Page 59 - Insurance Times March 2023

whether the insurable event occurred during the voyage; interpreted in favour of the insured, i.e., against the drafter
rather, the focus is on the nature of the cover. of the policy. The Rule of contra proferentem thus protects
the insured from the vagaries of an unfavourable
Role of exceptions in an insurance policy? interpretation of an ambiguous term to which it did not
agree. Importantly, the Court emphasized the role of contra
Shivram Chandra Jagarnath Cold Storage and Ors.
proferentem in standard form insurance policies, called
v. contract d' adhesion or boilerplate contracts, in which the
New India Assurance Company Limited and Ors. insured has little to no countervailing bargaining power.
I(2022)CPJ138(SC) Accordingly, ECGC was held to have incorrectly interpretated
an ambiguous term and was directed to pay the claim
Policy type- Deterioration of Stock Policy amount to the insured since the parties had transacted on
several previous occasions.
In this case, the insurance claim of the Insured arose under
a deterioration of stock policy which covered the stock of Can reliance be placed on definition of words
potatoes stored by the insured in cold storage. The surveyor
in specific statutes when the insurance policy
observed that the claim should be rejected in view of
itself defines those words?
exceptions to the policy. Thus, the insurer disclaimed any
liability. The Supreme Court discussed the role of exceptions Narsingh Ispat Ltd.
in an insurance policy, wherein it was opined that an insurer v.
seeks to indemnify the insured only against such losses that Oriental Insurance Company Ltd. and Ors.
are caused by certain perils arising under normal conditions Civil Appeal No. 10671 of 2016
whose effects are statistically estimated.
Policy type- Standard Fire and Special Perils Policy
The Court observed that exceptions are inserted to exempt
the liability of the insurer for which it would be otherwise The insured had taken a Standard Fire and Special Perils
liable. Excepted clauses are inserted ex abundanti cautela
Policy from the insurer. The policy covered the loss caused
in insurance policies to inform the insured that losses to the property of the insured on account of fire, lightning,
attributable to excepted causes will not be indemnifiable.
explosion, riots, strike etc. A claim was lodged by the insured
Since the exception, in this case, was neither too wide nor on account of 50-60 antisocial people with arms and
in conflict with the main purpose of the insurance policy, the
ammunition, who entered the factory premises of the
claim was held to be correctly repudiated by the insurer, insured and caused substantial damage to factory,
having regard to the specific exceptions in the policy.
machinery and other equipment. According to the insured,
the object of the incident was to terrorise the management
What is the rule of contra proferentem? of the insured. Insurer repudiated the insured’s claim by
placing reliance on the exclusion clause in the policy
Haris Marine Products
regarding loss or damage caused by the acts of terrorism,
v.
which was defined under the policy.
Export Credit Guarantee Corporation (ECGC) Limited
Civil Appeal No. 4139/2020
The Supreme Court held that the insurer had failed to
discharge the burden of bringing the case within the four
Policy type- Single Buyer Exposure Policy corners of the exclusion. When the policy itself defines the
acts of terrorism in the exclusion clause, the terms of the
The Supreme Court delved into the term business common
policy being a concluded contract will govern the rights and
sense to interpret terms of a credit risk insurance policy. The
liabilities of the parties.
Court relied on the UK Supreme Court’s judgment in Arnold
Therefore, the parties cannot rely upon the definitions of
v. Britton [2015] UKSC 36 and observed that the business
'terrorism' in various penal statutes since the exclusion clause
common sense was a decisive method was suggested to
contains an exhaustive definition of acts of terrorism. Since
construe the ambiguity of a term used in a commercial
contract. On contra proferentem, the Court observed that the policy covers explicitly a liability arising out of the damage
to the property of the insured due to riots or the use of violent
an ambiguous term in an insurance contract is to be construed
harmoniously by reading the contract in its entirety. means, therefore, there was no warrant for applying the
Exclusion Clause. Accordingly, the Insurer’s decision to
If after that, no clarity emerges, then the term must be repudiate the policy was held to be unsustainable.
52 March 2023 The Insurance Times