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.

Exercising its newly expanded jurisdiction that now permits Virginia’s intermediate appellate courts to hear insurance coverage disputes, the Court of Appeals recently reversed a lower court decision that allowed a two-year “Suits Against Us” provision to serve as a basis for an insurer’s refusal to reimburse repair and replacement costs incurred more than two years after the date of loss. Bowman II v. State Farm Fire and Casualty Co., Record No. 1256-22-3 (Nov. 21, 2023). CAV (unpublished opinion).