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CONSTRUCTION, LOSSES, RISKS & CAUSATION
Birds: Until recently, freedom of contract in insurance contracts reigned and
thus the only way to know whether or not a particular loss was within the ambit
of a particular policy was to apply to the insurance contract the general
principles of construction applicable to all written contracts.
o To refer to the rules of construction as aecting only risks covered andrisks excepted is misleading, because these principles may well apply to
the other contents of the insurance contract, for e.g., the meaning of
uestions and answers on a proposal form, or the warranties and
conditions in a policy.
o !n certain respects, it is not strictly accurate to refer to the construction of
words, rather the problem is one of describing their scope. "or e.g. what
loss means in the context of an insurance policy is not so much a uestion
of construction, but of description or de#nition. The same can be said of
the word $accident% commonly found in insurance policies. The rules ofconstruction do not help in #nding out what these words mean, but some
principles may be found to assist in explaining or de#ning them.
Birds: <hough as a matter of construction, a loss may fall within the risks
covered by a particular policy, it may still be necessary for the insured to show
that the loss was caused by such a risk and not predominantly by an uninsured
risk. Thus the issue of causation needs to also be considered.
Birds: '(ow inapplicable to insurance contracts eected by an individual
consumer insured) There is no reuirement that an insurance policy is
reasonably intelligible in terms of content and there is no reuirement that it be
especially legible. !n *oskas v. +tandard arine !nsurance -o td /01234, the
5udge at #rst instance refused to allow the insurer to rely upon a particular
condition on the grounds that the print was so small that it was barely legible.
The -& overruled this because the print was legible, albeit with di6culty.
o 7er Bankes 8: ! can read this with comparative ease. ! am rather afraid of
the doctrine that you can get out of clauses by saying they are di6cult to
read. There may be extreme cases. ! have in mind the bill of a well known
shipping line printed on red paper which was calculated to causeblindness in anyone reading it.
o 997oh: !t is thus clear that the terms and conditions appearing in an
insurance policy are intended not only to be read but strictly complied
with by an insured. "ailure by an insured to comply with the terms of the
policy often means that the insured%s claim is liable to be defeated even
though he might suer a genuine loss.
7oh: <hough it is possible in certain classes of insurance contracts to enter into
an oral contract of insurance 'ur#tt v. oyal !nsurance -o td /01224: there
was nothing in ;nglish law to prevent the formation of a verbal contract ofinsurance), most insurance contracts are in practice embodied in a written
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document. The tasks faced by the courts in construing an insurance contract is
in the main, no dierent from construing any other written document.
o The only likely dierence in respect of an insurance contract is that the
insurer is invariably the party responsible for putting the contract
together.
o !n such a situation, there is greater room for the contra proferentemrule
to apply, namely, if an ambiguity is found in the agreement, the ambiguityis to be construed more strongly against the party who formulated the
contract.
1. Risk Intentional & Negligent Conduct Reasona!le Ca"e Conditions
Birds: The essence of insurance is that it provides protection against the risks of
uncertain events befalling the insured, normally events that would be adverse
to him.
7oh: &n insurance policy is intended to insure against the occurrence of an
uncertain event, an event which is unexpected and fortuitous. The indemnity is
payable upon the occurrence of an event which may or may not happen. !tfollows from the underlying basis of the contract that if an insured were to
intentionally or deliberately bring about an insured event, he is not entitled to
recover under the policy as this is not the basis on which the insurer has
contracted with the insured. +uch an event is outside the scope of the policy
because it does not constitute an uncertain event 'see Beresford v. oyal
!nsurance -o /01).
o >owever if a loss is caused by the negligence of an insured, the event
causing the loss is uncertain as it is unexpected and fortuitous. The loss is
within the scope of the policy as it is caused by an uncertain event 'Tinline
v. ?hite -ross !nsurance &ssociation td /01204).
Birds: &s a general rule, the fact that a loss occasioned by the negligence of the
insured is irrelevant, but insurance does not cover losses deliberately caused by
him 'Britton v. oyal !nsurance -o /0=@@4: no cover for deliberate arson by the
insured of property covered by #re propertyA Beresford v. oyal !nsurance -o
/01: no cover for sane suicide of a life insured under a life policy).
o >owever, express policy terms can, if appropriately worded, cover
deliberate losses, so that the general rule is not an absolute one 'inpractice, only likely to apply in respect of suicide under a life policy).
o !n addition, the general rule excludes only losses caused deliberately by
the insured himself. The fact that his spouse intentionally destroys
property he has insured does not prevent the insured who is not a party to
the act from recovering 'idland !nsurance -o v. +mith /0==04A +haw v.
obberds /0=
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td /2CC@4 U*-&: a house and home policy excluding liability for an insured%s
$wilful% acts would cover an insured%s reckless conduct).
o #ACTS$
o The policy excluded $any wilful, malicious or criminal acts%. The damage
was caused by the insured%s coDinsured 00 year old son who had set #re to
a den made of pallets which then damaged a neighbouring property and
destroyed goods in it.o %OLIN'$
o $?ilful% covered an act that was deliberate and intended to cause damage
of the kind in uestionA it would be enough to show that the insured was
reckless as to the conseuence of his act. &s the boy was unaware of the
risk and there was nothing to show that he did not care whether or not the
property burnt down, the exclusion did not apply.
