Texas Court Rules in Favor of Consumer in Policy Interpretation Case

Feb 24, 2017 | Historic Bulletins

Understanding is key when it comes to insurance policies, and a new Texas Supreme Court decision has now been added as precedence when it comes to policy interpretation. The decision was rendered January 27, 2017.

The court determined in Nassar v. Liberty Mutual Fire Insurance Co. that if a policyholder’s interpretation of coverage is reasonable, it must be adopted. This is the case even if the insurer’s interpretation is also, or even more, reasonable than the one offered by the insured.

The case concerns Elie and Rhonda Nassar, who filed a claim under their homeowner’s insurance policy with Liberty Mutual after Hurricane Ike damaged their property in Richmond, Texas, in 2008. A dispute arose over which part of the policy covered the fencing on the Nassars’ property, which was damaged significantly, after Liberty Mutual refused to cover the entire cost of repairs.

The Texas Supreme Court, drawing from precedent, declared that if the policy is ambiguous, meaning that it is subject to multiple meanings after applying the rules of interpretation, then the court must rule in favor of the policyholder. However, in this case, the court determined that the policy was not ambiguous, as the Nassars’ analysis was reasonable and Liberty Mutual’s was not. Thus, the decision was reversed and granted in favor of the insured.

Cases such as this are vital when it comes to clarification in insurance policies, and this ruling will benefit consumers and insurers in future policy negotiations. SLTX will remain informed of this and similar issues, and will continue to apprise its stakeholders of important events in the legal arena that impact the industry.