We Didn't Really Mean 'Intentional': Structural Ambiguity Created by 'Personal Injury' Coverage

The purpose of insurance is to insure. In attempting to see that this purpose is achieved, courts have developed the following rules of construction that are beyond dispute. First, grants of coverage are broadly construed. See, e.g., Federal Home Loan Mtg. Corp. v. Scottsdale Ins. Co., 316 F.3d 431, 444 (3d Cir. 2003); Community Found. for Jewish Educ. v. Federal Ins. Co., 16 Fed. Appx. 462, 465 (7th Cir. 2001); Blum v. Allstate Ins. Co., No. 4:03CV401 CDP, 2003 WL 23009136, at *2 (E.D. Mo. Dec. 15, 2003). Second, exclusions to coverage are strictly construed. See, e.g., Auto-Owners Ins. Co. v. Churchman, 489 N.W.2d 431 (Mich. 1992); Napoli, Kaiser & Bern, LLP v. Westport Ins. Co., No. 02 Civ. 7931 (JGK), 2003 WL 22952171, at *7 (S.D.N.Y. Dec. 15, 2003); Dursham v. Nationwide Ins. Co., 92 F. Supp.2d 353 (D. Vt. 2000). Third, if there is any doubt as to whether coverage exists, such doubts should be resolved in favor of the existence of coverage. See, e.g., American Bumper & Mfg. Co. v. Hartford Fire Ins. Co., 550 N.W.2d 475, 481 (Mich. 1996); Hecla Mining Co. v. New Hampshire Ins. Co., 811 P.2d 1083, 1090 (Colo. 1991). All of these doctrines, while generally recognized, result in endless disputes between the insurance purchasers (policyholders) and insurance sellers (insurance companies) on a daily basis when the specific facts of a claim develop. But one recurring scenario is not addressed by these broad maxims of insurance law: What should a court do with the insurance contract that is, by its very nature, internally structured so that there is an inherent conflict that renders a determination of available coverage ambiguous before a claim is even presented?

The Personal Injury Structural Ambiguity

General liability coverage sold in this country has historically provided coverage for “unintentional” acts. Prior to the adoption of “occurrence”-based liability insurance policies, this concept was embodied in the term “accident,” which in common parlance, means something that was not intended to happen. See Eugene R. Anderson, Jordan S. Stanzler, Lorelie S. Masters, “Insurance Coverage Litigation” ” 1.02, 7.04, 1-9, 7-9 – 7-10 (2d ed. 2002). The transition to “occurrence” did not fundamentally alter this concept, as that term has historically been defined to mean actions that are “unexpected and unintended” from the policyholder's perspective. See Id. ” 1.05, 7.04, at 1-32, 7-9 – 7-10. Indeed, “occurrence” is typically defined as “an accident, including injurious exposure to conditions, which results, during the policy period, in bodily injury or property damage neither expected nor intended from the standpoint of the insured. Id. ' 1.05, at 1-31 – 1-32. “Occurrence” has also been defined as “either an accident or happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally causes injury to persons or tangible property during the policy period.” South Macomb Disp. Auth. v. American Ins. Co., 572 N.W.2d 686, 696 (Mich. App. 1997).

That notion changed with the introduction of “personal injury” coverage. See Id. ' 1.10, at 1-38 – 1-39. This coverage grant is part of many general liability insurance policies that supplements the coverage provided by “bodily injury” and “property damage” coverage grants, ones that are triggered by an “occurrence.” “Personal injury” is generally defined to include such offenses as “false arrest,” “false imprisonment,” “malicious prosecution,” “humiliation,” “libel,” “slander,” “invasion of right of private occupancy,” “invasion of privacy,” “assault,” “battery,” “infringement of copyright and other property,” and “discrimination.” See North Bank v. Cincinnati Ins. Co., 125 F.3d 983, 985 n.1 (6th Cir. 1997); Ethicon, Inc. v. Aetna Cas. & Sur. Co., 737 F. Supp. 1320 (S.D.N.Y. 1990); see also David B. Goodwin and A. Mari Mazour, “Insuring Corporate Competitive Practices,” 661 PLI/Comm 69, 72-76 (1993). All of these actions typically contain some form of intentional conduct among their elements. See North Bank, 125 F.3d at 986 (“[T]he policy defines “personal injury” to include a number of torts which are inherently intentional. These torts include: false arrest, false imprisonment, detention, malicious prosecution, humiliation, libel, slander, defamation of character, invasion of privacy, assault and battery, as well as discrimination.”)

