Page 27 - The Insurance Times November 2024

rule applies even with greater force to adhesion contracts to creating a doubt. Therefore, where the words used are
like insurance. free from ambiguity in the sense that, fairly and reasonably
construed, they admit of only one meaning, the rule has no
In addition, the exclusion terms of the insurance policy must application."
not violate the main purpose of the contract; else it would
be either read down to give effect to the main purpose of MacGillivray on Insurance Law define contra proferentem
the contract or be held in fundamental breach of contract, as follows:
and will be given no effect. "The contra proferentem rule of construction arises only
where there is a wording employed by those drafting the
Like any other provision in a contract, words of exception clause which leaves the court unable to decide by ordinary
or exclusion must be read in the context of the contract as principles of interpretation which of two meanings is the right
a whole and with due regard to the main purpose rule which one."
says that any amount of exclusion will not save the party of
a contract if it defeats the main purpose of the contract. Colinvaux's Law of Insurance elaborate contra proferentem
rule as:
The exclusion clauses may also be void if interpreting their "Quite apart from contradictory clauses in policies, ambi-
ordinary and natural meaning gives an absurd result or de- guities are common in them and it is often very uncertain
feats the very purpose of the insurance contract. what the parties to them mean. In such cases the rule is
that the policy, being drafted in language chosen by the
These exclusions are usually covered in a separate clause - insurers, must be taken most strongly against them. It is
called exclusion clause. Sometimes, they may be further construed contra proferentem, against those who offer it."
categorized under general exclusion and special exclusion.
They may also have disguised themselves under condition, Judicial Pronouncements
exceptions, limitation, policy terms and condition, warran-
In the case of General Assurance Society Ltd. Vs.
ties, etc. Exclusions are resorted to by the Insurers to mini-
Chandumull Jain held as under:
mize and manage their risks.
" .. there is no difference between a contract of insurance
and any other contract except that in the contract of insur-
Interpretation of insurance contract is guided by some es-
ance there is a requirement of uberrima fides i.e, good faith
tablished principles e.g. contra proferentem, main purpose
on the part of the assured and the contract is likely to be
rule, read down, blue pencil, severability, etc. Out of them construed contra proferentem that is against the company
'Contra Proferentem' and 'Main Purpose' rules are touch-
in case of ambiguity or doubt"
stones in construction of insurance contract.
In the case of United India Insurance Co. Ltd Vs.
Definitions of Contra Proferentem: Pushpalaya Printers, while interpreting the 'impact' ob-

Halsbury's Laws of England explains contra proferentem as served that Clause 5 speaks of "impact" by any rail/road
under: vehicle or animal, if the insurer had indented to exclude any
"Where there is ambiguity in the policy the court will apply damage or destruction caused on account of driving of ve-
the contra proferentem rule. Where a policy is produced by hicle on the road close to the building, it could have ex-
the insurers, it is their business to see that precision and pressly excluded. The insured possibly did not understand and
clarity are attained and, if they fail to do so, the ambiguity expect that the destruction and damage to the building and
will be resolved by adopting the construction favourable to machinery is confined only to the direct collision by vehicle
the insured. Similarly, as regards language which emanates moving on the road to the building or machinery.
from the insured, such as the language used in answer to
questions in the proposal or in a slip, a construction Recently, the Hon,ble Supreme Court in the case of
favourable to the insurers will prevail if the insured has cre- Sushlaben Indravadan Gandhi & Anr Vs. The New India
ated any ambiguity. This rule, however, only becomes op- Assurance Company Ltd, arising out of motor accident
erative where the words are truly ambiguous; it is a rule compensation case, applied the principle of contra
for resolving ambiguity and it cannot be invoked with a view proferentem and observed that in case of ambiguity, the

24 November 2024 The Insurance Times