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Policy exclusions can be occasion for insurers to attempt unfair limitations on coverage, P.2

Previously, we briefly looked at a federal case involving a dispute about insurance coverage for lead and copper exposure in a school district’s water supply. As we noted, at issue in the case were insurance policy exclusions for pollution and lead contamination coverage.

Policy exclusions are an important way insurance companies limit their coverage obligations, but they can also be an occasion for taking advantage of insured. Fortunately for insured, California law is rather in their favor. Whenever a claim is made, an insured has the initial burden of demonstrating that the claim is covered under the terms of the policy. If the insurer disputes the claim, it has the burden of proving the claim is excluded. These burdens are satisfied differently, though. 

Ambiguous policy language is almost always resolved in favor of the insured, even if the insured is sophisticated and had substantial bargaining power with the insurer. Because of this requirement for clear language, attempts to seek broad application of exclusions usually fail. Insurance companies are required to clearly identify the scope of the exclusion.

Exceptions to exclusions are also interpreted, where ambiguous, in favor of the insured. Insurers, therefore, have the burden of clearly identifying exclusions to coverage and limiting or foreclosing any possible exceptions. Disputes over exclusions or limitations in coverage are resolved in favor of the insured unless the insurer is able to show that its interpretation is the only reasonable one.

Although insured have the advantages described above, insurance companies typically have more bargaining power in negotiating insurance coverage agreements in the first place, and sophistication in disputing coverage matters when insured disagree with coverage decisions. Businesses and individuals who have been wronged by an insurance company over coverage exclusions, or any other coverage-related matter, should work with an experienced attorney to ensure their rights are zealously advocated. 

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