What is the typical effect of ambiguity in an insurance contract?

Ambiguity in an insurance contract typically favors the insured due to the principle of contra proferentem. This legal doctrine holds that if a contract’s language is unclear or ambiguous, it should be interpreted in favor of the party that did not draft the contract, which is usually the insured. Insurers are responsible for providing clear terms and conditions, and when ambiguity arises, courts and regulatory bodies often lean towards interpretations that protect the interest of the insured.

This principle is particularly relevant in the insurance context because the insurer has more expertise and resources in drafting policies, and the insured might not fully understand the complex language often used. Thus, when a dispute arises over ambiguous terms, the interpretation that benefits the insured is favored in order to uphold fairness and protect consumers in the insurance marketplace. This approach helps ensure that the insured receives the coverage they were likely expecting when they entered into the agreement.