o E(CER)TS$
o ?hat is the proper construction of the liability extension in this policyE !t
provides indemnity to the insured against legal liability arising fromincidents resulting in accidental damage to property. This wide cover is
excluded if the incident giving rise to the liability involves any wilful,
malicious or criminal act. The ad5ectives ualify or characterise the
excluded acts and look to the uality of the act and the state of mind of
the actor.
o !t is tolerably clear what malicious or criminal acts are and ! think these
words lend colour to what is meant by a wilful act. !n this context it must
be some act which is blameworthy. !f so, something more than a
deliberate or intentional act is contemplated. !f that is all the word meant,
the wide cover apparently provided by the extension would largely be
taken away by the exclusion. ost acts, including negligent acts, are
deliberate and intentional.
o Fbviously if the act is deliberate and intended to cause damage of the
kind in uestion it will be within the exclusion. !t will be wilful and might
also be malicious or criminal. But for an act to be wilful it is not necessary
to go as far as this. !t will be enough to show that the insured was reckless
as to the conseuences of his act. ecklessness has been variously
de#ned but if someone does something knowing that it is risky or not
caring whether it is risky or not he is acting recklessly. 7ut more precisely
for present purposes if the insured is aware that what he is about to do
risks damage of the kind which gives rise to the claim or does not care
whether there is such a risk or not, he will act recklessly if he goes ahead
and does it. ! think such conduct was intended to be included in the
exclusion and ! would euate a reckless act with a wilful act for this
purpose. This approach focuses upon the state of the insuredGs mind when
he does the act rather than its intended conseuences. He#ned in thisway the exclusion does not reuire the insured to intend to cause damage
of the kind in uestion.
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o !t falls somewhere between that contended for by the insurers and that
found by the 5udge. !t deals satisfactorily with the example which troubled
me most. !f ! light a bon#re in my garden which gets out of control and
burns down my neighbourGs house would ! be covered by this policyE Fn
the insurerGs construction ! would not because ! had started the #re
deliberatelyA on the 5udgeGs construction ! would be covered because ! had
not intended to burn down my neighbourGs house. But if ! was reckless inthe sense that ! have explained, cover would be excluded and rightly so.
y act could properly be characterised as wilful.
o y conclusion about the proper construction of the policy does not
however aect the result of this case. >aving regard to his age and his
statement, ! do not think -hristopherGs conduct could be described as
reckless. !t could be described as stupid but that is not enough. There
could have been another result if his statement had been dierent, but
taking it as it stands 'as ! must) he was unaware of the risk that his #re
might burn down the mill and there is nothing to show that he did not carewhether it might have done so or not.
&n insured who deliberately sets #re to the insured premises would be
precluded from recovering under the policy on contractual and public policy
grounds '7orter v. Iurich !nsurance -o /2CC14 U*>-).
o #ACTS$
o The policy excluded $any wilful or malicious act%. The insured who had
been drinking heavily and was suering from a persistent delusional
disorder decided to kill himself by setting #re to the insured property. >e
changed his mind and escaped from the property after a large part of the
insured property was ablaJe.
o The insurers denied liability to indemnify on two grounds: 0) that because
he started the #re intentionally, recovery by him would be contrary to
public policy and 2) that the policy excluded wilful acts. The insured
contended that his mental illness was so grave at the time of the #re that
his thoughts and 5udgment were grossly impaired and he had not acted as
a free agent, therefore his conduct was not deliberate, wilful or malicious.
o %OLIN'$
o !t was held that the insured who recklessly caused the loss would only be
able to recover if he could show that he was insane by reference to the
%(aghten rules.
o !t was trite law that an assured could not recover under a policy of
insurance in respect of a loss intentionally caused by his own criminal act.
The rule was founded on the principle of public policy applicable to all
contracts: that a court would not assist a criminal who sought to recover
any kind of bene#t or indemnity for his crime, for to do so would remove a
restraint upon the commission of crimes 'Beresford v. oyal !nsurance -oAKray v. Barr applied).
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o !t was a general rule of insurance law that an assured cannot normally
recover the policy monies when he had intentionally brought about the
event upon which the policy speci#es the money to be payable.
o &n act which was deliberate and intended to cause damage of the kind in
uestion would be within the general exclusion clause. !t would be wilful,
and might also be malicious or criminal. But for an act to be wilful it would
be enough to show that the insured was reckless as to the conseuence ofhis act '7atrick v. oyal ondon utual !nsurance).
o !f the assured was so insane as not to be legally responsible for his
actions, an act of incendiarisim would not prevent him from recovering
under the policy. !nsanity could be shown only if the assured was
labouring under such a defect of reason, from disease of the mind, as not
to know the nature and uality of the act he was doingA or, if he did know
it, that he did not know he was doing what was wrong. The test was
di6cult to satisfy.
o The insured had failed to demonstrate that when he set #re to theproperty, his mental state was so impaired that he did not know the
nature and uality of the act he was doing or if he did know, that what he
was doing was contrary to law. Fn the contrary, the evidence made it
plain beyond any doubt that the insured knew precisely what he was
doing and that he knew that what he was doing was wrong. The #re arose
as a result of < separate factors: delusional disorder, life events and
alcohol, all of which contributed to the #re setting. The insured%s mental
state was only one part of the causative thread and his delusional disorder
was not on its own su6ciently causative to meet the test of insanity.
