INSURANCE LAW 1.5A CONSTRUCTION OF INSURANCE POLICIES
Is done to ascertain the intention of the parties from the wording of the policy and other incorporated documents.
PRINCIPLES OF CONSTRUCTION.
Rule applicable to the policy:
- Construction is a question of law. Therefore, the doctrine of precedence would apply.
- The whole of the policy rather than a part of it would be construed.
- Where the policy makes reference to statutes and the statute has marginal notes… in practice, such marginal notes are not an integral part of the document.
- Where the policy as a whole contain conflicting clauses, the last in time prevails and is regarded as varying the first stipulation.
- Where a handwritten document conflicts with a typed document, the handwritten document prevails.
- Parole evidence cannot vary, edit or contradict written evidence. Although it can be utilized in resolving ambiguities in the written document-Abdul Yusuf V Nigerian Tobacco Company.
Rules applicable to the words used:
- A policy is generally construed according to its literal (ordinary) meaning: In Thompson V Equity Fire Insurance Co, the insurers provided that they shall be excluded from liability where fire is caused by “stored/kept” gasoline. The court construed this to mean when the gasoline is stored in large quantities. Held that it does not apply to the little quantity left in the stove.
- The ordinary meaning of a word would not apply where the word in question has acquired a technical, legal or other meaning. In London and Lancashire Insurance Co V Bolands, it was provided that the insurance would not cover riots. The court held that where four armed men entered the insured’s shop and held some hostages, it amounted to a riot at law. This case has been criticised.
- Contra Proferentem: Ambiguity in the language of the policy is construed against the party seeking to rely on it. In English V Western, since the meaning of “any member of assured’s household” was ambiguous, it was construed in favour of the insured. In Houghton V Trafalgar Insurance co, “any load” was held to include persons. Therefore, the court held the insurers liable.
- Ejusdem Generis Rule: where interpretation is given based on how the words are followed.
- Statutory aid: would be utilized. As the policy would be construed in favour of complying with the statute. E.g. Section 54-58 which deal with warranty, conditions, terms and insurable interest would be utilized in construing terms dealing with same.
In conclusion, although construction is an onerous task, the principles discussed above shall guide the courts in the interpretation process.