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Chevron, Contra Proferentem and Contract Interpretation

Recently, Justice Gorsuch has continued his attack on Chevron deference by writing a statement accompanying the denial of certiorari, joined by Roberts and Alito, that raised serious questions about the decisions of some lower courts to extend Chevron deference to contracts entered into with administrative agencies.  Gorsuch writes that it is one thing to provide Chevron deference for agency interpretation of statutes (which he clearly does not favor) and quite another to provide Chevron deference for interpreting contracts into which the agency entered (which he seems to regard as an excessive extension of Chevron).  Gorsuch appears to favor traditional contract interpretation – which would be more fair-minded – than this Chevron extension.

So far so good.  I agree that Chevron is mistaken and it should not be extended to contract interpretation.

In making his argument, however, Gorsuch referenced one of these traditional contract interpretive rules: “Usually, of course, judges look to the tested and pretty ancient rules of contract construction. For example, we often resolve contractual ambiguities against the party who wrote the agreement, in part on the theory that the drafter might have avoided the dispute by picking clearer terms.”

This latter rule of resolving contractual ambiguities against the drafter – contra proferentem – is in my view a problematic interpretive rule.  In my earlier career as an insurance scholar, I wrote a piece entitled “The Ambiguity Rule and Insurance Law: Why Insurance Contracts Should Not Be Construed Against the Drafter.”  In the insurance context, where the rule is applied most strongly, I argued that the rule has various problematic features.  First, it provides a variety of unfortunately incentives, such as inducing insurers to write harder to read contracts, because they have to spell out more to avoid ambiguity.  Second, it provides protection to insureds when they did not necessarily need it, since there is little reason to believe that ambiguous provisions are unfair to them.  Third, it discourages the courts from considering the purposes of the parties in resolving ambiguities, because it seems to say that the insurer should lose concerning unclear provisions, even if the parties’ purposes might support the insurer.

I don’t favor replacing one ambiguity rule (Chevron) with another one (contra proferentem).  Ambiguities sometimes makes sense (such as the one that asks judges to interpret provisions based on purposes), but often they do not.  That is the case with both Chevron and contra proferentem).

Of course, my policy views about the contra proferentem should not influence the Supreme Court in this case.  So Gorsuch is correct in his (apparent) claim that Chevron should not apply to contract interpretation and that traditional contract interpretive principles, including contra proferentem, should apply.

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