Most insurance disputes impacting business leaders begin the same way:
The insurer reads the policy one way.
The company reads it differently.
Who wins?
Billions of dollars in coverage disputes turn on that question each year. And many businesses walk away from coverage prematurely because they misunderstand how courts approach policy interpretation.
Let’s talk about one of the most important doctrines in insurance law.
The Rule: Contra Proferentem
Every state recognizes the doctrine of contra proferentem — Latin for “against the offeror.” The rule is simple:
If a written contract has more than one reasonable meaning, courts interpret it against the party that drafted it.
The doctrine has also been recognized at the federal level by the Supreme Court of the United States.
This rule matters enormously in the insurance context.
Why It Matters in P&C Insurance
Property and casualty policies are almost always:
- Drafted by insurers
- Built from standardized forms
- Offered on a “take it or leave it” basis
Even when sophisticated companies negotiate which forms or endorsements are included, the underlying language is typically authored by the insurer.
That makes insurers the drafter.
And under contra proferentem, drafters bear the risk of ambiguity.
What Businesses Often Get Wrong
When an insurer denies a claim based on its interpretation of policy language, many companies assume:
- The insurer’s reading must be correct.
- The insurer likely has the “better” argument.
- Fighting over language is futile.
That is not the legal standard.
The policyholder does not need to prove its interpretation is superior.
It does not need to prove the insurer’s reading is unreasonable.
It only needs to show that its interpretation is reasonable.
If two reasonable interpretations exist, courts resolve the ambiguity against the insurer.
That changes the leverage calculus dramatically.
The Practical Takeaway
If you receive a claim denial and the coverage question feels close:
- Do not assume the insurer’s interpretation controls.
- Do not assume ambiguity hurts you.
- Do not walk away without evaluating whether your reading is reasonable.
In many disputes, the policyholder’s burden is lower than business leaders think.
Billions of dollars turn not on who has the best reading — but on whether the policyholder has a reasonable one.
Understanding that distinction can mean the difference between absorbing a loss and enforcing the coverage you paid for.