That’s Gibberish! — Interpreting Incomprehensible ContractsPosted: September 2, 2012 Filed under: General Law Leave a comment
U.S. District Court Judge Mark Kravitz finally said–in a formal, written opinion–exactly what so many people really think about language in insurance contracts: Its “gibberish.” Judge Kravitz was describing a paragraph in a contract at issue in a coverage dispute arising out of the horrible child sex abuse cases involving the late Dr. George Reardon and St. Francis Hospital.
How should a court interpret gibberish in a contract? At oral argument before Judge Kravitz issued his decision, the parties disputed whether the court should apply the principle that ambiguous language in an insurance contract must be interpreted in favor of the insured. Judge Kravitz rejected that principle:
When a provision is incomprehensible rather than simply vague, the more applicable interpretive principle is to give operative effect to every provision of an insurance policy that is susceptible to a reasonable construction. Provisions which are meaningless–despite having been negotiated by two sophisticated parties, as here–must necessarily be ignored. Rather than drawing inferences for any party based on phrases that are unparsable, the Court will simply give operative effect to as much of the policy language as it can.
So, we now have two competing interpretive principles to deal with in the law of contracts. One says that all provisions in a contract must be given meaning because parties do not intend to insert meaningless provisions in a contract. The other says that if a provision is incomprehensible–if it is gibberish–the court may ignore it entirely. So much for canons of construction.