When an insurance policy is ambiguous, in whose favor does the court usually interpret it?

When an insurance policy is ambiguous, courts typically interpret the terms of the policy in favor of the insured. This principle is based on the idea that the insurance company, as the drafter of the policy, bears the responsibility for the clarity and comprehensibility of the contract terms. If there are provisions that are unclear or subject to more than one interpretation, the courts aim to protect the policyholder—who often has less bargaining power and expertise regarding legal terminology.

This interpretation is grounded in the principles of contract law, emphasizing fairness and the idea that consumers should not be disadvantaged by complex language or obscure clauses. The courts take into account that the insured has less knowledge and understanding of insurance contracts compared to the insurer, promoting consumer protection in contractual disputes.

In contrast, the other parties involved, such as the agent or third parties, do not usually have the same standing in interpreting ambiguities in the insurance policy. The agent may aid in the sale and explanation of the policy but does not have a direct role in how the policy is interpreted legally. Third parties, who may have interests in the policy’s coverage, are more likely to look to the terms as written rather than have the court favor them in interpretations of ambiguity.