On July 3, in a 4-3 decision, the Florida Supreme Court found in favor of a class of Insureds who disputed the application of an Automatic Benefit Increase Percentage provision (Provision) set forth in their home healthcare policies issued by Pioneer Life Insurance Company, later succeeded by Washington National Insurance Corporation (Insurer).

The Insurer argues the Provision contained in the Insureds’ policies applies only to the home healthcare daily benefit amount and not to the per occurrence maximum benefit amount or the lifetime maximum benefit amount. Each policy also includes a Certificate Schedule (Schedule) that sets forth the coverage amounts for each of the Insureds and provides an automatic 8% yearly increase in benefits. The Insureds argue that the increase, as set forth in the Schedule, also applies to the per occurrence maximum benefit and   the lifetime maximum benefit, as well as to the home healthcare daily benefit.

A federal district court concluded the application of the Provision was ambiguous and granted summary judgment to the Insureds after concluding Florida law required construing ambiguous insurance contracts in favor of coverage. On appeal, the Eleventh Circuit agreed that the policy was ambiguous, and recognized Florida’s well established precedent that “[a]mbiguous policy provisions are interpreted liberally in favor of the insured and strictly against the drafter who prepared the policy.” Auto-Owners Ins. Co. v. Anderson, 756 So. 2d 29, 34 (Fla. 2000). However, the Eleventh Circuit concluded that “the correct approach under Florida law in resolving the ambiguity is unclear.” Ruderman v. Washington National Insurance Corp., 571 F.3d at 1211.  Citing Excelsior Ins. Co. v. Pomona Park Bar & Package Store, 369 So. 2d 938 (Fla. 1979), which predated Anderson,  the Eleventh Circuit questioned whether, under Florida law, a court should consider  extrinsic evidence concerning the terms of the policy when an ambiguity is present.

Answering a multi-part certified question from the Eleventh Circuit, the Florida Supreme Court majority found the policy is ambiguous and, because of this ambiguity, must be construed against the insurer and in favor of coverage. The majority held that Excelsior does not require a court to consider extrinsic evidence before an insurance policy is found to be ambiguous and construed against the insurer. Instead, the majority said, “where, as here, one reasonable interpretation of the policy provisions would provide coverage, that is the construction which must be adopted.” As a result, the majority found the Provision applies to daily benefit, the per occurrence maximum benefit, and the lifetime maximum benefit.

A dissenting opinion disagreed that the policy is ambiguous, arguing the Provision, by the plain language of the policy, applies only to the daily benefit, not the per occurrence and lifetime maximum caps. Even assuming an ambiguity in the policy, Florida precedent requires review of extrinsic evidence to resolve the ambiguity if possible, according to the dissent.

On the question of ambiguity, the majority agreed with the Eleventh Circuit’s reasoning that the Schedule “sets forth the exact coverage amounts specific to each of the Insureds and provides a level of differentiation between each Policy.” Ruderman, 671 F.3d at 1210. As a result, the Insureds may place a 

greater reliance on the Schedule, and therefore, the Schedule should make clear which benefits amounts the Provision applies to.

The dissent argued, however, that the majority did not look at the policy as a whole inclusive of the Schedule, but rather looked to the plain text of the Schedule apart from the supporting policy language, incorrectly concluding an ambiguity exists.

Both the majority and dissent agreed that review of extrinsic evidence is not warranted to determine if an ambiguity exists. Extrinsic evidence should not be considered to make unambiguous policy language ambiguous. According to the dissent, however, the Eleventh Circuit was asking a different question—i.e., whether a court should consider extrinsic evidence to attempt to resolve an insurance policy that is ambiguous on its face. “[O]ur precedent provides that an ambiguous contract is construed against the insurer only as a last resort, meaning only after all available construction aids, including extrinsic evidence, fail to resolve the ambiguity,” the dissent wrote. When extrinsic evidence resolves the ambiguity, the need to apply what the dissent characterized as “the last-resort rule of construction against the drafter” no longer arises.

Washington Nat’l Ins. Corp. v. Ruderman, No. SC12-323 (Fla. July 3, 2013).