Insurance contracts are interpreted by judges and courts to implement only the objectively reasonable expectations of the insured. Any personal, or subjective, expectation of a policyholder which cannot be reasonably supported by the language of the contract is unenforceable. It matters not what the policyholder truly and honestly believes in his or her own mind – that is considered subjective opinion and is never in issue in a court of law.
Insurance law states that should there be an ambiguity or uncertainty in a policy, that issue would be resolved in favor of the policyholder and against the insurer. In the absence of a misrepresentation regarding coverage or exclusions, if the language of the policy is clear and explicit, the clear meaning will be enforced.
An objective person’s interpretation of the meanings and terms are the real test of a policy. So, when reading an insurance policy, the words selected by the insurance company are to be interpreted by judges according to their plain meaning. A plain meaning is one which an ordinary person would attach to such words, not the meaning which might be understood by an insurance company executive or an attorney.
Exclusions and limitations in a policy must be clearly written in unmistakable language because they often result in denying coverage when there is a loss. It is for this reason that exclusions and limitations are always narrowly defined. If there is more than one meaning to be given to an exclusion or a limitation, the narrowest interpretation will be adopted by the court. Any exclusionary clause that is not clearly defined will be interpreted in the interests of the insured.