Abbott and Costello’s performance of the now classic “Who’s on first?” baseball sketch remains comedy gold.1 In addition to being outrageously hilarious, this comedy sketch highlights the significance of language and how specific words can be misconstrued. The ambiguity of words becomes more significant than baseball positions when applying the legal effect of those words, especially as applied to a property insurance policy, which may mean hundreds of thousands of dollars or even millions.
Property insurance policies, though not intentionally so, are written ambiguously containing convoluted provisions in a mess of different forms that outline specific coverages, exclusions, and a number of limitations. In his book, When Words Collide, Bill Wilson notes:
It would be ludicrous for us to say [any] policy is not ambiguous. It is.2
The Tennessee Supreme Court has long instructed courts to interpret insurance policies using the same principles that guide the construction of any other contract.3 Traditionally, this means that the provisions are given their plain and ordinary meaning under the context of the entire agreement. However, Tennessee courts, like most other courts, take a step beyond for the benefit of the insured:
[C]ontracts of insurance are strictly construed in favor of the insured, and if the disputed provision is susceptible to more than one plausible meaning, the meaning favorable to the insured controls.4
One of those traditional principles for the interpretation of a contract or insurance policy “is to ascertain and give effect to the intent of the parties.”5 The intent is first sought in the words of the policy itself, but ambiguity exists where the intention of the parties is unclear. Fortunately, Tennessee courts have held that parol evidence can be used to define...