Notwithstanding this specific provision for coverage for certain types of intentional acts, standard industry general liability policy forms contain various exclusions aimed at precluding coverage for “intentional conduct.” See Alan D. Windt, “Insurance Coverage Disputes” (3d ed. 2000) ” 11.3, 11.4, 11.9. This paradox 'granting coverage on page one for intentional conduct, and charging premiums for it, while excluding it on page two with no premium reduction ' amounts to an intentional structural ambiguity. While many insurance law doctrines provide mechanisms that can assist in attempting to reconcile these contradictory provisions, it is arguable that some stricter enforcement mechanism is warranted. By way of example only, the doctrine of “reasonable expectations” is looked to by some courts. See Van Orman v. American Ins. Co., 680 F.2d 301 (3d Cir. 1982); Fried v. North River Ins. Co., 710 F.2d 1022 (4th Cir. 1983); Auto-Owners Ins. Co. v. Jensen, 667 F.2d 714 (8th Cir. 1981); Hanson v. Prudential Ins. Co., 772 F.2d 580 (9th Cir. 1985), modified and reh'g denied en banc, 783 F.2d 762 (9th Cir. 1985 & 1986); North Bank, 125 F.3d at 987; Board of Educ., Yonkers City School Dist. v. CNA Ins. Co., 647 F.Supp. 1495 (S.D.N.Y. 1986); Tonkovic v. State Farm Mut. Auto. Ins. Co., 521 A.2d 920 (Pa. 1987).

Other courts have invoked the concept of illusory contracts. See Elmore v. Cone Mills, Corp., 23 F.3d 855 (4th Cir. 1994); Century 21 v. McIntyre, 427 N.E.2d 534 (Oh. 1980); Bradley v. Mid-Century Ins. Co., 294 N.W.2d 141 (Mich. Sup. Ct. 1980); Asmus v. Pacific Bell, 999 P.2d 71 (Cal. 2000); B.L.G. Enterprises v. First Financial Ins., 514 S.E.2d 327 (S.C. 1999). And yet other courts have applied the ambiguity doctrine. See Stanback v. Westchester Fire Ins. Co., 314 S.E.2d 775, 779 (N.C. App. Ct. 1984) (finding that policy covering “personal injury” which defined “personal injury” to include intentional torts that also had an exclusion for all intentional acts was ambiguous, and that such ambiguity should and would be resolved in policyholder's favor).

There can be no doubt that insurance companies that provide “personal injury” coverage routinely invoke forms of exclusions that preclude coverage for “intentional” conduct. See, e.g., Nationwide Mut. Fire Ins. Co. v. Somers, No. A03A1067, 2003 WL 22846099 (Ga. App. Ct. Dec. 1, 2003) (finding assertion of intentional acts exclusion inapplicable to personal injury claim for wrongful entry into or an invasion of the right of private occupancy); Tanner v. State Farm Fire & Cas. Co., No. 1010888, 2003 WL 21771769 (Ala. Aug. 1, 2003) (insurance company's assertion of intentional acts exclusion on summary judgment not sufficient to defeat policyholder's claim for personal injury coverage, since intent is a question of fact); Frenzy v. Utica Nat. Ins. Group, 765 N.Y.S.2d 38 (N.Y.A.D. 1st Dept. 2003) (holding that insurance company's assertion of intentional acts exclusion did not defeat its duty to defend policyholder for use of force exerted by bartender).

