USA Law and Practice Contributed by: Christina Culver, Rhonda Thompson and L. Michael Brooks, Thompson, Coe, Cousins & Irons, LLP
Parties seeking a merits review sometimes adopt optional appellate-arbitration procedures by contract.
not susceptible to more than one reasonable interpre- tation in the context of the claim at issue), interpreta- tion focuses solely on the language without recourse to extrinsic evidence, which is admissible only when ambiguity remains after the plain meaning is applied. Ambiguities in policy language are typically construed in favour of the insured and against the insurer. This reflects the principle that insurers draft policies and should bear the risk of unclear language. Courts rec- ognise the insured’s reasonable expectations regard- ing coverage but will not extend coverage beyond clear and unambiguous policy limitations or exclu- sions. The reasonable-expectations doctrine applies predominantly when policy language is ambiguous or potentially unconscionable, and the courts undertake an objective assessment based on the insured’s view- point at the time the policy was issued. The courts generally apply a multi-step interpretive approach to exclusions and exceptions from cover- age: first determining whether the claim falls within coverage, next examining any applicable exclusions narrowly, and finally considering exceptions to exclu- sions that might reinstate coverage. Endorsements, whether issued contemporaneously or later, are treat- ed as modifications to the basic policy and gener- ally offer control over conflicting policy provisions in the absence of explicit language to the contrary. The courts also guard against “illusory” coverage, invali- dating exclusions that effectively negate coverage promised in other policy sections. These interpretive principles operate in both manuscript and standard form policies, emphasising harmonisation of all policy forms and sections. 4.3 Cyber and Technology-Related Coverage Issues Cyber-related disputes involve both specialised cyber-policies and traditional coverage forms. Cyber- insurers have sought to develop cyber-warfare exclu- sions to address cyber-attacks by nation-state actors that may not necessarily fall within the traditional “war exclusions” found in many policy forms (see Merck & Co . v Ace Am . Ins . Co ., 293 A.3d 535 (N.J. App. Div. 2023)). The courts also continue to wrestle with the boundary between “computer fraud” and “social engineering fraud” provisions, the latter of which often have dramatically different sub-limits. Courts have
4. Coverage Disputes 4.1 Evolving Trends in Coverage Disputes In the US, insurance coverage litigation is evolving rapidly to address new risks, changing judicial inter- pretations, and the emergence of new liability cate- gories. Across major lines, including general liability, D&O, cyber, property, and business interruption, new issues are arising from growing areas of risk includ- ing PFAS and other contaminants, opioids, climate change (flood, wildfire, drought), and the proliferation of AI. In many cases, insurer, insureds and the courts are addressing these novel risks using policy language drafted decades before many of these risks existed or were fully understood. These trends reflect ongo- ing efforts to stretch existing coverage frameworks to address novel and unforeseen risks. Professional-liability insurance disputes often arise where coverage intersects with general-liability cov- erage, especially regarding exclusions tailored for professional services in claims-made policies. Fur- ther, professional-liability claims increasingly involve complex financial and intangible losses outside of tra- ditional “bodily injury” and “property damage” con- cepts. Directors-and-officers insurance is impacted by growing AI and cyber-risks exposures, including the development of specialised endorsements creating or limiting coverage, new sub-limits, and the growth of specific cyber-insurance coverage types. Corporate directors and officers are increasingly expected to have an active role in cybersecurity. 4.2 Policy Wordings and Interpretation Developments Courts in the US tend to enforce insurance policy lan- guage according to the plain and ordinary meaning of the terms at the time of contracting, allowing words and phrases to be construed according to a more technical meaning where context dictates or where words and phrases are specifically defined in the pol- icy. If policy terms are unambiguous (meaning they are
296 I NSURANCE L I T IGATI O N 2026
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