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Insurance Contract Interpretation: Legal Principles and Case Studies

This informative guide explores key legal principles in interpreting insurance contracts using everyday language and relevant case studies, including Taylor v. State Farm and Fister v. Allstate Life Ins. Co. Learn about doctrines like waiver, estoppel, and reformation, as well as first-party coverage issues and the determinations of death in the insurance context. Dive into practical battles over fortuity, suicide cases like Nielsen, and incontestability clauses. Discover how intent and beneficiary changes are addressed, and explore rules surrounding accidental death definitions and indirect benefits in insurance.

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Insurance Contract Interpretation: Legal Principles and Case Studies

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  1. Last Class Review • Waiver, estoppel, and reformation • Doctrine of Reasonable Expectations • Taylor v. State Farm • Parole Evidence (Corbin/ Williston) • Corbin’s proposed rule • Pacific • An insurance contract is like any other • To determine intent, we construe the instrument as a whole. • Use everyday language • Ambiguous if suggests two meanings to layperson. • If ambiguous, extrinsic evidence for intent and trade usage.

  2. First Party Coverage Issues • Uniform Determination of Death • Determination of Death. An individual who has sustained either (1) irreversible cessation of circulatory and respiratory functions, or (2) irreversible cessation of all functions of the entire brain, including the brain stem, is dead. A determination of death must be made in accordance with accepted medical standards.

  3. Crobons • Marvin Wyatt: good guy or bad guy? • Bad guy. Why? • Pulls the old switcheroo • What do we get out of the case? • Rebuttable presumption is death certificate • Can be rebutted with evidence of loss of brain function or other evidence that demonstrates death was at a different time (note 2) • Note 4: death and taxes are certain. Fortuity? • How is this battle fought practically?

  4. Nielsen • Suicide • Facts • “Sane or insane? • Question: does the REAL cause matter? • Most states have statute support Nielsen (note 1) • Foolish but risky (note 4)

  5. Maryland Law • Maryland defines suicide: Md. Code Ann., Insurance Section 16-215 • Facts of Fister v. Allstate Life Ins. Co., 366 Md. 201 (2001) • Looking for someone to kill her • Hires friend who testified this is how it went down: “'Let's do it! Let's do it! Let's do it!' She said, 'Larry, for the first time in your life, do something right, help me! Help me!' And before I knew it, I had pulled the trigger."  • Larry gets five years • Does Larry get anything? He was a beneficiary. • No. Contingent beneficiary is estate • Maryland definition of suicide: Does not include hiring someone to kill you: heirs recovery over $1.6 million

  6. Incontestability • Maryland law: "There shall be a provision that the policy (exclusive of provisions relating to disability benefits or to additional benefits in the event of death by accident or accidental means) shall be incontestable, except for nonpayment of premiums, after it has been in force during the lifetime of the insured for a period of two (2) years from its date of issue." • Most states have similar law

  7. Crawford • Facts: • More than two years later, Ms. Crawford dies • Plaintiff and decedent makes misrepresentations: • 32 hours a week • Earned a salary • Worked for business • Is eligibility a threshold issue? • How about termination of employment?

  8. Lemke • Key question: what is required to evidence intent to change beneficary • Facts: • Writes to cut his wife out as his beneficiary • What is compelling about the language? • What is the test? Either strict compliance or… • Intent • Affirmative action

  9. Problem with Oral Statements • People change their minds. Often.

  10. Murdering the Insured • Facts • Wife murders husband • Wife’s sister is secondary beneficiary after wife • Sister is raising stepchild • Sister and murderer are not close • Does this matter?

  11. Possible Rules to Deal with Indirect Hookup • What is an indirect hookup? • Killer gets a benefit from the killing • Possible rules to deal with: • Georgia bright line rule • Factual determination – is the killer getting an indirect benefit. • Faulknerian opacity • Theme of the day: human relationships are complicated

  12. Definition of Accidental Death • Facts: man dies during an operation unexpectedly • Cause of death: cardiac arrest • 58 years old; 75 pounds overweight; high blood pressure; possible diabetic; several martinis; pack and a half

  13. Definition of Accidental Death • Facts: man dies during an operation unexpectedly • Cause of death: cardiac arrest • 58 years old; 75 pounds overweight; high blood pressure; possible diabetic; several martinis; pack and a half • Accidental results v. accidental means • Serbonian Bog • Difference in this case and how Maryland looks at insurance contracts • What was the parol evidence?

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