This unseemly practice is particularly troubling for multiple reasons. First, “personal injury” coverage is often sold as an “extra” or “endorsement to coverage” for which the policyholder is specifically charged an additional premium for coverage that is doomed before it is even invoked for a claim due to the presence of the intentional conduct exclusions. Second, some courts have not only tolerated such conduct; they have implicitly endorsed it. See, e.g., Kehoe v. Nationwide Mut. Fire Co., 750 N.Y.S.2d 95 (N.Y.A.D. 2d Dept. 2002) (finding application of intentional acts exclusion defeats policyholder's claim for personal injury coverage); St. Paul Fire & Marine Ins. Co. v. Engelmann, 639 N.W.2d 192 (S.D. 2002) (same); Hunt v. Capitol Indem. Corp., 26 S.W.3d 341 (Mo. App. E.D. 2000) (same).

It is difficult to discern the basis upon which a court could allow such duplicitous conduct. In numerous other contexts, courts routinely condemn such conduct as fraudulent and warranting harsh criticism and substantial relief to the deceived party. See, generally, Edwards v. Jackson Nat. Life Ins. Co., 860 So.2d 842 (Miss. App. Ct. 2003) (where policyholder asserted claim of fraudulent inducement against insurer for deceptive practices); Liberty Nat. Life Ins. Co. v. Ester, No. 1021395, 2003 WL 22419314 (Ala. Oct. 24, 2003) (same); Vos v. Farm Bureau Life Ins. Co., 667 N.W.2d 36 (Iowa 2003) (same); Blaske v. Provident Life & Acc. Ins. Co., 264 F.Supp.2d 1212 (N.D. Ga. 2003). It is time for courts to follow the general rules of construction identified above, and extend them to address this intentionally-designed paradox so that the impressions conveyed through the “personal injury” coverage grant are not swept away through provisions that render the coverage hollow.

For example, if a “personal injury” coverage provision includes “nuisance” or other “trespass”-related actions, any claims that arguably fall within those terms should be covered, and no resort to a provision that excludes “intentional” conduct should be tolerated. Numerous doctrines are available to courts to enforce this type of approach: reformation, estoppel, and/or some broadening of the general insurance policy construction doctrines mentioned above. See, e.g., Hayes v. Harleysville Mut. Ins. Co., No 995 EDA 2003, 2003 WL22839277 (PA. Super. Dec. 1, 2003) (reformation of insurance policy allowed to provide policyholder with benefits he reasonably anticipated under the contract); Rempel v. Nationwide Life Ins. Co., Inc., 320 A.2d 366 (Pa. 1977) (same); Line Lexington Lumber & Millwork Co., Inc. v. Pennsylvania Pub. Corp., 301 A.2d 684 (Pa. 1973) (same); Missouri Pacific R.R. Co. v. American Home Assur. Co., 675 N.E.2d 1378 (Ill. App. Ct.), appeal denied, 684 N.E.2d 1366 (Ill. 1997) (finding that where the insurance company has the same knowledge as the policyholder concerning the likelihood of the loss and chooses nevertheless to insure the policyholder and accept premiums without taking any steps to eliminate coverage for such loss or notify the policyholder of a desire to discontinue insuring its operations without a reduction in coverage to exclude the foreseeable loss, the insurance company is estopped from relying upon the known loss, fortuity, or expected/intended defense); Nestle Foods Corp. v. Aetna Cas. & Sur. Co., 842 F. Supp. 125, 128 (D.N.J. 1993) (same); J.T. Baker, Inc. v. Aetna Cas. & Sur. Co., No. 86-4794, slip op. at 42-43 (D.N.J. Sept. 23, 1993), reprinted in 7 Mealey's Litigation Reports (Insurance) No. 48, at A-21 – A-22 (Oct. 28, 1993) (same); Affiliated FM Ins. Co. v. Board of Educ. of Chicago, No. 90C6040, 1992 WL 409442, at *16 (N.D. Ill. Oct. 6, 1992), rev'd on other grounds, No. 90 C 6040, 1993 WL 189808 (N.D. Ill. Jun. 3, 1993), aff'd, 23 F.3d 1261 (7th Cir.), cert. denied, 513 U.S. 963 (1994) (same); Joseph Simon & Sons, Inc. v. Aetna Fire Underwriters Ins. Co., No. 90-2-14568-9, slip op. 2-3 (Wash. Super. Ct., King Cty. May 14, 1991), reprinted in 5 Mealey's Litig. Reports (Insurance) No. 28, at D-1-D-2 (May 28, 1991) (same); North Bank, 125 F.3d at 987 (“Under the doctrine of reasonable expectations, a 'court grants coverage under the policy if the policyholder, upon reading the contract language is led to a reasonable expectation of coverage.'”) (citations omitted); See Bradley v. Mid-Century Ins. Co., 294 N.W.2d at 163 (“The objectively reasonable expectations of applicants and intended beneficiaries regarding the terms of insurance contracts will be honored even though painstaking study of the policy provisions would have negated those expectations. When members of the public purchase policies of insurance they are entitled to the broad measure of protection necessary to fulfill their reasonable expectations. … Where particular provisions, if read literally, would largely nullify the insurance, they will be severely restricted so as to enable fair fulfillment of the stated policy objective.”) (Internal quotations omitted and emphasis added.)

