Bad Faith Insurance: Construction Upholding Whole Contract

The rules of construction require the court to consider the policy as a whole, to give effect to each provision, and to interpret each provision to harmonize with each other. Additionally, a court should avoid an interpretation of a contract that renders portions of the language of the contract meaningless.

“[I]t is a cardinal rule of contract construction that a court should, if possible, construe a contract so as not to render any of its provisions meaningless and in a manner that gives effect to all of the contractual terms.” Pomerance, 288 Ga. App. at 494, 654 S.E.2d at 641.

A court may not construe an insurance policy in a way that renders a provision superfluous. York Ins. Co. v. Williams Seafood of Albany, Inc., 273 Ga. 710, 712, 544 S.E.2d 156, 157 (2001). This Court “must consider [the policy] as a whole, give effect to each provision, and interpret each provision to harmonize with each other.” S. Trust Ins. Co. v. Dr. T’s Nature Products Co., 261 Ga. App. 806, 807, 584 S.E.2d 34, 35-36 (2003).

As a corollary of this rule, when a contract uses two different terms in short sequence, the terms cannot have the same meaning. Ins. Co. of Pennsylvania v. APAC-Se., Inc., 297 Ga. App. 553, 558-59, 677 S.E.2d 734, 739 (2009), citing, Pomerance v. Berkshire Life Ins. Co. of Am., 288 Ga. App. 491, 494-95, 654 S.E.2d 638 (2007) (rejecting interpretation of the word “substantial” that would render it interchangeable with the word “material”), and Tyson v. McPhail Properties, 223 Ga. App. 683, 689, 478 S.E.2d 467 (1996) (concluding that contract “would not have used two different terms in two sequential paragraphs to describe the same thing”).

 Endorsements

An endorsement is “[a] provision added to an insurance contract whereby the scope of its coverage is restricted or enlarged.”  The terms of an endorsement take precedence over printed portions of the policy.  Multiple endorsements can combine with the policy form to create ambiguities.

Burdens

The burden of proof is on the insured to show that there is a loss covered by the policy.  The insurer has the burden of showing that any exclusion applies.  The insurer may not fulfill that burden by showing an absence of evidence, but must show that the exclusion applies “without dispute.”