1.1 Reasona!le Ca"e)"ecaution Conditions
7oh: &n insurer may however expressly exclude the risk of an insured%s
negligence by reuiring the insured to take reasonable care to prevent losses
under the policy. !f this is done, an insured can no longer rely on his own
negligence to make a claim under the policy. >owever such a term cannot
operate to exclude an insured%s negligence when the policy covers third party
liability. &n insured is only legally liable to a third party if he is negligent.
o !n a policy insuring against third party liability, the commercial ob5ect of
the policy is entirely negated if the insured is barred by the policy from
claiming an indemnity when he is negligent in causing the loss or damage
to the third party.
o &n insurer can expressly reuire an insured to take reasonable precautions
to prevent accidents or damage to the insured property. >ow is such a
provision to be construedE !s the duty imposed by the insurer to be
construed literallyE
!f the duty is given a literal construction, it may well take away thevery indemnity the policy purports to provide under a third party
liability policy. &n insured generally does not become liable to a thirdM
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party unless he is negligent. !f an insured%s negligence constitutes a
breach of his contractual duty under the policy, then in reality no
eective insurance cover is provided by the insurer.
o & term reuiring an insured to take reasonable precautions to prevent
accidents must be construed so as not to defeat the commercial ob5ect of
the policy. The policy is intended to provide an insured with insurance
coverage against third party liability when he is negligent.o The courts have construed the contractual duty of an insured to take
reasonable precautions in a third party liability policy to mean that the
insured must not be reckless.
Birds: That the insured who is negligent can recover is sub5ect to the important
uali#cation that a term of the policy may seek to exclude the insurer%s liability
in this respect, by imposing on the insured an obligation to take reasonable
care, which may be phrased as a warranty or condition or as an exception to the
risk. ?hichever way it is done, the eect will be to relieve the insurer from
liability.o Birds: There are basically two common form conditions of relevance for
liability insurance. 0) &dmissions of liability and the conduct of
proceedings. 2) The obligation of the insured to take reasonable care.
This second standard condition reuires the insured to take
reasonable precautions or care to avoid loss. +uch a clause literally
construed would negate a large part of the cover intended to be
eected, since one of the ma5or purposes of a liability policy is to
insure the insured against liability in negligence and negligence is a
failure to take reasonable care reasonable care when a duty of care
is owed. +o the courts have adopted a common sense construction
of this condition.
&n employer was not in breach of a term reuiring him to take reasonable
precautions to prevent accidents under an employer%s liability policy unless he
acted recklessly '?oolfall immer td v. oyle /01L24 U*-&).
o #ACTS$
o The insured employer was vicariously liable for the acts of a foreman who
had failed to ensure that certain scaolding was safe. The employer%sliability policy provided that the $assured shall take reasonable
precautions to prevent accidents and to comply with all statutory
obligations.
o The insurers contended that the plaintis were in breach of their duty to
take reasonable precautions to prevent accidents because the scaolding
was defective and of insu6cient strength. The duty to take reasonable
precautions to prevent accidents under the policy constituted a duty coD
terminous with and similar in uality to the duty owed by the insured to
their own employees.o %OLIN'$
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o The court re5ected the insurer%s argument that the insure had therefore
failed to take reasonable precautions. The insured had complied with that
condition by selecting a competent foreman and reasonably delegating to
him certain tasks. The insured was not personally negligent, which was
the circumstance when the condition might apply.
o The commercial ob5ect of the policy would be negated if the duty imposed
by the policy was given its literal construction. The duty had to beconstrued as meaning that the insured must not be reckless. The
plaintis had discharged their duty of care towards the insurers because
they employed a competent foreman who was responsible for selecting
the materials to be used at the painting 5ob. 7er Koddard 8:
To accept the insurers contention would be to say that we insure you
against your liability for negligence on condition that you are not
negligent. That would be granting an indemnity with one hand and
taking it away with the other.
o By appointing a competent foreman the insured discharged thecontractual obligation owed to the insurers to take reasonable precautions
to prevent accidents. 7er ord 8ustice du 7arc:
!t is not right to say that they delegated to another the duty which
they owed to the underwriters. !n its nature, that is a duty which
they cannot delegate and when they appointed another person to
see that provision was made for the safety of their workmen they
were not delegating their duty to take reasonable precautions but
were performing it.
