Confronted with an ambiguity in its own insurance policy, an insurance company will sometimes attempt to rewrite its policy long after it first issued that policy.  Last week, the Pennsylvania Superior Court again rejected such gamesmanship, emphasizing that, when interpreting an insurance policy, a court “must examine and construe the policy as it exists, not the way [the insurer] wishes it had drafted it with the benefit of hindsight.”  In Rourke v. Pennsylvania National Mutual Casualty Insurance Company, 2015 PA Super 100 (Pa. Super. Ct. 2015), the Superior Court reaffirmed the long-standing principle that a court cannot rewrite a policy to include terms an insurer omitted.

In Rourke, a 19-year-old (former) foster child was severely injured in an auto accident.  Seeking coverage pursuant to their personal auto policy, the (former) foster parents argued that that policy afforded coverage because the 19-year-old was a “family member.”  “Family member” was defined in their policy to mean “a person related to you by blood, marriage or adoption who is a resident of your household.  This includes a ward or foster child.”  The policy, however, failed to define the terms “foster child” or “ward.”  In relevant part, the Court’s analysis focused only on whether the 19-year-old was a “ward.”  The insurer claimed that the 19-year-old was not a “ward” because he was not a minor at the time of the accident.  The Pennsylvania Superior Court soundly rejected this argument:

Here, the insurance policy included the term “ward” within the broader term “family member.”  We recognize that the term “ward” may carry with it potentially specialized legal meanings when defining legal duties among parties.  However, these contexts, not being defined in the insurance policy, are not likely to be readily understood by the average insured, especially as the term is included expansively as part of the more familiar term “family member.”  Thus, an insured, relying on a general understanding of the relational nature of a ward, may not be alerted of a need to take other legal action to extend coverage to a household member.

As noted above, our cases unequivocally state that if an insurance policy contains an ambiguous term, the policy is to be construed in favor of the insured to further the contract’s prime purpose of indemnification and against the insurer, as the insurer drafts the policy and controls coverage.  [The insurer], as the drafter of the policy, elected not to include a definition of “ward” in the policy.  Nothing prevents [the insurer] or any insurer from drafting its policies and definitions more precisely or narrowly to avoid future litigation.  However, it did not do so in this case.  This Court must examine and construe the policy as it exists, not the way [the insurer] wishes it had drafted it with the benefit of hindsight.  The law does not permit [the insurer] to give a definition in its policy and then post hoc, after a loss is reported, add an additional textual limitation onto the same term.  Stated another way, [the insurer] cannot add an age restriction onto the term “ward” that is not contained within the policy at the time of its issuance.  (Internal quotations and citations omitted; emphasis added).

Although Rourke involved a personal auto policy, the principles set forth by the Superior Court in this case apply with equal force to other types of insurance policies.  For example, 10 years ago, addressing a commercial-lines policy, the Superior Court, in 401 Fourth St., Inc. v. Investors Insurance Group, 823 A.2d 177, 179 (Pa. Super. Ct. 2003), aff’d, 879 A.2d 166 (Pa. 2005), similarly stated that “it is not the trial court’s responsibility to rewrite the policy to protect the insurer. If [the insurer] wanted to limit its risk … it could easily have done so.”

Accordingly, policyholders – in Pennsylvania and elsewhere – should always be on the look out for, and be prepared to push back against, an insurance company that attempts to rewrite its policy years after issuance.  Simply put, as the Superior Court observed, an insurance company is bound by the policy it issued, not by the policy it wished has issued.