I have always liked the doctrine of contra proferentem, not only because it is a rule that often benefits policyholders, but because it sounds like a made-up or misused latin term that could have been used on Johnny Dangerously's "death walk."
Apparently, not everyone likes contra proferentem as much as I do. Though PA courts generally apply the rule of contra proferentem to insurance contracts resulting in the construction of ambiguous policy terms against insurers, a recent case in the Eastern District of PA demonstrates that there are exceptions to this rule.
Prudential Ins. Co. v. Prusky involved a variable universal life insurance contract originally purchased by Stephen Prusky and, later, transferred to his father, Paul. Without belaboring the details, a dispute arose regarding Prusky's right and ability to transfer in and out of various investment options. Both parties argued that the contract was not ambiguous. Nevertheless, they advanced different interpretations of the contract. The court, looking to extrinsic evidence to determine if the contract was ambiguous, found that the evidence suggested ambiguities were present.
Prusky argued that the rule of contra proferentem applied, as it typically does where insurance policies are ambiguous. Nevertheless, the court, finding that the Prusky's were "sophisticated investors with specific experience in mutual funds and variable life insurance" and that the parties engaged in contract negotiations regarding the transfer issues before the court, declined to apply the rule, citing Burns Mfg. Co. v. Boehm (Pa. 1976) (contra proferentem is not intended "as a talismanic solution to the construction of ambiguous language"); RESTATEMENT (SECOND) OF CONTRACTS § 206 (Interpretation Against the Draftsman, Reporter's Note cmt. a noting that "the rule has less force when the other party has taken an active role in the drafting process, or is particularly knowledgeable.")
Thus, while the contra proferentem rule can be a valuable tool in pursuing a claim against an insurer, policyholders with particular expertise in the type of insurance at issue and/or who negotiated the terms at issue should not expect that a court will always blindly apply this rule.
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