High court gives benefit of doubt to policyholder in insurance case

The Nevada Supreme Court ruled this week that, when an insurance policy is vague or ambiguous, the policyholder, not the insurance company, should get the benefit of the doubt.

The ruling came in a case where four people died of carbon monoxide poisoning in a room at Casino West Motel in Yerington. The motel owners sought coverage for the deaths but Century Surety denied the claims saying the insurance policy excludes coverage for damages resulting from the discharge of pollutants.

The case ended up in federal district court where a judge ruled the policy exclusions ambiguous and ruled in Casino West’s favor. The case came back to the Nevada Supreme Court from the 9th Circuit Court to interpret how state law applies in this situation.

The opinion states an insurance policy is ambiguous “when applying the policy to the facts leads to multiple reasonable interpretations.”

While Casino West argued the absolute pollution exclusion only applies to traditional environmental pollution and the fact the two sides disagree on the meaning of the language demonstrates the policy’s ambiguity.

The court agreed.

“Taken at face value, the policy’s definition of a pollutant is broad enough that it could be read to include items such as soap, shampoo, rubbing alcohol and bleach,” the opinion states.

“So if an insurance policy has ambiguous terms, this court will interpret the policy to effectuate the insured’s reasonable expectations,” it says.

The ruling was unanimous.