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30 Ga. L. Rev. 171 (1995-1996)
The Ambiguity Rule and Insurance Law: Why Insurance Contracts Should Not Be Construed against the Drafter

handle is hein.journals/geolr30 and id is 201 raw text is: THE AMBIGUITY RULE AND INSURANCE LAW: WHY INSURANCE CONTRACTS SHOULD NOT BE CONSTRUED AGAINST THE DRAFTER Michael B. Rappaport* CONTENTS Page INTRODUCTION .................................. 173 I. THE DIFFERENT VERSIONS OF THE AMBIGUITY RULE.. 178 II. THE COSTS OF THE AMBIGUITY RULE*. .............. 187 A. THE COSTS OF CONSTRUING AMBIGUITIES AGAINST THE INSURER ............................ 187 1. The Ambiguity Rule Results in Inefficient Interpretations ....................... 188 a. Interpreting Efficient Contracts ....... 188 b. Interpreting Inefficient Contracts ...... 192 2. The Costs of Inefficient Interpretations .... 199 3. The Ambiguity Rule Causes Uncertainty ... 202 4. The Costs of Uncertainty ............... 203 5. The Combined Effect of Inefficient Interpretations and Uncertainty .......... 206 B. THE COSTS OF ELIMINATING AMBIGUITIES ........ 207 1. Reduced Readability and Other Costs ..... 207 2. Regulatory Limits on Eliminating Ambiguities 213 HI. THE BENEFITS OF THE AMBIGUITY RULE ........... 215 A. PROMOTING CLEAR CONTRACTS .................. 215 1. Insurers Do Not Have an Incentive to Use * Professor, University of San Diego School of Law. J.D. 1985, D.C.L. 1990, Yale Law School I would like to thank Larry Alexander, Akhil Amar, Ian Ayres, Gail Heriot, Mike Kelly, Gary Lawson, Bill Levin, John Manning, Richard Nagareda, George Priest, Thomas Smith, Steve Walt, and Chris Wonnell for their comments and suggestions. I also thank my wife, Erela Katz Rappaport, for her encouragement and support.