Die another day: How a two-word ambiguity sent an insurer to the Court of Appeal

In 2023, a dispute over an insurance claim went all the way to the High Court and the Court of Appeal. The dispute hinged on the interpretation of two words in one definition. Photo by Romain Dancre | Unsplash.

When we work with an insurer to get the WriteMark® on their documents, we always anticipate a bit of pushback from the legal team. This conflict plays out respectfully, through document comments, tracked changes, and meetings. It’s an essential and robust part of a good editing process.

We bring the plain language expertise; lawyers bring their intricate legal knowledge and fine-tuned risk lens. Together, we strike a balance in the text that’s both reader-friendly and secure against unintended liability.

In 2023, a dispute over an insurance claim went all the way to the High Court and the Court of Appeal. The details of the case demonstrate the importance of both plain language and legal rigour.

The $1.2 million question

Most insurance disputes don’t make the news. An RNZ headline captures the absurdity that propelled this one to newsworthiness.

Man who didn’t die loses court battle to get life insurance paid out

RNZ, 9 August 2023

Here’s the story: a Christchurch man was diagnosed with cancer in 2019. Thankfully, due to the treatment he received, he was still alive 4 years later.

But he argued that, according to the wording of his insurance policy, he had been diagnosed with a ‘terminal illness’ and was therefore owed a $1.2 million payout from his insurer.

The debate hinged on the following definition.

terminal illness and terminally ill means

• • • in the opinion of a specialist medical practitioner; and
    • if we require, in the opinion of one of our approved specialist medical practitioners; and
    • in our assessment, having considered medical or other evidence we may require,

your life expectancy is, due to sickness and regardless of any available treatment, not greater than 12 months.

The construction and conditions of the definition make it tricky to wade through, but the meaning seems relatively clear, right? You’re ‘terminally ill’ if your doctor says you’re going to die within 12 months, regardless of the treatment you receive.

But the claimant had his own interpretation. Can you spot the ambiguity?

Two readings with opposite meanings

In the definition, the phrase ‘regardless of’ can be interpreted in opposite ways.

• You will die within 12 months, despite the effect of treatment (the insurer’s intent).
• You will die within 12 months, ignoring the effect of treatment (the claimant’s read).

Because he would have died within 12 months without treatment, the Christchurch man argued he was terminally ill in 2019. The insurer, naturally, disagreed.

The courts shared the insurer’s interpretation, which most of us can probably agree is the more likely read. But a drawn-out dispute and multiple court appearances were no doubt a headache the insurer would have preferred to avoid.

And, with a plainer definition, that might have been possible.

Plain language meets legal reality

If we were working with the insurer to get the WriteMark® on this life policy, we would give them a few options to stamp out the ambiguity. We’d get their feedback and suggestions, revise, and rework until we landed on a definition that was crystal clear and watertight.

For example, we might suggest the following rewrite (setting aside the diagnosis criteria for conciseness).

Terminal illness or terminally ill means

you’re expected to die from an incurable sickness within 12 months.

In our view, describing the sickness as ‘incurable’ captures the original intent of ‘regardless of available treatment’ much more concisely.

But say we get this feedback from the legal review:

This wording is concise, but ‘incurable’ is its own can of worms and would need to be defined. Please revert to original wording.

We would push back on this, because we know the original wording has an ambiguity that makes the cover unclear for the reader. But we respect that the lawyers don’t want to touch ‘incurable’ — perhaps a legal precedent or regulation is steering them away from that term. That’s their area of expertise, not ours.

So, we suggest a new version that’s closer to the original, but resolves the ambiguity.

Terminal illness or terminally ill means

you’re expected to die from sickness within 12 months, even if you receive treatment.

This version gets the legal sign-off. It’s clearer for the reader, safe for the insurer, and helps the document reach WriteMark® standard.

Ambiguity is its own liability

As the case above shows, ambiguity in an insurance policy isn’t just a problem for the reader. It can be a liability for the insurer, too.

Although they won in court, we suspect the insurer in this case would have preferred not to have the claim disputed in the first place.

Any change to the wording of a legal document can introduce risk. But we believe carefully crafted plain language — in collaborative conversation with legal expertise — reduces risk, as well as making life easier for readers.

Contact us about working together to achieve the WriteMark® on your documents

 

New research uncovers the depth of the ‘no-understanding’ problem in insurance contracts

Insurance customers are often frustrated to learn the limits of their cover after an event. New research shows how deep the problem goes. Photo by Javin Rungsung | Pexels.