Birds: This sort of term has been common for some years in liability insurance
policies where sensibly a reuirement of reasonable care has been construed to
be applicable only to reckless acts by an insuredA otherwise such policies would
not provide the very basic cover against negligence liability for which they are
eected '"raser v. "urman /01@34 U*-&: when a policy covers an insured%s
liability towards a third party, a term reuiring the insured to take reasonable
precautions to prevent accidents and loss is to be construed as meaning that
the insured must not be reckless so as to achieve the commercial ob5ect of the
policy which is to guard against the insured%s third party liability).
o #ACTS$
o &n employee sustained serious in5uries when her hand was caught in an
electric welding machine. +he recovered damages based on common law
negligence and breach of statutory duty against her employers for failing
to fence a dangerous part of the machinery. The employers who had
engaged insurance brokers to arrange insurance coverage for them took
out third party proceedings against the brokers claiming that they were
negligent because they failed to eect the necessary insurance coverage.
o The insurance brokers contended that if a policy had been eected, itwould contain a term reuiring $the insured to take reasonable precautions
to prevent accidents and disease% and by virtue of the employer%s Nagrant3
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breach of statutory duty and their failure to fence a dangerous part of the
machinery, the insurers would have been entitled to repudiate liability
under the policy and the employers would have suered no damage from
the broker%s failure to eect the insurance policy.
o %OLN'$
o The court went further than ?oolfall so that only recklessness or worse on
the part of the insured will now amount to a breach of this condition.easonable care does not mean reasonable as between the insured and
third party, but as between insured and insurer having regard to the
commercial purpose of the contract, which includes indemnity against the
insured%s own negligence. The insured%s omission or act $must be at least
reckless, that is to say, made with actual recognition by the insured
himself that a danger exists, and not caring whether or not it is averted.
The purpose of the condition is to ensure that the insured will not,
because he is covered against loss by the policy, refrain from taking
precautions which he knows ought to be taken.o ?hen an employer was reuired to take reasonable precautions to
prevent accidents under an employer%s liability policy, there was no
breach of the duty unless it could be shown that the employer was
reckless. ere negligence would not constitute a breach of the duty under
the policy, the insured must have acted recklessly, he must have
deliberately courted a danger the existence of which he recognised by
failing to take necessary measures to avert the danger. >ere the employer
did not appreciate the risk in uestion and since so, they were not reckles
in failing to fence the machinery. 7er Hiplock 8:
?hat is reasonable as between the insured and the insurer without
being repugnant to the commercial purpose of the contract is that
the insured, where he does recognise a danger should not
deliberately try to court it by taking measures which he himself
knows are inadeuate to avert it.
!t is not enough that the employer%s omission to take any particular
precautions to avoid accidents should be negligentA it must be at
least recklessA made with actual recognition by the insured himself
that a danger exists, and not caring whether or not it is averted.
The purpose of the condition is to ensure that the insured will not,
because he is covered against loss by the policy refrain from taking
precautions which he knows ought to be taken.
7oh: & bailee is generally not liable unless he is negligent in taking care of the
bailor%s goods.
!f a bailee is reuired by his insurance policy to take reasonable precautions to
safeguard the insured property, the duty is to be construed as meaning that the
insured must not be reckless, this construction being necessary to ensure thatthe commercial ob5ect of the policy is not negated by the terms of the policy '?
8 ane v. +pratt /013C4: a road haulier who was reuired to take reasonable=
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precautions to safeguard the insured goods is only reuired not to act recklessly
or grossly negligent in his care of the insured goods).
o #ACTS$
o & #rm of haulage contractors was insured under a Koods in Transit policy
covering the insured%s $legal liability as carrier for loss of or destruction of
or damage to the goodsOmerchandise in transit%. The policy stipulated that
the insured shall take all reasonable precautions for the protection andsafeguarding of the goodsOmerchandise. The #rm hired a diver sent to
them through the abour ;xchange without asking for any references or
verifying the driver%s identity. The driver disappeared with a lorry load of
bacon on his #rst day at work.
o %OLIN'$
o The provision relied upon by the insurers did not apply to the hiring of an
employee and even if it did, it would only apply if the insured was reckless
or grossly negligent. 7er oskill 8:
They are carriers of repute. The last thing they would have wantedwould have been wittingly to have taken on a dishonest employee.
&pplying the test in "raser, the underwriters have failed to show that
they refrained from taking the normal precautions because they
knew they were covered against loss by the policy and were thus
reckless even though they neglected to take precautions.
7oh: & policy taken out by an individual to insure his own property has to be
distinguished from a policy covering the insured%s third party liability. !n a policy
insuring an insured%s own property, a term reuiring the insured to take
reasonable precautions to safeguard the insured property may be given a literal
construction without being repugnant to the commercial ob5ect of the contract.
o &n insurer is entitled to rely on an insured%s contractual duty to take
reasonable precautions to safeguard the insured property.
o +uch a precaution can reuire an insured to take keep any alarm systems
and other safety devices in full operation during the currency of the policy.
&n insured can prove a breach of this duty by showing that the insured
has acted negligently in failing to ensure that the safety devices are kept
in working order.o There is no need for the insurer to show that the conduct of the insured
was reckless.
o <hough an insurer is entitled to reuire an insured to take reasonable
precautions to safeguard the insured property, it must be recognised that
the duty is to take reasonable precautions to safeguard the insured
property and not an absolute duty to safeguard the insured property. &n
insured ful#ls his duty under the policy if he takes reasonable steps to
safeguard the insured property.
