Facts
- Florida insureds bought limited-liability home-health-care policies providing reimbursement subject to three dollar limits: a daily benefit, a per-occurrence maximum, and a lifetime maximum.
- The policies included an “Automatic Benefit Increase Percentage” provision that increased benefits annually if the insured paid an increased premium.
- A dispute arose over whether the automatic increase applied only to the daily benefit or also to the per-occurrence and lifetime maximums.
- The insureds, as a class, sued seeking the broader reading that increased all three benefit amounts.
- The insurer argued for a narrower reading and sought to use extrinsic evidence (e.g., intent and materials outside the policy) to support its interpretation.
- A federal district court found the policy ambiguous and the controlling Florida law on the use of extrinsic evidence to resolve ambiguity uncertain.
- The federal appellate court certified questions of Florida law to the Florida Supreme Court.
Issues
- Whether the policy is ambiguous as to whether the Automatic Benefit Increase Percentage applies only to the daily benefit or also to the per-occurrence and lifetime maximum benefits.
- If ambiguous, whether a court should first attempt to resolve the ambiguity by considering extrinsic evidence before construing the ambiguity against the insurer.
- Applying Florida rules of insurance-policy construction, whether the automatic increase applies to the per-occurrence and lifetime maximum benefits.
Decision
- The court answered that the policy’s Automatic Benefit Increase Percentage applies to the dollar values of both the lifetime maximum benefit amount and the per-occurrence maximum benefit.
- The court agreed the policy language is ambiguous on the scope of the automatic increase.
- The court held that, once ambiguity remains after applying ordinary textual rules of construction, Florida courts do not consider extrinsic evidence to resolve it.
- The court resolved the ambiguity against the insurer and in favor of coverage, adopting the broader interpretation.
Legal Principles
- Insurance policies are construed as a whole, giving effect to all provisions; ambiguities are construed strictly against the insurer and liberally in favor of coverage.
- An ambiguity exists when policy language is reasonably susceptible to more than one interpretation after applying ordinary, text-based rules of contract construction.
- In Florida insurance cases, if ambiguity remains after textual construction, courts construe the ambiguity against the insurer without resort to extrinsic evidence.
- Prior precedent on “ordinary rules of construction” does not require consideration of extrinsic evidence before applying contra proferentem in the insurance context.
Conclusion
The Florida Supreme Court clarified that ambiguous insurance-policy language, once unresolved by text-based construction, is construed in favor of coverage without using extrinsic evidence, and it interpreted the automatic benefit increase to apply to the policies’ per-occurrence and lifetime maximum benefits as well as the daily benefit.