What is the test for making an exclusionary clause in an insurance policy conspicuous, plain and clear?

[I]nterpretation of an insurance policy is a question of law. [Citation.] While insurance contracts have special features, they are still contracts to which the ordinary rules of contractual interpretation apply. [Citation.] Thus, the mutual intention of the parties at the time the contract is formed governs interpretation. [Citation.] If possible, we infer this intent solely from the written provisions of the insurance policy. [Citation.] If the policy language is clear and explicit, it governs. ( Palmer v. Truck Ins. Exchange (1999) 21 Cal.4th 1109, 1115, 90 Cal.Rptr.2d 647, 988 P.2d 568.)

[215 Cal.App.4th 575]

In the insurance context, we begin with the fundamental principle that an insurer cannot escape its basic duty to insure by means of an exclusionary clause that is unclear. As we have declared time and again, any exception to the performance of the basic underlying obligation must be so stated as clearly to apprise the insured of its effect. ( Haynes v. Farmers Ins. Exchange (2004) 32 Cal.4th 1198, 1204, 13 Cal.Rptr.3d 68, 89 P.3d 381.) [T]o be enforceable, any provision that takes away or limits coverage reasonably expected by an insured must be conspicuous, plain and clear. [Citation.] Thus, any such limitation must be placed and printed so that it will attract the reader's attention. Such a provision also must be stated precisely and understandably, in words that are part of the working vocabulary of the average layperson. [Citations.] The burden of making coverage exceptions and limitations conspicuous, plain and clear rests with the insurer. ( Id. at p. 1204, 13 Cal.Rptr.3d 68, 89 P.3d 381.)

The rule that exclusionary language must be conspicuous, plain and clear applies only when the insured has a reasonable expectation of coverage. ( Haynes v. Farmers Ins. Exchange, supra, 32 Cal.4th at p. 1213, 13 Cal.Rptr.3d 68, 89 P.3d 381.) Once an insured has a reasonable expectation of coverage, the court then must consider whether the limitation on that coverage is conspicuous. The issue is whether the entire policy adequately directs the reader to the terms of the relevant exclusionary language. ( Id. at p. 1210, 13 Cal.Rptr.3d 68, 89 P.3d 381.) Once the provision has been determined to be conspicuous, the provision must also be plain and clear in order to be given effect. This means more than the traditional requirement that contract terms be unambiguous. Precision is not enough. Understandability is also required. ' ( Id. at p. 1211, 13 Cal.Rptr.3d 68, 89 P.3d 381.)