the most important skills for an attorney is legal writing. Yet, it goes beyond “an arresting opener, a clean narrative line, and polish throughout.”[1] Whether you are a litigator or a transactional attorney, a recent case from the Indiana Court of Appeals emphasizes the importance of incorporating proofreading into your writing process, specifically focusing on formatting and uniformity.

In Erie Indemnity Company v. Estate of Brian L. Harris,[2] the Indiana Court of Appeals analyzed an employer’s commercial automobile policy to determine whether an employee’s death was covered under the policy’s uninsured motorist coverage. The employee had been cutting his grass on a riding lawnmower when an intoxicated driver struck and killed him. The court’s factual review explained that the employee neither paid any premiums nor was he listed as a named insured on the employer’s policy. Although he was not a named insured or additional insured, he was listed as a scheduled driver under the policy and had been for more than seventeen (17) years. The policy included an uninsured motorist coverage endorsement (“UM Endorsement”), which provided coverage limits of one million dollars ($1,000,000) per accident, and the employee’s estate (“Estate”) submitted a claim pursuant to the UM Endorsement.

The insurance company denied the claim based on the following two reasons: (1) the employee did not meet the definition of the named insured “you“; and (2) the employee was not using or occupying an automobile insured by the policy at the time of the accident. The Estate subsequently commenced a declaratory judgment action regarding coverage under the terms of the UM Endorsement. At the summary judgment stage, the trial court “determined that the Estate was entitled to recover for [the employee’s] accident under the Policy’s UM Endorsement,” which decision was subsequently appealed.[3]

The primary issue addressed by the Court of Appeals was whether the policy was ambiguous.[4] The UM Endorsement triggered coverage for “bodily injury to you or others we protect.” (Underline added in opinion). The definitions section of the policy provided that words used in bold type have a “special meaning.” While this definition section did not define the phrase “others we protect,” the UM Endorsement included a section entitled “Others We Protect,” which stipulated specific individuals who presumably are “others we protect.” The insurance company argued that the phrase, as used in the UM Endorsement, should mean those specific individuals stipulated in the “Others We Protect” section. The Estate argued that: (1) only using bold for “we” and not the entire phrase meant the phrase did not have special meaning; (2) the language in the “Others We Protect” section did not apply; and therefore (3) the employee should be covered by the phrase.

The court held that (1) “the phrase ‘others we protect’ is ‘susceptible to more than one interpretation’ where reasonable people . . . ‘would differ as to its meaning,'”[5] and (2) “others we protect” was ambiguous and construed the ambiguity against the insurer.[6] Notably, if a policy is determined to be ambiguous, then courts will “construe the policy strictly against the insurer.”[7] This ambiguity, which was caused by the lack of bold type throughout the phrase and its exclusion from the policy’s definitions, led the court to affirm the trial court’s decision to allow the Estate to recover uninsured motorist damages. This also allowed the court to invoke the longstanding “public policy of providing coverage to those protected by an insurance policy.”[8]

Drafting Lessons

This case identifies two drafting issues: (1) uniformity, and (2) proofreading. Clearly, uniform formatting could have prevented the ambiguity in this case. Words should not be in bold text or capitalized without a reason. Sometimes drafters capitalize or make bold certain words or phrases because those words or phrases are defined terms within a contract. If you’re going to define a word or phrase in an agreement, then that word or phrase should be capitalized or in bold wherever it is used throughout the contract.

However, drafters sometimes do not capitalize or bold previously defined words or phrases throughout a document. This is done to use the word or phrase in two different ways. Take “Obligations” and “obligations.” “Obligations” would be defined in the contract and have a specific meaning, while “obligations” would be undefined in the contract and have a general meaning. In this case, using “others we protect” instead of “others we protect” signifies that the drafter did not intend for “others we protect” to have the specific meaning given to such phrase in the policy. If the drafter had intended to use the specific meaning in this instance, then he/she should have used bold text for the entire phrase. Additionally, in this case, if the policy drafter had proofread the document with a focus on uniformity, he/she would have likely seen the inconsistent formatting that gave rise to the ambiguity. Consistent formatting and careful proofreading help prevent drafting ambiguities and future liabilities.

Justin Wiser is an associate in the firm’s litigation practice group. In this position, he represents companies and individuals in both state and federal courts. Sebastian Spears is a member of the firm’s business law group. He typically focuses on commercial lending and matters of corporate and real estate finance.

[1] LawProse, http://www.lawprose.org/training/ (last visited Sep. 20, 2017).

[2] Erie Indem. Co. v. Estate of Brian L. Harris, 46A03-1606-CT-1261, 2017 WL 3222938 (Ind. Ct. App. July 31, 2017) (Erie Indemnity Company filed a Petition for Rehearing on August 30, 2017).

[3] Id. at *8.

[4] Id. at *11.

[5] Id. at *18.

[6] Id. at *18-25.

[7] Id. (quoting Milbank Ins. Co. v. Indiana Ins. Co., 56 N.E.3d 1222, 1229 (Ind. Ct. App. 2016)).

[8] Id. at 16.