Additionally, in jurisdictions that recognize a cause of action for bad faith conduct, courts should consider such “fraud in the inducement” as actionable. Indeed, the Uniform Unfair Insurance Practices Act (UIPA), promulgated by the National Association of Insurance Commissioners, includes a provision that forbids insurance companies from misrepresenting the scope of available coverage under insurance policies. See The Unfair Insurance Practices Act, 42 P.S. ' 1171.5 (1999) (defining unfair insurance practices as, among other things, misrepresenting the benefits, advantages, conditions or terms of any insurance policy). Many states look at transgressions of provisions of the UIPA as evidence of bad faith conduct. See, e.g., Miglicio v. HCM Claim Mgmt. Corp., 288 N.J. Super. 331, 340-41 (1995) (applying New Jersey's Unfair Claim Settlement Practices Act to determine the appropriate standard of conduct for insurance companies to follow in settling claims). This creation of an inherently ambiguous policy by its very structure should be considered wrongful.

Conclusion

Purposely misleading conduct is not tolerated under the law. Courts, however, have been less than assertive at ending an inherently deceptive practice that the insurance industry has followed for years. The time to terminate such conduct is now. Following some of the recommended remedies laid out in this article would be a considerable step in that direction.

The purpose of insurance is to insure. In attempting to see that this purpose is achieved, courts have developed the following rules of construction that are beyond dispute. First, grants of coverage are broadly construed. See, e.g., Federal Home Loan Mtg. Corp. v. Scottsdale Ins. Co., 316 F.3d 431, 444 (3d Cir. 2003); Community Found. for Jewish Educ. v. Federal Ins. Co., 16 Fed. Appx. 462, 465 (7th Cir. 2001); Blum v. Allstate Ins. Co., No. 4:03CV401 CDP, 2003 WL 23009136, at *2 (E.D. Mo. Dec. 15, 2003). Second, exclusions to coverage are strictly construed. See, e.g., Auto-Owners Ins. Co. v. Churchman , 489 N.W.2d 431 (Mich. 1992); Napoli, Kaiser & Bern, LLP v. Westport Ins. Co., No. 02 Civ. 7931 (JGK), 2003 WL 22952171, at *7 (S.D.N.Y. Dec. 15, 2003); Dursham v. Nationwide Ins. Co. , 92 F. Supp.2d 353 (D. Vt. 2000). Third, if there is any doubt as to whether coverage exists, such doubts should be resolved in favor of the existence of coverage. See, e.g., American Bumper & Mfg. Co. v. Hartford Fire Ins. Co., 550 N.W.2d 475, 481 (Mich. 1996); Hecla Mining Co. v. New Hampshire Ins. Co., 811 P.2d 1083, 1090 (Colo. 1991). All of these doctrines, while generally recognized, result in endless disputes between the insurance purchasers (policyholders) and insurance sellers (insurance companies) on a daily basis when the specific facts of a claim develop. But one recurring scenario is not addressed by these broad maxims of insurance law: What should a court do with the insurance contract that is, by its very nature, internally structured so that there is an inherent conflict that renders a determination of available coverage ambiguous before a claim is even presented?

