Revisiting Maryland's Common Law Interpretation of Insurance Contracts

Under Maryland’s common law, courts interpret ambiguous insurance contracts using traditional contract law principles. In February 2015, Maryland’s highest court faced the question of whether to change its method of interpreting insurance contracts to a more pro-policyholder method, contra proferentem. Contra proferentem interprets policy terms strictly against the insurers without reviewing extrinsic evidence. This Comment contends that Maryland courts should continue applying contract law when interpreting ambiguous insurance contracts. This Comment explores cases showing the court’s long-standing reliance on contract law principles when interpreting insurance contracts and insurance contract exclusion clauses. Contract law principles best reinforce the court’s primary purpose of ascertaining the parties’ intent while ensuring adequate protection for insurance consumers. Many courts and commentators also favor contract law principles by noting the benefits to consumers from standardized insurance contracts. From an economic perspective, while jurisdictions that interpret insurance contracts using contract law principles appear preferable over contra proferentem jurisdictions, the argument that contra proferentem significantly increases consumer insurance costs seems unsupported. Maryland courts should continue applying contract law to interpret insurance contracts and permit the state legislature to determine whether contract law or another method of interpretation best advances broader public policy considerations.