The Washington Court of Appeals recently clarified what evidence is admissible on the question of how to interpret the meaning of undefined terms in an insurance policy. In Spratt v. Crusader Ins. Co., 37 P.3d 1269 (Wash.Ct.App. 2002), the owner of a "pub & eatery," Lawrence Spratt, was sued when an intoxicated patron of the pub caused a motor vehicle accident, seriously injuring Mrs. Burrows and killing one of her children.
Spratt's liquor liability policy, issued by Crusader, had aggregate limits of $2 million, but also had "each common cause" limits of $1 million, described as "the most we will pay for all ‘injury' sustained by one or more persons or organizations as the result of the selling, serving or furnishing of any alcoholic beverage to any one person." (Emphasis added.) Spratt and the injured claimants brought a declaratory judgment action against Crusader to establish that, because the intoxicated patron had had two or more drinks at the pub, the aggregate ($2 million) limit applied to the claims.
The parties filed summary judgment motions. In support of their motion, plaintiffs submitted (1) an affidavit by an English professor and (2) an affidavit by Mr. Spratt. The professor's affidavit stated that he had reviewed the language of the "each common cause" provision and found the term "any alcoholic beverage" to be ambiguous. It could be interpreted to mean any one drink, so that each drink served to the patron was a different common cause. Spratt's affidavit stated that he understood each serving to a customer constituted a different covered event. Crusader moved to strike the affidavits.
The court of appeals agreed with Crusader. Contract interpretation is a question of law for the court, which must give undefined policy terms the common meaning an ordinary purchaser of insurance would give them. Although the court may consult a dictionary, a college professor is not a dictionary. The court approved Crusader's argument that "the average person is not likely to consult an English professor when purchasing an insurance policy."
As to Spratt's testimony, the court noted that extrinsic evidence of the parties' negotiations may be admitted solely to aid in interpreting the words employed, but not to show intention independent of the policy terms. In this case, there were no negotiations, and Mr. Spratt's subjective understanding was irrelevant.
The court held that neither affidavit was admissible and that the trial court had erred in considering them. It also held that the "each common cause" language was not ambiguous and that only one common cause applied to Spratt's liability. The court reversed the trial court and ordered that judgment be entered for Crusader on its motion for summary judgment.