The federal courts are bound to follow the insurance law of the state in which the contract is to be enforced. The federal judge will look to the supreme court of that state and analyze its decisions. The federal court is generally bound by those decisions. This rule is not always easy to follow. The decisions of the courts of appeal are fond of saying words to the effect that A a contract of insurance is just a contract and shall be interpreted according to the rules and statutes dealing with contract law.
Insurance contracts are so unique, it is often difficult for the courts to follow that rule.
There is contract law that most of the world deals with and then there is insurance law. This is a fancy word for interpret the policy. Another example is fraud. In order to be a victim of fraud you must have been told a lie, believed that lie and depended on it , acting on the lie to your harm or detriment. When you give an insurance company a statement under oath, the insurance company already knows the answers to the questions that you are asked.