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California Court Interprets Commercial Insurance Policy, Says Policy Covers Assault and Battery

A California Court of Appeals case highlights why it is important for business owners to understand their company's insurance policy, especially the exclusions.

A Case in Point

In 2004, Terrell Ford was dining at a restaurant owned by Palmden. During this time, 20 gang members entered the restaurant and caused a disturbance. Shortly thereafter, the argument was brought outside and a fight instigated.

Ford attempted to leave, but the restaurant employees locked the front doors so he exited a back door. He was attacked and severely beaten by gang members and suffered life-threatening injuries.

Ford sued Palmden for damages. Palmden looked to their business insurance policy for coverage. But, a coverage dispute arose and the case proceeded to court.

The court's major objective was to interpret the 119 page Commercial General Liability Insurance Policy purchased by Palmden and decide whether the incident was covered under the policy.

Plain Meaning

Courts like to give effect to what's referred to as the "plain meaning" of a contract. As the court in this case noted:

"In reaching this determination, basic principles of   contract interpretation apply and require that the mutual intent of the parties, as inferred from the written language of the policy, so long as it is clear and explicit, be given effect. The assumption is that the contract is an accurate reflection of the mutual intent of the parties."

Insurance contracts are somewhat special. Insurance companies are in the business of writing these types of contracts, and most consumers lack the understanding of the intricacies of insurance law to negotiate with the insurance company. (Nor, would most choose to "haggle" over the terms of the policy.) Because of this, courts look at these contracts very closely and tend to construe any ambiguity against the insurance company.

Is the Insurance Policy Language Ambiguous?

The court says that the insurance contract in this case "is no model of clarity with respect to the organization of its provisions." But, they add, "Simply because something could be interpreted in more than one way does not always make it "ambiguous."

The court asserts that:

"Provisions of an insurance policy are considered ambiguous when two or more reasonable constructions of the language are possible. However, language is not made ambiguous because persons might disagree about its meaning, or because it might be susceptible of more than one meaning if isolated from its context."

This is important, because the section in question states:

"ASSAULT AND/OR BATTERY EXCLUSION. It is agreed that this Insurance does not apply to Bodily Injury or Property Damage or Personal Injury or Advertising Injury arising out of or in any way related to, an Assault and/or Battery, provoked or unprovoked, committed or allegedly committed by

  • an Insured or
  • by an Employee(s) or Agent(s) of the Insured, or
  • by customer(s) of the Insured; or
  • by any other party(ies)"

The clause specifically excludes coverage for assault and battery, but Ford argued that the clause "or by any other party(ies)" modified only "customers" and since the gang members weren't customers, he says the exclusion didn't apply.

Court Clarifies Language, Agrees with Ford

The court accepted Ford's argument stating that, "the phrase 'or by any other party(ies)' clearly was not meant to qualify or modify the language immediately preceding it, but is the last item in a list of persons whose acts to which the exception applies."

Contact an Insurance Law Attorney

This case highlights the complexity of insurance policies and how a court can construe even seemingly straightforward language as unclear or ambiguous.

If you have questions over the terms of a CGA or other insurance policy, or are engaged in a coverage dispute with your insurer, contact an attorney experienced with insurance law. A lawyer can help answer your questions and provide support if litigation is necessary.

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