Western World Ins. Company v. Markel American Ins. Company involved two insurance companies which insured a "Haunted House." Judge Gorsuch had some fun with his opinion some of which will be quoted below. Hodges' flashlight went out and he fell down an elevator shaft while looking for another. Western defended and paid the claim; then sued Markel. Markle claimed it owed nothing because of an escape clause in its policy. But the "escape clause" was found in the "who is an insured" part of the policy, not in the "other insurance" part of the policy. And, it was unclear whether the "escape clause" applied to all insureds or just additional insureds. Furthermore, the "escape clause" if applied as Markel claimed would make the other insurance clause superfluous, something that contract law doesn't like to do. Oklahoma law requires that ambiguities be resolved in favor of coverage, and that's what the Tenth Circuit did. Judge Gorsuch states:
“[I]f an insurer desires to limit its liability under a policy, it must employ language that clearly and distinctly reveals its stated purpose.” Spears v. Shelter Mut. Ins. Co., 73 P.3d 865, 868 (Okla. 2003). If (as here) the relevant limiting policy provisions are “unclear or obscure,” then the objectively reasonable expectations of a person “in the position of the insured” control. Id. Put differently, when a policy’s escape hatch is less a clearly marked exit than it is a hidden trap door, the reasonable expectations of an insured who has read and become familiar with the policy language supplies the rule of decision.
Finally the whole escape clause precludes any liability argument was not raised in Markel's reservation of rights letter to its insured -- which raised many other arguments as to why it should not cover the claim ("arguments it gave up the ghost on long ago")
The case was sent back to the trial court for determination of how much Markel should pay. No escape for either insurance company, indeed.
Please read the entire opinion for the full effect; here is how it starts:
Haunted houses may be full of ghosts, goblins, and guillotines, but it’s their more prosaic features that pose the real danger. Tyler Hodges found that out when an evening shift working the ticket booth ended with him plummeting down an elevator shaft. But as these things go, this case no longer involves Mr. Hodges. Years ago he recovered from his injuries, received a settlement, and moved on. This lingering specter of a lawsuit concerns only two insurance companies and who must foot the bill. And at the end of it all, we find, there is no escape for either of them.