Lack of Emphasis on Defined Terms May Render Insurance Policy Ambiguous
In Meridian Leasing, Inc. v. Associated Aviation Underwriters, an all-risk insurance policy contained a definitions section and specified that phrases in boldface were given special meaning under the policy. The phrase “wear and tear” was not listed in the definitions section. It was used in an exclusionary clause without boldface, quotation marks, capitalization, or anything else to indicate it should be treated as a defined term. Two pages later, the policy stated (outside of the definitions section) that damage from certain specified causes was to be considered “wear and tear.” The Sixth Circuit Court of Appeals applied California law and found that the policy was ambiguous so the ordinary and normal meaning of “wear and tear” should be applied. The Sixth Circuit affirmed partial summary judgment for the insured.