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Interpretation of insurance policy exclusions

by | Mar 25, 2024 | Insurance Law

Insurers often add exclusions to insurance policies to lower premiums and reduce their exposure to insurance claims.  These exclusions are usually buried in a policy or endorsements and can dramatically affect the coverage of loss in first party and third party claims.  A careful reading of the insurance policy before and after a claim is made is important.

A first party insurance claim is a claim filed with your own insurance company following an accident or injury. This type of claim is made by policyholders who have suffered losses to their own property or personal injury.  In cases involving all risk insurance policies, once the insured shows that an event falls within the scope of basic coverage under the policy, the burden is on the insurer to prove a claim is specifically excluded. The exclusionary clause must be conspicuous, plain and clear.

A third party insurance claim is a claim filed with your insurance company for a loss alleged by an injured third party.  A third party insurance claim may be made by the policy holder or the injured third party.  The insurer has a duty to investigate when the insurer becomes aware of third party claims. Exclusionary clauses in third party policies are narrowly construed and the insurer bears the burden of proving their application. An insurer that wishes to rely on an exclusion has the burden of proving that the exclusion applies in all possible worlds.

Insurance policy exclusions are interpreted by their plain and ordinary meaning.  If insurance policy exclusions are ambiguous their interpretation depends on the context of first party and third party claims.  Experienced attorneys know when and how to interpret insurance policies to maximize the chances of successful claims.  If you or your business have suffered a loss, attorneys at Tropea McMillan can help to interpret insurance policy exclusions.