People working in insurance know that insurance contracts have a fundamental flaw: their customers don’t read them.

This is a problem because a contract depends on all parties agreeing to its terms. If a customer doesn’t read their policy, they can’t really agree to it. This can cause disputes, which often lead to costly court battles.

Legal scholars call this the ‘no-reading’ problem.

But the no-reading problem has a lesser-known counterpart: the ‘no-understanding’ problem. The no-understanding problem suggests that consumers who do read their contracts can’t reliably understand them.

Now, new research from the University of Michigan sheds further light on just how severe the no-understanding problem is. The authors also offer a few practical solutions.

The study tells us a few important things about how customers read insurance policies.

• Poorly written policies can be worse for readers’ understanding than no policy at all.
• Partially reading or partially understanding is its own challenge, and the standard policy structure makes it worse.
• Readers with a more sophisticated understanding of insurance may struggle just as much as ‘unsophisticated’ readers.

Not reading versus not understanding

They may be unimaginatively named, but the no-reading and no-understanding problems are important to distinguish. That’s because they have different implications.

For example, consumers can shoulder some of the blame for not reading their contract — they are part of the no-reading problem. But, if they try to read a contract and find it too hard to understand, more blame lies with the insurer.

That means the problems have different solutions, too. For example, requiring consumers to scroll to the bottom of an agreement before they click ‘I agree’ may make them more likely to read it (let’s be honest — it probably won’t). But that requirement won’t help consumers understand the agreement if it’s poorly written.

The study: can people tell if a scenario is covered?

To find out just how big the no-understanding problem is, the researchers asked 2,500 American insurance customers to work out whether seven hypothetical scenarios would be covered by a standard home insurance policy.

Respondents were split into two groups.

• The control group had to guess whether an event would be covered without referring to an insurance policy.
• The treatment group had to use an excerpt from a real-world insurance policy to work out whether the event would be covered.

 

Surprisingly, the treatment group did not fare much better than the control group. In fact, for two out of the seven scenarios, the group without the wording did better.

In other words, having the insurance policy in front of them actually made it harder for respondents to work out whether an event would be covered in some situations. The difficult wording was actively detrimental to their understanding of coverage.

‘While it has long been evident that most consumers do not attempt to read standard consumer forms,’ the authors write, ‘our research indicates that even when they do, they often fail to fully grasp the terms.’

What the study tells us

The researchers found that part of the problem is what they call ‘a partial-reading or partial-understanding problem’.

This problem arises when a consumer reads or understands one part of their policy, but not another part that modifies the first. For example, they might read that their house is covered against flooding, but not read or understand a relevant exclusion for retaining walls.

This incomplete understanding often leads, as you can imagine, to very unhappy customers.

The partial-reading or partial-understanding problem points to a challenge inherent in the standard structure of insurance policies. Benefits are one section; exclusions are another. Customers who give up reading on page five may not realise their home becomes ineligible for cover on page six.

But some readers are more sophisticated, right?

The researchers also broke their findings down by race or ethnicity, income, and ‘sophistication’. Sophisticated respondents were those with a higher education who claimed to have experience reading and understanding insurance policies.

This deeper analysis yielded more surprising results. These ‘sub-populations’ within both the control and treatment group all performed similarly. In other words, even people who thought they had a good grasp of insurance found it hard to tell if a scenario would be covered.

These findings may be a bit of a reality check for some insurers. We often hear that insurance companies know they have a sophisticated or specialist audience. But, according to this study, we can’t assume that more educated or wealthy customers will be more likely to understand a complex policy wording.

What we can do with this information

The authors also suggest a range of possible solutions for lawmakers and regulators. They could impose readability standards on insurers. They could also look to AI. ‘Smart readers’ using generative AI tools like Chat GPT could create simple summaries of cover.

Finally, insurers could make extra effort in the policy wordings themselves to solve understanding problems, like adding contextual ‘warnings’ throughout the text. These would be eye-catching messages designed to:

• address common misunderstandings
• remind readers that they may have an incomplete understanding if they don’t read a whole section.

 

It may go without saying, but we see the WriteMark® as part of the solution, too. Readability requirements across 25 criteria — from big picture to language and presentation elements — all make insurance policies easier to understand.

For insurers, the overall lesson of this research is simple: there’s no point getting customers to read your policy if they won’t understand it.

 

Check out the the article, ‘Read But Not Understood? An Empericial Analyis of Consumer Comprehension In Homeowners Insurance’