& policy reuiring an insured to keep a burglar alarm system in e6cient workingorder did not impose an absolute duty on the insured to ensure that the alarm
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system was fully operational at all times. The insured discharged his contractual
duty of care if he did everything possible to ensure that the alarm system was in
working order 'Pictor elik -o td v. (orwich Union "ire !nsurance +ociety td
/01=C4).
o #ACTS$
o & warehouse storing treated leather was insured against the risk of theft.
The policy stipulated that $it is a condition precedent to liability that a) theburglar alarm installed at the premises is kept in e6cient working order%.
Fne day the insured was informed that a fault had developed in the
telephone line connected to the alarm system and conducted a check on
their premises to #nd that the telephone lines were not working. The
alarms were then reset to give an audible signal. The thieves who had
earlier cut the telephone lines broke into the insured premises that night.
o The insurers contended that the plaintis failed to keep their burglar
alarm system in e6cient working order. The insured contended that they
were not in breach of the term pertaining to the alarm system and even ifthere was a breach, the insurers either waived the breach or were
estopped from relying on the breach.
o %OLIN'$
o The insured had ful#lled their duty to keep the alarm system in e6cient
working order because they did everything possible to rectify the fault.
There was nothing in the conduct of the insurers to show that they had
waived the beach of condition. 7er ?oolf 8:
The burglar alarm is not reuired to be in e6cient working order but
kept as such. The word kept implies within it a reuirement that
before there can be a breach of that condition by an insured, he
must be aware of the facts which give rise to the alarm not being in
e6cient working order, or if he is not aware of those facts, he should
at least be in a position where exercising common care, he should
have known those facts.
"urthermore he must be given a su6cient opportunity to have the
alarm installed once more restored to proper working order.
The burglar alarm installed at the premises was at all times in
e6cient working order, what was not in working order was the
telephone line 'property of the 7ost F6ce) which had been cut. That
line was cut outside the premises of the insured. The cut prevented
the alarm doing what was intended, but the alarm itself was
operating e6ciently and therefore there was no breach of the
condition.
7oh: Terms in an insurance policy are to be construed consistently throughout
the policy. !f a policy covers both an insured%s own property as well as his third
party liabilities, a term in the policy reuiring the insured to take reasonableprecautions to safeguard the insured property and to prevent accidents is to be
construed consistently throughout the policy to mean that the insured must not0C
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would escape all liability under sections 0 and 2 in the very ordinary
case of damage to a house or its contents by #re 'one of the insured
perils) if the #re were caused by the negligence of the insured. That
cannot be right.
There is no distinction between property insurance nor liability
insurance such that the recklessness test applies only to liability
insurance 'as per "raser) and not to property insurance, it being thecase only in liability insurance that there is nothing to insure at all
unless the insured is liable to a third party.
"or a composite policy such as the present, the condition could not
have dierent meaning in relation to the dierent sections. The
recklessness test is thus eually applicable whether the condition is
included in a property insurance or in a liability insurance.
o The insured did not act recklessly but had taken all reasonable steps to
safeguard the 5ewellery. 7er loyd 8:
They did not leave the 5ewellery exposed to view. They were notgoing to be absent from the car for more than half an hour at most
and were in any event absent for much less than half an hour. The
safest thing in the circumstances was to leave the 5ewellery in the
locked glove compartment.
o The condition was stated to be a condition precedent and the insurers
contended that the insured was obliged to show that he had complied with
the condition before he could claim under the policy. The court decided
that the burden of proof rest with the insurers to show that the insured
was in breach of the term. 7er loyd 8:
The burden was on the insurers to prove a breach of the condition
precedent, not on the insured to prove compliance with the
condition. There is nothing in the language of the condition to shift
the ordinary burden of proof.
o 997oh: >ere the -& considered a composite insurance policy covering both
the insured%s own property and his third party liability. The court did not
agree with the insurer%s contention that the insured%s obligation to take
reasonable steps to safeguard the insured property meant that the
insured must not be negligent as opposed to being reckless. !n the context
of a composite policy, it is clearly illogical for a term in the policy to take
on two dierent meanings. The court was right in this instance to hold that
the insured%s obligation to safeguard the insured property meant that he
must not be reckless.
!t is however doubted that the court was intending to apply this
lower standard of care to all cases where an insured is reuired to
take reasonable precautions to safeguard the insured property. !t is
eually clear that in situations where giving the words in aninsurance policy their ordinary meaning would not be repugnant to
the commercial ob5ect or purpose of the policy, the courts are likely
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to give the words their intended meaningA that ordinary negligence
would su6ce to constitute a breach under the policy.
?hen an insurance policy covers both an insured%s own property as well as his
third party liability, a term reuiring the insured to take reasonable precautions
to safeguard the property insured or to prevent accidents will be construed as
reuiring the insured not to be reckless 'Kunns v. 7ar !nsurance Brokers /01134:
a term in a home contents insurance policy reuiring the insured to takereasonable precautions meant that the insured must not be reckless).
o #ACTS$
o & husband and wife own several 5ewellery shops. They eected a home
contents policy through insurance brokers who did not disclose that the
insured were previously refused home insurance cover by other insurers.
