Opinion ID: 2585539
Heading Depth: 1
Heading Rank: 5

Heading: Principles for Construing Insurance Policies under California Law

Text: We begin our own analysis with a review of the principles that govern the construction of insurance policy language in this state. Interpretation of an insurance policy is a question of law and follows the general rules of contract interpretation. ( Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18, 44 Cal.Rptr.2d 370, 900 P.2d 619 (Waller ).) The fundamental rules of contract interpretation are based on the premise that the interpretation of a contract must give effect to the `mutual intention' of the parties. `Under statutory rules of contract interpretation, the mutual intention of the parties at the time the contract is formed governs interpretation. (Civ.Code, § 1636.) Such intent is to be inferred, if possible, solely from the written provisions of the contract. (Id., § 1639.) The clear and explicit meaning of these provisions, interpreted in their ordinary and popular sense, unless used by the parties in a technical sense or a special meaning is given to them by usage (id., § 1644), controls judicial interpretation. (Id., § 1638.)' [Citations.] A policy provision will be considered ambiguous when it is capable of two or more constructions, both of which are reasonable. [Citation.] But language in a contract must be interpreted as a whole, and in the circumstances of the case, and cannot be found to be ambiguous in the abstract. (Id. at p. 18, 44 Cal.Rptr .2d 370, 900 P.2d 619.) Moreover, insurance coverage is `interpreted broadly so as to afford the greatest possible protection to the insured, [whereas] ... exclusionary clauses are interpreted narrowly against the insurer.' ( White v. Western Title Ins. Co. (1985) 40 Cal.3d 870, 881, 221 Cal.Rptr. 509, 710 P.2d 309.) [A]n insurer cannot escape its basic duty to insure by means of an exclusionary clause that is unclear. As we have declared time and again `any exception to the performance of the basic underlying obligation must be so stated as clearly to apprise the insured of its effect.' [Citation.] Thus, `the burden rests upon the insurer to phrase exceptions and exclusions in clear and unmistakable language.' [Citation.] The exclusionary clause `must be conspicuous, plain and clear.' ( State Farm Mut. Auto. Ins. Co. v. Jacober (1973) 10 Cal.3d 193, 201-202, 110 Cal. Rptr. 1, 514 P.2d 953.) This rule applies with particular force when the coverage portion of the insurance policy would lead an insured to reasonably expect coverage for the claim purportedly excluded. ( Gray v. Zurich Insurance Co., supra, 65 Cal.2d at pp. 272-273, 54 Cal.Rptr. 104, 419 P.2d 168.) [4] The burden is on the insured to establish that the claim is within the basic scope of coverage and on the insurer to establish that the claim is specifically excluded. ( Aydin Corp. v. First State Ins. Co. (1998) 18 Cal.4th 1183, 1188, 77 Cal. Rptr.2d 537, 959 P.2d 1213.)