The Personal Injury Structural Ambiguity

General liability coverage sold in this country has historically provided coverage for “unintentional” acts. Prior to the adoption of “occurrence”-based liability insurance policies, this concept was embodied in the term “accident,” which in common parlance, means something that was not intended to happen. See Eugene R. Anderson, Jordan S. Stanzler, Lorelie S. Masters, “Insurance Coverage Litigation” ” 1.02, 7.04, 1-9, 7-9 – 7-10 (2d ed. 2002). The transition to “occurrence” did not fundamentally alter this concept, as that term has historically been defined to mean actions that are “unexpected and unintended” from the policyholder's perspective. See Id. ” 1.05, 7.04, at 1-32, 7-9 – 7-10. Indeed, “occurrence” is typically defined as “an accident, including injurious exposure to conditions, which results, during the policy period, in bodily injury or property damage neither expected nor intended from the standpoint of the insured. Id.  ' 1.05, at 1-31 – 1-32. “Occurrence” has also been defined as “either an accident or happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally causes injury to persons or tangible property during the policy period.” South Macomb Disp. Auth. v. American Ins. Co., 572 N.W.2d 686, 696 (Mich. App. 1997).

That notion changed with the introduction of “personal injury” coverage. See Id. ' 1.10, at 1-38 – 1-39. This coverage grant is part of many general liability insurance policies that supplements the coverage provided by “bodily injury” and “property damage” coverage grants, ones that are triggered by an “occurrence.” “Personal injury” is generally defined to include such offenses as “false arrest,” “false imprisonment,” “malicious prosecution,” “humiliation,” “libel,” “slander,” “invasion of right of private occupancy,” “invasion of privacy,” “assault,” “battery,” “infringement of copyright and other property,” and “discrimination.” See North Bank v. Cincinnati Ins. Co. , 125 F.3d 983, 985 n.1 (6th Cir. 1997); Ethicon, Inc. v. Aetna Cas. & Sur. Co., 737 F. Supp. 1320 (S.D.N.Y. 1990); see also David B. Goodwin and A. Mari Mazour, “Insuring Corporate Competitive Practices,” 661 PLI/Comm 69, 72-76 (1993). All of these actions typically contain some form of intentional conduct among their elements. See North Bank, 125 F.3d at 986 (“[T]he policy defines “personal injury” to include a number of torts which are inherently intentional. These torts include: false arrest, false imprisonment, detention, malicious prosecution, humiliation, libel, slander, defamation of character, invasion of privacy, assault and battery, as well as discrimination.”)

Notwithstanding this specific provision for coverage for certain types of intentional acts, standard industry general liability policy forms contain various exclusions aimed at precluding coverage for “intentional conduct.” See Alan D. Windt, “Insurance Coverage Disputes” (3d ed. 2000) ” 11.3, 11.4, 11.9. This paradox 'granting coverage on page one for intentional conduct, and charging premiums for it, while excluding it on page two with no premium reduction ' amounts to an intentional structural ambiguity. While many insurance law doctrines provide mechanisms that can assist in attempting to reconcile these contradictory provisions, it is arguable that some stricter enforcement mechanism is warranted. By way of example only, the doctrine of “reasonable expectations” is looked to by some courts. See Van Orman v. American Ins. Co., 680 F.2d 301 (3d Cir. 1982); Fried v. North River Ins. Co., 710 F.2d 1022 (4th Cir. 1983); Auto-Owners Ins. Co. v. Jensen , 667 F.2d 714 (8th Cir. 1981); Hanson v. Prudential Ins. Co., 772 F.2d 580 (9th Cir. 1985), modified and reh'g denied en banc , 783 F.2d 762 (9th Cir. 1985 & 1986); North Bank, 125 F.3d at 987; Board of Educ., Yonkers City School Dist. v. CNA Ins. Co., 647 F.Supp. 1495 (S.D.N.Y. 1986); Tonkovic v. State Farm Mut. Auto. Ins. Co., 521 A.2d 920 (Pa. 1987).

