Appeals Court Ruling on Insurance Clarity: A Legal Precedent

A New Eighth Circuit Reminder: Ambiguity Still Breaks Against the Drafter

On January 14, 2026, the U.S. Court of Appeals for the Eighth Circuit handed insurers and policy drafters a familiar, practical lesson: when policy language can reasonably be read two ways, courts are likely to pick the reading that favors coverage. (U.S. Court of Appeals)

The dispute in Auto-Owners Mutual Insurance Company v. Granger centered on a question that sounds narrow but has broad drafting implications for auto carriers, product teams, and claims leaders: when a spouse seeks underinsured motorist benefits for loss of consortium, does that claim fall within the same “each person” limit already paid to the physically injured spouse, or can it trigger its own recovery under the same UIM insuring agreement? (U.S. Court of Appeals)

What happened and why it mattered

Randy Granger was seriously injured in an auto collision. The at-fault driver’s carrier paid its policy limit of $25,000, and Randy then recovered $250,000 under his own underinsured motorist coverage with Auto-Owners, which the insurer treated as the per-person UIM limit. (Justia Law)

After that payment, Randy’s wife, Beverly Granger, pursued her own claim for loss of consortium, describing the personal and household impacts that follow a severe injury. Auto-Owners denied the claim, taking the position that Beverly’s damages were derivative of Randy’s bodily injury and therefore subject to the same per-person limit already exhausted by Randy’s recovery. (Justia Law)

A federal district court agreed with Auto-Owners, concluding the claims were inseparable under the policy and capped at a single $250,000 “each person” limit. (Justia Law)

The Eighth Circuit reversed.

The policy phrase doing all the work: “bodily injury you sustain”

The appellate decision turned on a deceptively simple word choice and a definition that expanded its reach.

The UIM insuring language required the insurer to pay damages, including loss of consortium, for “bodily injury you sustain.” The policy defined “you” to include a named insured and, in household context, the spouse. With both Randy and Beverly fitting within “you,” the court concluded there were two reasonable ways to read the coverage grant. (U.S. Court of Appeals)

One reading tied consortium recovery only to the person who sustained the physical injury, which is the interpretation Auto-Owners urged.

The other reading recognized that Missouri law treats loss of consortium as a separate injury to the uninjured spouse, and therefore “you” could plausibly refer to Beverly for purposes of recovering her consortium damages under the UIM coverage. (U.S. Court of Appeals)

Because both interpretations were reasonable, the court applied the standard rule of construction: ambiguity is construed against the drafter, and in favor of the insured. (U.S. Court of Appeals)

“With another reasonable interpretation available, however, we reverse.”
— U.S. Court of Appeals for the Eighth Circuit (U.S. Court of Appeals)

Why this is bigger than one consortium claim

For the industry, the takeaway is not “consortium claims always get a separate limit.” It’s more foundational: if the coverage grant, definitions, and limit language do not line up cleanly, the policy may unintentionally create two plausible pathways, and courts will treat that as the insurer’s drafting problem.

That risk compounds quickly in personal auto forms where:

• “You” is used as shorthand in multiple sections, sometimes expanding via definitions

• derivative damages are named in the insuring agreement but limited elsewhere

• the limits section focuses on “bodily injury to one person” without clearly addressing derivative claimants

The Eighth Circuit’s opinion is a sharp example of how a carrier can pay a full per-person UIM limit and still face additional exposure if the drafting leaves room for a second, insured-favorable reading. (U.S. Court of Appeals)

“Including both Randy and Beverly, as the definition does, yields two reasonable interpretations.”
— U.S. Court of Appeals for the Eighth Circuit (U.S. Court of Appeals)

A quick numeric snapshot of the dispute

One practical bullet-point section: drafting and filing implications

• Align the coverage grant and limits language so that if consortium is included as a covered damage, the policy clearly states whether it shares the injured person’s limit or may trigger a separate limit for another insured. (U.S. Court of Appeals)

• Audit “you” and other defined terms for unintended expansion across sections, especially when “you” is used inside phrases like “bodily injury you sustain.” (U.S. Court of Appeals)

• Stress-test forms the way courts do: ask whether two reasonable readers could reach different outcomes, and treat that as a red flag before the form reaches the field. (U.S. Court of Appeals)

Closing thought for carriers and claims teams

This case is a reminder that claims outcomes are often shaped long before a loss occurs, at the drafting table. When a policy uses a broad term like “you” in a key coverage trigger, and also promises payment for consortium damages, the form needs to be crystal clear about how limits apply. Otherwise, a court may decide the contract can reasonably be read in the insured’s favor, and the carrier will be living with that reading.

In short: if your intent is “one bodily injury equals one per-person limit, consortium included,” say it plainly, in the coverage grant and in the limits section, using the same defined terms. The Eighth Circuit’s reversal shows what happens when those pieces do not quite lock together. (U.S. Court of Appeals)