On July 3, 2013 the Florida Supreme Court issued an opinion responding to four certified questions from the Eleventh Circuit relating to whether, in a home health care benefit policy, an automatic daily benefit increase of 8% applied only to the “Daily Benefit,” or whether the 8% increase also applied to the “Lifetime Maximum Benefit Amount” and the “Per Occurrence Maximum Benefit.” While three of the certified questions related to the specific policy form in this class action, one sub-part certified the following question of broader significance:
B. If an ambiguity exists in this insurance policy—as we understand it does—should courts first attempt to resolve ambiguity by examining available extrinsic evidence?
The Eleventh Circuit inquired whether, under Florida law, a court should consider extrinsic evidence to clarify or resolve an ambiguity in an insurance policy. . Justice Labarga wrote a plurality opinion joined only by Justices Pariente and Perry. Justice Lewis concurred only in the result, indicating that he did not join in the plurality’s reasoning, but Justice Lewis did not explain his reasoning in joining in the result. Chief Justice Polston wrote a strong dissent, joined by Justices Quince and Canady.
The plurality opinion stated that “under Florida law applicable to construction of insurance policies, because the policy is ambiguous it must be construed against the insurer and in favor of coverage without resort to consideration of extrinsic evidence.” (Slip opinion, at 2.) The plurality restated certain principles of insurance policy construction, including that unambiguous policy language must be enforced as written, the policy should be read as a whole, every provision should be given effect, and an ambiguity exists only “if the language is ‘susceptible to more than one reasonable interpretation, one providing coverage and the other limiting coverage.’” (Id. at 8.) The plurality concluded that the policy at issue could reasonably be read such that the 8% increase was either applicable or inapplicable to the per occurrence maximum benefit and lifetime maximum benefit. (Id. at 9-10.) The plurality further explained that “where the provisions of an insurance policy are at issue, any ambiguity which remains after reading each policy as a whole and endeavoring to give every provision its full meaning and operative effect must be liberally construed in favor of coverage and strictly against the insurer.” (Id. at 12.)
In a lengthy dissent, Chief Justice Polston, joined by Justices Quince and Canady, disagreed, not only with the finding of ambiguity, but also concluding that “if the policy was ambiguous, our precedent requires allowing the admission of extrinsic evidence to determine the policy’s meaning.” (Slip opinion, at 18.) The dissent opined that Florida law provides that, after a finding of ambiguity, 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.” (Id. at 23.) The dissent cited numerous Florida state and federal cases in support of that rule. The dissent also criticized the plurality opinion for failing to apply the rule that requires the schedule to be read together with the entire policy, and that when so read, the policy was not susceptible to more than one meaning, and was not therefore ambiguous. Finally, the dissent argued that the plurality opinion (which the dissent labels as a “majority,” although it was not joined by 4 of the 7 justices) “improperly rewrites the parties’ contract to provide for coverage for which the parties did not bargain and the insureds did not pay.” (Id. at 21.) Chief Justice Polston concluded in his dissent “by applying the rule that ambiguities are construed against the insurer other than as a rule of last resort, the majority recedes from precedent and prematurely abandons the search for the parties’ intent.” (Id. at 31.)
This opinion is likely to create some confusion in the lower courts. Three justices concluded that extrinsic evidence could not be considered in resolving the ambiguity. Three justices concluded that extrinsic evidence could be considered if there were an ambiguity. Justice Lewis joined with the plurality in the result, but declined to join in the reasoning. Justice Lewis might well have concluded, for example, that the extrinsic evidence offered in this case could not resolve the ambiguity, or that extrinsic evidence was inappropriate in this case but not in every case. The contours of Florida law on this issue will have to await further guidance. In the meantime, insurers may want to focus their efforts on demonstrating that an ambiguity does not exist, especially when relevant principles of contract construction are applied. In that analysis, a strong majority of the Florida Supreme Court has agreed that all relevant principles of contract interpretation may be applied before deciding whether or not an ambiguity exists.