Other courts have invoked the concept of illusory contracts. See Elmore v. Cone Mills, Corp. , 23 F.3d 855 (4th Cir. 1994); Century 21 v. McIntyre , 427 N.E.2d 534 (Oh. 1980); Bradley v. Mid-Century Ins. Co., 294 N.W.2d 141 (Mich. Sup. Ct. 1980); Asmus v. Pacific Bell , 999 P.2d 71 (Cal. 2000); B.L.G. Enterprises v. First Financial Ins. , 514 S.E.2d 327 (S.C. 1999). And yet other courts have applied the ambiguity doctrine. See Stanback v. Westchester Fire Ins. Co., 314 S.E.2d 775, 779 (N.C. App. Ct. 1984) (finding that policy covering “personal injury” which defined “personal injury” to include intentional torts that also had an exclusion for all intentional acts was ambiguous, and that such ambiguity should and would be resolved in policyholder's favor).

There can be no doubt that insurance companies that provide “personal injury” coverage routinely invoke forms of exclusions that preclude coverage for “intentional” conduct. See, e.g., Nationwide Mut. Fire Ins. Co. v. Somers, No. A03A1067, 2003 WL 22846099 (Ga. App. Ct. Dec. 1, 2003) (finding assertion of intentional acts exclusion inapplicable to personal injury claim for wrongful entry into or an invasion of the right of private occupancy); Tanner v. State Farm Fire & Cas. Co., No. 1010888, 2003 WL 21771769 (Ala. Aug. 1, 2003) (insurance company's assertion of intentional acts exclusion on summary judgment not sufficient to defeat policyholder's claim for personal injury coverage, since intent is a question of fact); Frenzy v. Utica Nat. Ins. Group , 765 N.Y.S.2d 38 (N.Y.A.D. 1st Dept. 2003) (holding that insurance company's assertion of intentional acts exclusion did not defeat its duty to defend policyholder for use of force exerted by bartender).

This unseemly practice is particularly troubling for multiple reasons. First, “personal injury” coverage is often sold as an “extra” or “endorsement to coverage” for which the policyholder is specifically charged an additional premium for coverage that is doomed before it is even invoked for a claim due to the presence of the intentional conduct exclusions. Second, some courts have not only tolerated such conduct; they have implicitly endorsed it. See, e.g., Kehoe v. Nationwide Mut. Fire Co., 750 N.Y.S.2d 95 (N.Y.A.D. 2d Dept. 2002) (finding application of intentional acts exclusion defeats policyholder's claim for personal injury coverage); St. Paul Fire & Marine Ins. Co. v. Engelmann, 639 N.W.2d 192 (S.D. 2002) (same); Hunt v. Capitol Indem. Corp., 26 S.W.3d 341 (Mo. App. E.D. 2000) (same).

It is difficult to discern the basis upon which a court could allow such duplicitous conduct. In numerous other contexts, courts routinely condemn such conduct as fraudulent and warranting harsh criticism and substantial relief to the deceived party. See, generally , Edwards v. Jackson Nat. Life Ins. Co., 860 So.2d 842 (Miss. App. Ct. 2003) (where policyholder asserted claim of fraudulent inducement against insurer for deceptive practices); Liberty Nat. Life Ins. Co. v. Ester, No. 1021395, 2003 WL 22419314 (Ala. Oct. 24, 2003) (same); Vos v. Farm Bureau Life Ins. Co., 667 N.W.2d 36 (Iowa 2003) (same); Blaske v. Provident Life & Acc. Ins. Co., 264 F.Supp.2d 1212 (N.D. Ga. 2003). It is time for courts to follow the general rules of construction identified above, and extend them to address this intentionally-designed paradox so that the impressions conveyed through the “personal injury” coverage grant are not swept away through provisions that render the coverage hollow.