Burglars broke into the insured%s home while they were away taking a safe
containing the insured%s 5ewellery. The insured%s burglar alarm system was
not activated.
o The insurers contended that the insured failed to disclose his previouslosses and the refusal by other insurers to insure them. The insured
sought to recover the losses from the brokers on the ground that the
brokers acted negligently when they failed to disclose the information to
the insurers 'this was re5ected by the court). The brokers contended that
the insured was in breach of a term in the policy reuiring them to take
reasonable precautions to safeguard the insured property when they failed
to activate the alarm system.
o %OLIN'$
o The insured acted recklessly in not activating the alarm system. 7er +ir
ichael Fgden R-:
&s in +o#, the principle extended to this type of policy which applies
to all insurance policies. The insured%s conduct was reckless. "or a
5eweller who knew full well the risks of robbery and burglary to
which 5ewellers are particularly susceptible and unusually easy prey,
the insured%s conduct was extraordinary. This is especially so when
they knew they were being followed 'resulting in the insured to
increase their cover). To go away for the weekend and leave
valuables in a safe which they knew the insurers regarded as not
satisfactory in view of the value of the contents without turning on
the alarm system is incredible conduct.
Birds: & number of perils are never covered by indemnity insurance. 7rimarily
these are wear and tear and inherent vice, in other words, what occurs or
happens naturally. +imply, these are not fortuitous and are not therefore
capable of being covered by an insurance contract, the essence of which is to
cover uncertain risks. The ma5or exception here is in the #eld of contingency
insurance, namely, life and related contracts. & life contract covers the naturalprocess of dyingA a health insurance covers what may be inevitable illness.
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*. Rules o+ Const"uction ContetO"dina"- & Tecnical /eaningCont"a0
"o+e"ente2
Birds: The uestion of construction is a uestion of law and once a word or
phrase has been 5udicially considered, that decision should be followed
according to the usual rules of precedent '? 8 ane v. +pratt /013C4).
o The traditional approach to construing insurance contracts 'rules of
construction):7rimarily it was the intention of the parties as discovered ob5ectively
from the whole of the policy that prevailed. ?ritten parts, if present,
prevailed over printed parts as more likely to express the agreement
of the parties and parol evidence was not in general admissible to
vary or contradict the written document.
The policy was construed according to its literal meaningA only if
that was unclear could extraneous circumstances be examined.
?ords were normally understood in their ordinary meaning, but this
was not the case where they had a technical legal meaningA here
the latter prevailed. +imilarly, the context of a word might dictate a
departure from its ordinary meaning. ?ords appearing in the one
phrase were prima facie to be construed ejusdem generis.
!n the event that there was any ambiguity, the policy was construed
contra proferentem, that is against the person who drafted it and in
favour of the other 'normally against the insurer in favour of the
insured).
o The modern approach to the construction of contracts of all sorts still has
as its prime ob5ective the ascertainment of the intention of the parties.
<hough literal interpretation divorced from the background of facts in
which agreements are concluded had already been abandoned, it was still
the case that particularly in standard form contracts, the parties%
expressed intention might be interpreted as being rather dierent from
what the parties or perhaps one of them actually intended. ?hat many
regarded as a de#ciency in the law not least because the primary rule was
founded on the often incorrect premise that the contract was the result of
bargaining between parties of eual strength, led to the rules of
construction receiving attention in the >.
& fundamental change has overtaken this area of the law. The result
has been to assimilate the way in which such documents are
interpreted by 5udges to the common sense principles by which any
serious utterance would be interpreted in ordinary life. &lmost all
the old intellectual baggage of legal interpretation has been
discharded '!nvestors -ompensation +cheme v. ?est Bromwich
Building +ociety /011=4 U*>).
7er ord >oman: !n construing contractual documents, theaim must be to #nd the meaning that the document would
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convey to a reasonable person having all the background
knowledge that would reasonably be available to the parties in
the situation in which they were at the time of the contract.
7revious negotiations and declarations of sub5ective intent
must be excluded, but included is the possibility of ambiguity
and the realisation of the possible misuse of words and
syntax. The court is not obliged to ascribe to the parties anintention that plainly they could not have had and in choosing
between competing unnatural meanings, it was entitled to
decided that the parties must have made mistakes as to
meaning. "urther commercial contracts ought to be construed
in a way that makes good commercial sense.
99Birds: The modern day restatement of the principles of
construction certainly has a bearing on the interpretation of
insurance contracts 'see for e.g. cKeown v. Hirect Travel
!nsurance /2CCope.
o %OLIN'$
o The court agreed with the insurers.7er ord ;llenborough -8:
The same rule of construction which applies to all other instruments
applies eually to a policy insuranceA that it is to be construed
according to its sense and meaning, as collected in the #rst place
from the terms used in it, which terms are to be understood in their
plain, ordinary and popular sense, unless they have generally inrespect to the sub5ect matter, as by the known usage of trade or the
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like, acuired a peculiar sense distinct from the popular sense of the
wordA or unless the context evidently points out that they must in
the particular instance, in order to eectuate the immediate
intention of the parties to that contract, be understood in some
other special and peculiar sense.
