What principles govern the construction of insurance documents?

  

Date Posted: 4/14/2012 9:15:23 AM

Posted By: Suter junior  Membership Level: Silver  Total Points: 834

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Insurance contracts are much like any other legal contract. And the rules of construction are as follows:

1. APPLY PRECEDENT.
here the general rule is that where an issue has been interpreted by courts of law the subsequent cases should let that construction stand this was held to be true in Glen versus Lewis (1853) 8 Exch. 607 the court stating that "if a construction has already been put on a phaser clause of a contract of in strange the same should be given in subsequent "in Re Calf and sun insurance office (1920) the court found that the matters in question should be substantially similar for this rule to apply.

2. INTENTION OF PARTIES.
This rule states that the courts should always uphold the intention of the parties. And it should avoid speculation as to this but reference to the surrounding circumstances may be made.

3. THE HOLISTIC RULE
A policy of insurance must be construed in its entirety the court in Hamlet versus crown accidental assurance company (1893) IQ 750 said that " you must look at the document as a whole". All words must be given meaning and non deemed meaningless without good cause.

4.THE LITERAL RULE.
In this instance words must be given their ordinary and natural meaning and sentences their ordinary grammatical meaning the court in Leo Rap Ltd versus mc Clue (1955) 1 llyds re 292 QBD when the courts are construing words in an insurance policy it must give them their ordinary and natural meaning". However technical meanings may be resorted to as last resort if they amplify the natural meaning a position held in London and Lancashire fire insurance versus Bolands (1924) AC 823.

5. EJUSDEM GENERIS.
This rule is use to interpreter things os the same kind. In king

versus Travelers insurance association ltd (1931) 41 li. Lr.13 the court refused the plaintiff a claim since the policy listed: jewelry, camera, field glass, watches and other fragile materials as being covered when his fur coat got lost the court stated that is was not of the same genus and species as those listed.

7. PAROLE EVIDENCE RULE.
This rule states that oral evidence can not be admitted to contradict written evidence. In insurance this may only be allowed to show usage and custom.

8. CONTRA PREFERENCE RULE.
like all legal documents insurance contracts are strictly construed against the drafters in case of ambiguity in the terms of the contract. This position was held true in Simmons versus cockell (1920) 1KB 843 at 485

APPLICATION OF RULES OF CONSTRUCTION IN INSURANCE LAW.

When disputes emerge from an insurance contract courts and the parties fall back to the agreement stage each having an interpretation of a term in his or her favour. The courts have therefore to adopt standard rules that will govern the construction of such documents, this goes also along way to enhance prediction of outcome of cases a lawyer needs to just ask, what rule might the court use and what is the likely outcome?

It is important to note that insurance contracts must as basic rule satisfy the basic contract rules it must have ; offer, acceptance, parties must intend to contract and the contract must be for a legal purpose.

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