Who’s On First? Discerning Ambiguity in Insurance Policy Language

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 non-obvious terms in an agreement.⁶ Parol evidence is evidence that attempts to modify, explain, or supplement the contract at issue through the use of prior or contemporaneous declarations. This evidence is typically prevented from being used absent specific circumstances, of which ambiguity is one such circumstance. In Jones v. Brooks, the Tennessee Supreme Court found that parol evidence could be considered where a contract provision was subject to two reasonable interpretations, and the Tennessee Court of Appeals in Coble Systems, Inc. v. Gifford Company, noted that parol evidence may be used to clarify latent ambiguities in written agreements.⁷

But whether an ambiguity even exist must first be established. In Southern Trust Insurance Company v. Phillips, the issue present was whether arson is covered under the “fire” provision or excluded under the “vandalism and malicious mischief” provision.⁸ The trial court reasoned that since the two perils where undefined, an ambiguity exists; therefore, the meaning favorable to the insured controls, and arson is covered under the “fire” provision. Though the trial court found ambiguity in these provisions, the appellate court did not. The appellate court held that the policy issued “unambiguously provides coverage for fire and/or arson but does not cover vandalism or malicious mischief.”⁹ Both courts found in favor of the insureds, but through very different rationales.

While Abbot and Costello figure out Who’s on first and that Mr. What is on second base, insureds should know the terms of their insurance policy, specifically who to contact and what is covered so that they may slide into home.
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¹ Who’s on First?, YouTube (Feb. 16, 2017, last visited Nov. 30, 2020), https://www.youtube.com/watch?v=sShMA85pv8M
² Bill Wilson. When Words Collide: Resolving Insurance Coverage And Claims Disputes. 10 (2018).
³ Am. Justice Ins. Reciprocal v. Hutchinson, 15 S.W.3d 811, 814 (Tenn. 2000).
⁴ Southern Trust Ins. Co. v. Phillips, 474 S.W.3d 660, 664-65 (Tenn. Ct. App. 2015), quoting Garrison v. Bickford, 377 S.W.3d 659, 663-64 (Tenn. 2012) (internal citations omitted).
⁵ Id.
⁶ Williams v. State Farm Mutual Automobile Ins. Co., 2020 WL 6821700 at *4 (Tenn. Ct. App., Nov. 20, 2020).
⁷ Jones v. Brooks, 696 S.W.2d 885, 886 (Tenn. 1985); Coble Systems, Inc. v. Gifford Co., 627 S.W.2d 359, 362 (Tenn. Ct. App. 1981).
⁸ Southern Trust Ins. Co., 474 S.W.3d at 660.
⁹ Id. at 671.