For example, if a “personal injury” coverage provision includes “nuisance” or other “trespass”-related actions, any claims that arguably fall within those terms should be covered, and no resort to a provision that excludes “intentional” conduct should be tolerated. Numerous doctrines are available to courts to enforce this type of approach: reformation, estoppel, and/or some broadening of the general insurance policy construction doctrines mentioned above. See, e.g., Hayes v. Harleysville Mut. Ins. Co., No 995 EDA 2003, 2003 WL22839277 (PA. Super. Dec. 1, 2003) (reformation of insurance policy allowed to provide policyholder with benefits he reasonably anticipated under the contract); Rempel v. Nationwide Life Ins. Co., Inc., 320 A.2d 366 (Pa. 1977) (same); Line Lexington Lumber & Millwork Co., Inc. v. Pennsylvania Pub. Corp., 301 A.2d 684 (Pa. 1973) (same); Missouri Pacific R.R. Co. v. American Home Assur. Co., 675 N.E.2d 1378 (Ill. App. Ct.), appeal denied, 684 N.E.2d 1366 (Ill. 1997) (finding that where the insurance company has the same knowledge as the policyholder concerning the likelihood of the loss and chooses nevertheless to insure the policyholder and accept premiums without taking any steps to eliminate coverage for such loss or notify the policyholder of a desire to discontinue insuring its operations without a reduction in coverage to exclude the foreseeable loss, the insurance company is estopped from relying upon the known loss, fortuity, or expected/intended defense); Nestle Foods Corp. v. Aetna Cas. & Sur. Co., 842 F. Supp. 125, 128 (D.N.J. 1993) (same); J.T. Baker, Inc. v. Aetna Cas. & Sur. Co., No. 86-4794, slip op. at 42-43 (D.N.J. Sept. 23, 1993), reprinted in 7 Mealey's Litigation Reports (Insurance) No. 48, at A-21 – A-22 (Oct. 28, 1993) (same); Affiliated FM Ins. Co. v. Board of Educ. of Chicago, No. 90C6040, 1992 WL 409442, at *16 (N.D. Ill. Oct. 6, 1992), rev'd on other grounds , No. 90 C 6040, 1993 WL 189808 (N.D. Ill. Jun. 3, 1993), aff'd , 23 F.3d 1261 (7th Cir.), cert. denied , 513 U.S. 963 (1994) (same); Joseph Simon & Sons, Inc. v. Aetna Fire Underwriters Ins. Co., No. 90-2-14568-9, slip op. 2-3 (Wash. Super. Ct., King Cty. May 14, 1991), reprinted in 5 Mealey's Litig. Reports (Insurance) No. 28, at D-1-D-2 (May 28, 1991) (same); North Bank, 125 F.3d at 987 (“Under the doctrine of reasonable expectations, a 'court grants coverage under the policy if the policyholder, upon reading the contract language is led to a reasonable expectation of coverage.'”) (citations omitted); See Bradley v. Mid-Century Ins. Co., 294 N.W.2d at 163 (“The objectively reasonable expectations of applicants and intended beneficiaries regarding the terms of insurance contracts will be honored even though painstaking study of the policy provisions would have negated those expectations. When members of the public purchase policies of insurance they are entitled to the broad measure of protection necessary to fulfill their reasonable expectations. … Where particular provisions, if read literally, would largely nullify the insurance, they will be severely restricted so as to enable fair fulfillment of the stated policy objective.”) (Internal quotations omitted and emphasis added.)

Additionally, in jurisdictions that recognize a cause of action for bad faith conduct, courts should consider such “fraud in the inducement” as actionable. Indeed, the Uniform Unfair Insurance Practices Act (UIPA), promulgated by the National Association of Insurance Commissioners, includes a provision that forbids insurance companies from misrepresenting the scope of available coverage under insurance policies. See The Unfair Insurance Practices Act, 42 P.S. ' 1171.5 (1999) (defining unfair insurance practices as, among other things, misrepresenting the benefits, advantages, conditions or terms of any insurance policy). Many states look at transgressions of provisions of the UIPA as evidence of bad faith conduct. See, e.g., Miglicio v. HCM Claim Mgmt. Corp., 288 N.J. Super. 331, 340-41 (1995) (applying New Jersey's Unfair Claim Settlement Practices Act to determine the appropriate standard of conduct for insurance companies to follow in settling claims). This creation of an inherently ambiguous policy by its very structure should be considered wrongful.

Conclusion

Purposely misleading conduct is not tolerated under the law. Courts, however, have been less than assertive at ending an inherently deceptive practice that the insurance industry has followed for years. The time to terminate such conduct is now. Following some of the recommended remedies laid out in this article would be a considerable step in that direction.