Professor Erik Knutsen, recently elected a Fellow of the European Law Institute, has received a new research grant to write a practical reference book for courts, lawyers, and insurers to guide decision-making processes around interpreting the language of insurance policies to produce fair, efficient, and just outcomes for both sides involved in disputes.
Professor Erik Knutsen, recently elected a Fellow of the European Law Institute, has received a new research grant to write a practical reference book for courts, lawyers, and insurers to guide decision-making processes around interpreting the language of insurance policies to produce fair, efficient, and just outcomes for both sides involved in disputes.

In the aftermath of the attack on the Twin Towers, not many people were thinking about insurance law – but Professor Erik Knutsen was. The insurance property policies of the World Trade Centre stated that the company would provide $3.5 billion of property damage coverage per “occurrence.” But the policies didn’t define what an occurrence was. “So, the lawsuit was: is it two planes, two towers – two occurrences?” Knutsen explained, “Or one World Trade Center, one terrorist attack – one occurrence?” 

Lawyers argued over whether two planes equaled two “occurrences” or whether the 9/11 entire event represented one “occurrence.” It was a decision where the difference was billions of dollars in insurance money. For Knutsen, the story demonstrates just how pervasive insurance issues have become in the world around us – whether man-made or natural disaster, whether buying a house or a car, insurance touches many parts of our lives. 

“The cases are mostly about people that just get caught by this weird language in insurance policies,” he says. “Insurance is the backbone of compensation for society. Anything that goes wrong we, in Canada, are entirely reliant on having that backstop there to help us out. People would lose their homes, their businesses, their livelihoods otherwise.”

With a grant awarded to him from the Canadian Foundation for Legal Research, Knutsen will be writing a book to help Canadian lawyers and courts streamline the legal doctrine behind interpreting insurance policy language, with a goal of helping make insurance dispute resolution processes more effective and efficient. He plans to use the funding to hire two to four research assistants this fall, when they will aid him with collecting and analyzing cases and identifying trends in Canadian insurance law disputes. He plans for the assistants to be involved with the entire editing process of the book as well – all within his ambitious one-year completion timeline. 

In 2015, Knutsen received a Social Sciences and Humanities Research Council Insight Grant for a four-year project on “Floods, Fires, Crashes: Resolving Post-Disaster Insurance Coverage Conflicts in Canada,” which was an academic, comparative piece of different countries’ legal processes for interpreting the language in insurance policies. He says that the idea for his current project came on the heels of this research as a way to create something practical and solutions-oriented from what his research revealed about the lack of consistent direction for Canadian courts faced with disputes about the interpretation of insurance policies. “I can at least help my own country in a more informed way, with a simple targeted book that is practical, as well as academic, and that can be aimed to help solve these disputes,” Knutsen says. Arguments over word meaning in insurance disputes can be time-consuming and costly, especially for the people who have had an unexpected event upend their life. 

Knutsen expects the research for his upcoming project will reveal two prevailing trends in how Canadian courts currently deal with disputes about the meaning of insurance policy terms: one is to understand a word as per its literal definition in the dictionary; the second is to define the wording by applying more context and asking: what was the intent of the policy in which the word or phrase is located? “Insurance companies can’t pay for everything, so you have to find something that’s fair for both sides,” he explains. “I think that, as an academic, that’s a real challenge because in law you’ve either got policyholder plaintiffs or insurer defendants…I’m in a special position – I don’t care who wins or loses, I just want the result to be fair and predictable for both sides.” 

Knutsen’s pursuit of his project is informed by his passion for insurance law. He has a penchant for puzzles and to him, the conundrum of insurance policy language is a puzzle in a real-world setting. “I am fascinated by having to take real life situations, like an accident or some crazy set of facts and asking: what does this mean based on what the insurance policy says it will cover or not cover?” he says.

His previous work as an insurance lawyer played a pivotal role in pursuing a research project like this one. Knutsen remembers one case of a woman and her baby who were seriously injured in a car accident with a front-end loader. Receiving the insurance money as compensation for injuries hinged on whether the front-end loader was classified as an automobile or not. “It’s the kind of thing that keeps you up at night,” Knutsen says. The final decision was that the front-end loader wasn’t classified as an automobile and the woman didn’t receive the insurance compensation. 

“We can’t pick and choose what drives into us – how can this be the result in a just society? It can’t be,” Knutsen says, “It’s the ‘it can’t be’ that drew me to this area of law. Now it’s time to write a book about 10 or 12 ‘it can’t be’ types of cases and try to offer some solutions after I research where the law has attempted to resolve these cases, what happened to them as more cases came forward, and what is a possible way out that both insurance companies and policyholders can live with.” 

Earlier this year, Knutsen was elected a Fellow of the European Law Institute (ELI), an organization that seeks to provide practical guidance on European legal issues. He is one of a handful of Canadian members in this research group of about 1,500 lawyers, judges, and academics from over 60 countries. As a member of ELI’s Insurance Law Special Interest Group, he co-hosted the Institute’s first Trans-Atlantic Lectures on Insurance Law. The lectures focused on COVID-19 pandemic insurance law issues, such as the insurance implications of business owners being unable to use their company’s building during lockdowns. 

He hopes that his forthcoming book will become a practical reference for courts, lawyers, policyholders and insurers to guide decision-making processes around interpreting the language of insurance policies to produce fair, efficient, and just outcomes for both sides involved in disputes. “In many instances in Canadian law, you can find courts going in opposite directions on nearly identical insurance law issues and it gets really unpredictable for the average person who’s got a problem and looking to determine if they have insurance coverage,” he says. “It can be maddening and just makes more and more court cases. If we had some really simple, easy to follow methodology for helping to figure out what these things mean and what they should be doing, I think we could cut out a lot of this litigation.”

By Geena Mortfield