A fundamental canon of construction used to interpret statutes and contracts is noscitur a sociis, which translates to “it is known by the company it keeps.” In Virginia v. Tennessee, 148 U.S. 503, 519 (1893), the United States Supreme Court explained that “the meaning of a term may be enlarged or restrained by reference to the object of the whole clause in which it is used.” In other words, context is key.
Noscitur a sociis is often utilized when terms are used in a list, allowing words to draw meaning from the common elements of the list. To take a simple example, the word “mustang” could have a different intended meaning when used with “ranger” and “explorer” (vehicles manufactured by Ford) than if used with “filly” and “mare” (horses). Finding the common connection between words in a list is helpful in discerning meaning.
Insurance policies have special interpretive rules
An insurance policy is a special kind of contract, one where ambiguous insurance policy language must be interpreted in favor of insurance coverage for the policyholder. Provisions that grant insurance coverage are read broadly, and exclusions to insurance coverage are construed narrowly. In insurance law, noscitur a sociis is most often used to narrow the reach of exclusions, resolving contextual ambiguities in favor of finding coverage. It can also be used appropriately to construe insuring agreements broadly and to identify multiple reasonable meanings of insurance policy language. Noscitur a sociis should never be used to narrow insuring agreements or to expand exclusions by interpretation.
A provision can be ambiguous in context
Because insurance policies must be read as a whole, the doctrine of noscitur a sociis is an appropriate tool to identify an ambiguity in insurance policy language where a plain-meaning reading of isolated provisions could appear, at first blush, to lack ambiguity.
In Flagship Credit Corp. v. Indian Harbor Ins. Co., 481 F. App’x 907, 910-12 (5th Cir. 2012), the Fifth Circuit considered whether statutory damages for violations of the Texas Business and Commercial Code constituted a “penalty” that fell within an exclusion of “fines, penalties or taxes imposed by law.” The court determined that the word “penalties” gained meaning from the words “fines” and “taxes,” which are paid to the government. While the definition of “penalty” could possibly extend to private settlements for civil wrongs of the type prohibited by the Texas Business and Commercial Code, in context, the terms “fines” and “taxes” made clear that the term “penalties” should be limited to payments to the government.
Likewise, in Hunters Ridge Condo. Ass’n v. Sherwood Crossing, LLC, 395 P.3d 892 (Or. Ct. App. 2017), the court used the doctrine of noscitur a sociis to determine that the word “condominium” was ambiguous in the context of a building being used for both residential and commercial purposes. The other listed structures in the policy definition of “condominium”—“apartment” and “townhouse”—were residential in character, shedding “considerable light” on how a purchaser of insurance would interpret the term “condominium.” Accordingly, the court limited the exclusion to wholly residential structures.
Insuring agreements must be read broadly, not limited by interpretation
In considering the term “invasion of the right of private occupancy,” the Third Circuit noted that, while that term had been used in insurance policies for over twenty years, courts had not identified a uniform definition of the term. New Castle Cnty. v. Nat’l Union Fire Ins. Co., 243 F.3d 744, 755 (3d Cir. 2001). Courts had repeatedly found the term to be ambiguous; yet, insurance companies continued to use it. Because the burden is on the insurance company to write a clear policy with adequately defined terms, the court construed the ambiguity against the insurance company.
The dissent reasoned that because the term “invasion of the right of private occupancy” was used in connection with the terms “wrongful eviction” and “wrongful entry,” the coverage grant should be limited to situations involving possessory interests in real property rather than to deprivations of the right to use and enjoy land (like the denial of a building permit, the voiding of a development plan, and the rezoning of land).
The majority was correct to construe the ambiguous language against the insurance company and broadly construe the insuring agreement. It would have been against fundamental insurance law precepts to use noscitur a sociis to narrow the reach of the insuring agreement, as the dissent advocated.
Exclusions can be narrowed through examining context
In Murray v. State Farm Fire & Cas. Co., 509 S.E.2d 1 (W. Va. 1998) and Change, Inc. v. Westfield Ins. Co., 542 S.E.2d 475 (W.Va. 2000), the Supreme Court of West Virginia applied the doctrine of noscitur a sociis to limit a flood exclusion and a landslide exclusion, respectively. The court in Change ruled that a flood exclusion did not apply to water seeping into an office building due to a water main break, limiting “flood” to natural disasters based on the list of words in the exclusion: “Flood, surface water, waves, tides, tidal waves, overflow of any body of water, or their spray, all whether driven by wind or not.” 542 S.E.2d at 479. Likewise, in Murray, the court limited the application of the earth movement exclusion to natural, catastrophic events, rather than man-made events.
In the insurance area, noscitur a sociis must be applied in accordance with the fundamental “rules of the road” in insurance disputes—where coverage provisions are construed broadly, exclusions are construed narrowly, and multiple reasonable interpretations of policy language result in a construction in favor of insurance coverage for the policyholder.