Opinion ID: 2604158
Heading Depth: 1
Heading Rank: 3

Heading: Resolution of Ambiguity

Text: When the parties' language is ambiguous, the principal goal of contractual construction is to enforce the parties' intent. Jacoby v. Grays Harbor Chair & Mfg. Co., 77 Wn.2d 911, 918, 468 P.2d 666 (1970); Jones Assocs. v. Eastside Properties, Inc., 41 Wn. App. 462, 467, 704 P.2d 681 (1985). This intent is to be determined by viewing the contract as a whole, the subject matter and objective of the contract, all the circumstances surrounding the making of the contract, the subsequent acts and conduct of the parties to the contract, and the reasonableness of respective interpretations advocated by the parties. Stender v. Twin City Foods, Inc., 82 Wn.2d 250, 254, 510 P.2d 221 (1973), quoted in Millican of Wash., Inc. v. Wienker Carpet Serv., Inc., 44 Wn. App. 409, 416-17, 722 P.2d 861 (1986) and Jones Assocs. v. Eastside Properties, Inc., supra at 467. Accordingly, the parties have each argued that certain extrinsic evidence supports their position. Northwestern points out that Greer was told at the time of his purchase that his policy did not cover claims brought by his passenger. On the other hand, Peterson and Greer argue that the letter written by Cecelia Clow represented a binding statement that Northwestern intended the policy to provide such coverage. Unfortunately, this extrinsic evidence is of little aid in clarifying the contract. Although the court may take into consideration the parties' own construction of ambiguous language, [a] construction by one party does not control, and where the acts of the parties indicate contrary understandings, there is no practical construction overcoming the language of the contract. 2 G. Couch, Insurance § 15:53 (2d ed. 1984). The evidence in this case establishes that the parties had contrary understandings. Northwestern, through Clow, interpreted the language to provide coverage to Greer; Northwestern's agent understood it to exclude coverage; and Greer himself expressed no independent understanding but apparently did not object to the agent's interpretation. This represents a reversal of the usual positions in an insurance case, because here the insurer believed that coverage existed while the insured believed, if anything, that coverage did not exist. [3] Therefore, the policy remains ambiguous even after consideration of the extrinsic evidence. In this situation, courts turn to the rule that ambiguities in an insurance contract are resolved against the insurer. Where a provision of a policy of insurance is capable of two meanings, or is fairly susceptible of two constructions, the meaning and construction most favorable to the insured must be employed, even though the insurer may have intended otherwise. This rule applies with added force in the case of exceptions and limitations to a policy's coverage. (Citations omitted.) Shotwell v. Transamerica Title Ins. Co., 91 Wn.2d 161, 167-68, 588 P.2d 208 (1978). See also, e.g., Vadheim v. Continental Ins. Co., 107 Wn.2d 836, 841, 734 P.2d 17 (1987); E-Z Loader Boat Trailers, Inc. v. Travelers Indem. Co., 106 Wn.2d 901, 907, 726 P.2d 439 (1986); Morgan v. Prudential Ins. Co. of Am., 86 Wn.2d 432, 435, 545 P.2d 1193 (1976). Under this rule, Greer's policy must be construed as providing coverage for Peterson's claim. Because there was coverage, Northwestern's refusal to defend Greer constituted a breach of contract.