In what may be described as a controversial 4-3 decision, the Florida Supreme Court in Washington National Insurance Corp. v. Ruderman, No. SC12-323, 2013 WL 3333059 (Fla. July 3, 2013), held that ambiguous language in an insurance policy “must be construed against the insurer and in favor of coverage without resort to consideration of extrinsic evidence.” (Emphasis added). Although the first part of the court’s holding, which is embodied in the Latin phrase contra proferentem, was nothing new, the second part of its holding—excluding the use of extrinsic evidence—appears to be a significant departure from well-established Florida jurisprudence. The court limited its analysis on this issue to a 34-year old decision, Excelsior Ins. Co. v. Pomona Park Bar & Pkg. Store, 369 So. 2d 938 (Fla. 1979), and found that the court never “expressly” held that “extrinsic evidence must be considered in determining if an ambiguity exists.”
The dissent, authored by Chief Justice Polston, disagreed that the policy was ambiguous and charges that the “majority improperly rewrites the parties’ contract to provide coverage for which the parties did not bargain and the insureds did not pay.” Even if the policy was ambiguous, the dissent contends that the majority “improper recedes from [its own] precedent” because “it is well-settled Florida law that parties may attempt to resolve an ambiguity through available extrinsic evidence before applying the last-resort principle of construction against the drafter.” To support its position, the dissent cites to decisions from the Florida Supreme Court (one dating back over 100 years) and the district courts. The sheer volume of authority referenced by the dissent with selected quotations appears to render the majority’s analysis facially incomplete.
The court’s decision will probably have a tremendous impact on coverage disputes in the State of Florida. The holding effectively precludes insurers from introducing any evidence to oppose a claim that a policy provision is ambiguous. Consequently, insurers will have to focus their legal energy on convincing the court that the policy is clear and unambiguous. On the other hand, given that ambiguity is an extremely subjective determination (as evidenced by this decision), if an insurer offers what the trial court believes to be a reasonable (and favorable) construction of the policy, the courts will have to side with the insured.
Although it remains to be seen, the decision also could obviate the need for experts and streamline cases. The decision also leaves unanswered whether the holding applies in a dispute between two insurers, and whether the sophisticated insured defense—an exception to the doctrine of contra proferentem—is viable. Similarly, while insurers can try to insulate themselves from the effect of the decision by allowing insureds to actively negotiate insurance policies, this would only be realistic for large, sophisticated commercial policyholders. Finally, litigants may try to use the decision in run-of-the-mill contract disputes where the contract was drafted by one party without negotiation or input by the other party.