The words superadded in writing are, if there should be any
reasonable doubt upon the sense and meaning of the whole, to havegreater eect attributed to them than to the printed words,
inasmuch as the written words are the immediate language and
terms selected by the parties themselves for the expression of their
meaning and the printed words are a general formula adapted
eually to their case and that of all other contracting parties upon
similar occasions and sub5ects.
7oh: !n construing a term in a written contract, one of the basic rules of
construction is that one must construe the term in the context of the entire
contract. The term must not be construed in isolation, apart from the rest of thedocument and is to be seen as forming part of a larger document.
& term in an insurance contract must be construed in the context of the entire
contract '>amlyn v. -rown &ccidental !nsurance -o td /0=1
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o %OLIN'$
o !n construing the risk insured, regard must be given to the rest of the
policy, including the exclusion provision. The term external meant
something not arising from an internal weakness or disease.
7er ord ;sher: The expression $external% 'looking at the rest of the
policy) must be taken to mean the antithesis of internal. !f the in5ury
had happened by reason of something internal it would not bewithin the policy but that is not the case. Because the cause of the
in5ury was not internal, it must have been $external% and in that
case, it was also $visible% within the meaning of the policy.
o The term $external% referred to an event which did not arise from an
internal disease or weakness.
7er opes 8: The policy must be read in the way in which a person
of ordinary intelligence would read it and in construing this
particular clause, attention must not be con#ned to that clause, but
must look to the whole of the policy. The exception clause dealsstrictly with matters internal to the person who sustains the in5ury
and the words used in the descriptive clause apply to matters
dierent from and contradistinguished from the internal matters
dealt with in the proviso.
o 99Birds: The uestion is whether subtle changes in wording can aect the
interpretation of words. "or e.g. a personal accident policy may not simply
cover death or in5ury $caused by accident% but one $caused by accidental
means% or $by violent, accidental, external and visible means%. >ere it
could be argued not 5ust that the #nal event or in5ury must be accidental,
but also the means, in other words, the prior act of the insured or whoever
is responsible for the act, so that if a deliberate act led to the #nal
accident, the insured is not covered.
&n argument along these lines seems to have been re5ected in
>amlyn, where the wording was of this sort and the bending over
the insured was clearly deliberate.
>owever in Hhak v !nsurance -ompany of (orth &merica 'U*) td
/011@4 U*-&, recovery was denied in circumstances where the
insured died from asphyxiation due to vomiting while under the
inNuence of alcoholA she had drunk in order to control severe back
pain 'an insured who took a deliberate risk did not suer an in5ury
by accident if the risk materialised).
The earlier ;nglish approach is to be preferred. The attempted
distinction between accidental results and accidental means
will plunge this branch of the law into confusion.
7oh: & word often takes on a meaning from the context in which it is placed.
The meaning of a word was to be gathered from the context in which the wordwas used '7rovincial !nsurance -o td v. eo -hee +wee /01=L4 &"-).
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o #ACTS$
o The insured died in a road accident while riding a motorcycle. >is
insurance policy excluded the following risks: $death or disablement
caused by or conseuent upon participation in hunting, mountaineering,
winter sports, racing of any kind, polo, football, motorDcycling or any form
of diving in the sea%. The court was asked to construe the exclusion
provision pertaining to the risk of motorDcycling. The provision could beconstructed as applying when the insured used a motorDcycle or only
where the insured used a motorDcycle as part of some sporting activity.
o The insurers contended that when the meaning of a word was reasonably
clear, the word should be given its plain and ordinary meaning even
though it might operate harshly against an insured. The insured
contended that the maxim noscitur a sociisought to be applied to help
#nd the true meaning of the word $motorDcycling%.
o %OLIN'$
o The word motorDcycling must be construed in the context of the policy and
in this case the word obviously referred to the use of a motorDcycle in
some form of sports, exhibition or competition.
7er >ashim eop & +ani "8: & policy of insurance is basically sub5ect
to the same rules of construction as any other written contract. The
words used in it must be given their plain, ordinary meaning but in
the context of the policy looked at as a whole and sub5ect to any
special de#nitions contained in the policy. <hough the grammatical
sense is not the sole or primary method of constructing a policy, it
does in this case give a useful guide as to the intention of the
parties. >ere the word $participation% is important. &pplying the
maxim noscitur a sociis to the exclusion provision, motorcycling
must be motorcycling not undertaken in the ordinary sense but
motorcycling in some form of sports or exhibition or competition.
?hen the terms in an insurance policy are clear, eect must be given to the
terms '-hiew +wee -hai v. British &merican !nsurance -o ') +dn Bhd /01=34
alaysia).
o #ACTS$
o The insured%s life insurance policy provided that coverage if the insured
suered any personal in5ury in an accident resulting in a loss of limbs.
