Hunton Insurance Recovery Blog

A recent decision by the Fifth Circuit illustrates an important principle in insurance coverage disputes: The wording of insurance policies and basic grammar principles are important to coverage determinations, placing the onus on the insurers that draft insurance contracts to use clear and unambiguous language, especially in seeking to deny coverage based on exclusions. In Paloma Resources, L.L.C. v. Axis Ins. Co., No. 22-20228 (5th Cir. July 7, 2025), the insurance policy included an intellectual property exclusion, which used the phrase “actual or alleged” before listing a series of clauses. The court held that use of “the” immediately before the “misappropriation of ideas or trade secrets” clause in the exclusion meant that it was reasonable to interpret the exclusion as applying only to actual misappropriation, rather than broader actual and alleged misappropriation. Because the policyholder’s narrower reading of the exclusion based on the word “the” was reasonable, the court was required to adopt it, regardless of whether the insurer’s preferred, narrower interpretation was equally or even more reasonable.

In Yahoo, Inc. v. National Union Fire Insurance Co. of Pittsburgh, PA., the California Supreme Court confirmed that contra proferentem and other rules of policy interpretation apply even to language insurers argue is “manuscript” as long as the provisions in question use standard-form policy terms. There, the United States Court of Appeals for the Ninth Circuit asked the California Supreme Court to answer a certified question regarding whether a commercial general liability policy (CGL) covers defense costs related to claims under the Telephone Consumer Protection Act of 1991 (TCPA) (47 U.S.C. § 227). Following a thorough and thoughtful assessment of California law involving fundamental rules of policy interpretation, the California Supreme Court ruled in favor of the policyholder, Yahoo, Inc. (“Yahoo!”). The authors of this article represented amicus curiae, United Policyholders, in support of Yahoo! before the California Supreme Court.