Since insurance policies were first invented, there have been disputes
over how they should be interpreted and, given the stakes, the disputes
can wind up in court. If your insurance company tells you that your policy
does not cover your loss, you certainly are entitled to, and may want
to consider, running the situation by a lawyer. The recent case of
Fire Insurance Exchange (2015) 235 Cal.App.4th 901 is interesting both for its discussion of how the words in an insurance
policy should be interpreted and as an example of an insurance company
losing an interpretation dispute.
Mr. Ong bought a home in 2007. He apparently rented it out for a while,
but the last tenants moved out in February of 2010 and the utilities were
There was a fire that damaged the home in December 20, 2011 and Mr. Ong
made a claim on his insurance. His insurance company, Fire Insurance Exchange,
had a fire investigator investigate the fire. The investigator concluded:
“’it appears the fire may have been initiated as the result
of an uncontrolled warming fire
started by an unauthorized inhabitant. Signs of possible habitation were
present and the
relatively isolated location would permit this. This [sic] presence of
firewood in the adjacent room and the mattress next to the large hole
in the floor also supports this theory. It is possible the holes burned
in the floor by the door were the result of the occupant attempting to
throw burning wood outside when the warming fire got out of control.’”
The claims adjustor met with the investigator at the home and noted that
there was a bed in the kitchen and that the fire had originated there.
She also noted that a transient had likely been in the home and that it
looked like an unintentional fire - the result of a warming fire that
got out of hand. Despite this, the insurance company denied the claim
on the basis that this was vandalism in a dwelling vacant more than 30
days. Vandalism was not defined in the policy. The trial court granted
summary adjudication to Fire Insurance Exchange.
The appellate court reversed, stating that the words in an insurance policy
are generally to be interpreted in their ordinary and popular sense, looking
to how a layperson would interpret them.
Looking to the dictionary, the appellate court noted that vandalism is
defined as the willful or malicious destruction or defacement of property
and that malicious is defined as having or showing a desire to cause harm
In granting summary adjudication for Fire Insurance Exchange, the trial
court had not consulted the dictionary, or defined malicious in its ordinary
sense. Instead, it had utilized a legal definition of malice in law. This,
the appellate court held, was error.
The appellate court stated that malice, as understood in the popular mind,
means ill-will against a person and not a wrongful act, done intentionally,
without just cause or excuse, which was the definition advocated by the
insurance company and relied on by the trial court. The appellate court
pointed out that the common understanding of language is bedrock, whereas
the definition advocated by the insurance company came out of two criminal
The law is that courts are supposed to interpret the words of an insurance
policy in their ordinary and popular sense and in the way a layperson
would interpret them (such as by using a dictionary). If you let insurance
companies and judges sympathetic to insurance companies interpret the
words of a policy, and/or let them apply narrow, legalistic definitions
to the words of policies, I think it is likely both that fewer claims
will be paid and you will need both a law degree and be up-to- date on
the case law to figure out what you are paying for. You would not, in
such a situation, be able to just read the policy.
Mark E. Hancock is an attorney in Ventura, who handles personal injury
and insurance coverage matters for injured people and insureds.