Insurance companies have long experience litigating the terms of their policies so they know how the courts define standard terms. (For this reason alone, filing against an insurance company is not a do-it-yourself project; seek the advice of an attorney who is a veteran in the field.) This experience gives them an advantage in drafting policies and selecting the language they find most advantageous. As a potential purchaser of insurance, you have no opportunity to negotiate the terms of your contract. You must accept the wording of the insurance company. Because of this one-sided contractual arrangement, the law provides that any ambiguity or unclear wording will be resolved in favor of the insured and against the insurance company. Unfortunately, you may have to sue if the wording is ambiguous, and if the courts rule that the wording is clear and explicit, the policy will be enforced as written

Courts tend to interpret poli cy language the way the average person who is neither a lawyer nor an insurance expert would understand it. Their test is what the words in the policy mean to an objective person. Generally courts seek to enforce coverage if a fair, honest and reasonable interpretation of the policy wording will benefit the insured.

The language for policy exclusions and limitations that deny coverage must be clear and unmistakable. One reason that exclusions and limitations always are narrowly construed. If the wording could have more than one meaning, courts will adopt the narrowest interpretation in the interests of the insured.

When advertising and solicitation materials used by an insurance company are unfair or deceptive, some, but not all, states provide legal protection for the insured. Most states do prohibit insurance companies from engaging in such conduct and may assess penalties if they do. In most states, the insured can only sue the insurance company over the words in the policy and the law does not provide the insured with a private cause of action against the company for misleading advertising. The insured, however, may have a private cause of action against an agent who uses unfair or deceptive materials.

Bad Faith

Every insurance contract contains an unwritten but implied covenant of good faith and fair dealing in handling claims. Courts will read this promise into the contract and a violation of this implied promise exposes the insurance company to a charge of bad faith.

Improperly denying benefits, inappropriately delaying payments and paying less than owed are examples of bad faith acts. The insured does not need to show that an insurance company intended to cause harm in a breach of covenant case, only that the insurance company failed to honor the contractual agreement and had no cause not to pay what was due.

When an insured person successfully shows that an insurance company breached the implied covenant of good faith and fair dealing, that person can recover all damages caused by the breach. These may include, in addition to the benefits due, damages for emotional distress and, possibly, punitive damages to punish the company.

Your best protection against any future problems with your long term care policy is to carefully read every word of the actual insurance policy and be sure that you fully understand how the policy is going to work for you. (Read our article on "Avoiding the Potential for Fraud and Abuse".) If, however, you do have problems when you begin filing claims, the courts will be sympathetic to the fact that you entered into a one-sided contractual agreement with the insurance company and will hold the insurance company to a high standard in any litigation.