Rejecting Word Worship: An Integrative Approach to Judicial Construction of Insurance Policies

Litigation over insurance coverage is really a quest for meaning: Does the insurance policy cover the loss at issue? Construing the insurance policy, courts are attempting to give legal effect to what the document purports to command. But what were the intentions and expectations of insurer and insured? Do those intentions even matter? Or is only the written text of the policy relevant to the coverage result? Courts approaching these questions typically frame the interpretative choice as one of strict textualism versus a more contextual, functionalist approach. In many, perhaps even most situations, text and context align to create an “easy” case. If a factory is sued for contaminating a neighborhood pond, the absolute pollution exclusion almost certainly applies. If builder’s bulldozer cuts an underground powerline, the insurer cannot avoid coverage by labeling the mishap as excluded faulty work. But in more uncertain circumstances, a court’s choice of methodology often changes the result, with significant consequences for risk management and victim compensation. Despite the departure from strict adherence to textualism signalled in the Restatement (Second) of Contracts in 1981, courts typically continue to embrace a highly textualist approach in contract interpretation cases, including insurance cases. Strict textualism continues to be one of the core orthodoxies of American law and dispute resolution, even though both modern cognitive science and practical experience have shown its limits. Undue reverence for text abounds even when inapt. Deviation from textual orthodoxy is often unfairly condemned as result-oriented judicial activism or judicial legislation that undermines the predictability and consistency to which law aspires. In our view, departures from strict textualism – especially (but not only) in insurance cases – are mistreated as heretical when they are in fact comprehensive, insightful, and helpful in vindicating the apt function of insurance and other agreements. A more expressly integrative harnessing of the indicia of contract term meaning does not excessively empower judges relative to legislatures, executives, and private parties but instead permits courts to be helpful in ensuring that statutes, contracts, and in particular insurance policies function in a manner consistent with the intent, purpose, and operation of these writings and the objectives they represent. Courts in our view need not be cabined by excessive textualism in order to “stay in their lane” relative to other branches and the decision-making preferences of the parties but can adopt a broader, more integrative approach to construction without violating traditional norms regarding judicial role. The integrative solution is not radical but realistic and should enjoy greater, expressly acknowledged, judicial favor.

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