The policy stipulated that it was $understood that loss shall mean with
regard to hands and feet, dismemberment by severance at or above the
wrist or ankle 5oint%.
o The insured in5ured his left arm in a road accident 'and became useless to
him) and the doctors who treated him recommended that the arm should
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be amputated. The insured refused to have his arm amputated because it
would be too traumatic and the operation would cost too much money.
o The insurers contended that the severance of the in5ured arm constituted
a condition precedent to the liability of the insurers and until amputation
of the arm had taken place, they were not bound to pay. The insured
contended that refusal of the insurers to make payment was totally
unreasonable and that it was outrageous that the insurers should insistthat the insured should have his arm amputated before they would make
the payment.
o %OLIN'$
o +ince the words in the policy were clear, it was bound to give eect to
them. 7er +hankar 8:
The interpretation should be reasonable and any ambiguities should
be resolved against the person in whose favour the document has
been framed. But where the words of the document are crystal
clear, the sanctity of the contract should be upheld. The words havebeen put there to obviate the necessity of making #ne 5udgments
whether a limb has or has not been lost. ;ven if the plainti%s limp
arm serves a cosmetic purpose, he simply cannot say that he has
lost it because it is still there for the whole world to see.
Birds: The words in a policy are prima facie to be understood in their ordinary
meaning.
?hen a term has no precise or exact meaning, one has to look at the context in
which the term is used to #nd a meaning for the term 'Thompson v. ;uity "ire
!nsurance -o /010C4 7-: a term prohibiting gasoline from being $stored or kept%
on the insured premises constituted common ;nglish words with no precise or
exact signi#cance. !n the context of a domestic #re insurance policy, the term
must be construed as intending to prohibit the storage or keeping of gasoline for
a commercial purpose. !t was not intended to prevent an insured from having a
small uantity of the item for household purposes).
o #ACTS$
o & #re policy taken out by a shopkeeper exempted the insurers from
liability for loss or damage occurring $while gasoline is stored or kept inthe building insured%. The insured had a small uantity of gasoline for
cooking purposes, but no other.
o %OLIN'$
o The insurers was liable for the #re that occurred as the words $stored or
kept% in their ordinary meaning implied fairly considerable uantities and
imported the notion of warehousing or keeping in stock for trading. This
was not the case and so the exception was inapplicable.
o !n construing the words in the exclusion provision, account must be taken
of the commercial context in which the words were used. The exclusion
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was not intended to cover possession of prohibited substances for
household use. 7er ord ac(agthen:
?hat is the meaning of the words in collocation and in the
connection in which they are foundE They are common words with
no precise or exact signi#cation. The expression as used in the
statutory condition seems to point to the presence of a uantity not
inconsiderable or at any rate not triNing in amount, and to import anotion of warehousing or depositing for safe custody or keeping in
stock for trading purposes. & person who has a reasonable uantity
of the substance for household uses would not be $storing or
keeping% such substances.
?hen a policy uses an ordinary word, the word was to be given its plain and
ordinary meaning 'eo app td v. c-lure /01MM4).
o #ACTS$
o etal was insured against theft $whilst in warehouse%. +ome of the
relevant metal was stolen from a lorry parked in a locked compound'depot) surrounded by a high brick wall topped by barbed wire.
o %OLIN'$
o The insurer was not liable as the ordinary meaning of the warehouse
implied some sort of covered building and not a yard, however secure.
o The term $warehouse% was a word with a plain and ordinary meaning. !n its
plain and ordinary meaning, the term referred to some sort of building. 7er
Helvin 8:
Unless some evidence is given of a secondary meaning and there is
none here, the ordinary and popular meaning must control the
matter.
Birds: !n two respects however, the ordinary meaning of words will not prevail.
o The #rst is where a word has a technical legal or other meaning.
This will generally be the case in respect of words describing cover
or exceptions to it, which are also the names of criminal oences,
such as theft or have acuired a particular meaning. The meaning in
the latter respect applies to the word in an insurance policy.
o The second way in which the ordinary meaning of a word may not beadopted is where the context reuires otherwise.
!t has been suggested that the traditional approach should be
replaced by an enuiry as to what cover the parties really thought
was being provided by the policy and as to the purposes behind the
insurance in uestion 'erkin)
7oh: ?hen a term is a legal term or a term which has become a technical term
of art, the term is likely to be construed in its legal or technical sense. This
approach in construction can easily work against the interests of an insured,
especially if the term has both a legal as well as an ordinary meaning and the
two meanings do not coincide. & layman may be totally unaware that a term
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used in the policy may have a legal or technical meaning apart from its plain
and ordinary meaning.
o There is a natural tendency for the courts to give a term with which they
are very familiar its legal or technical meaning rather than to look for its
plain and ordinary meaning. This bias towards a legal or technical
construction can cause a great deal of hardship for a lay insured.
The term riot constituted a well known legal term and the term ought to begiven its legal meaning 'ondon ancashire "ire !nsurance -o v. Bolands td
/012L4 U*>: the word riot should be construed in accordance with its de#nition
in the criminal law, deciding in favour of a legal meaning for the term over its
plain and ordinary meaning).
o #ACTS$
o & policy on a baker%s shop against loss by burglary, housebreaking and
theft exempted the insurers from loss caused by or happening through or
in conseuence of inter alia, $riot%. "our armed men entered the shop one
day, held up the employee with guns and stole all the money they could#nd. There was no actual violence used and no other disturbance nearby.
o The policy excluded $loss directly or indirectly caused by or happening
through or in conseuence of invasions, hostilities, acts of foreign enemy,
riots, strikes, civil commotions, rebellions, insurrections or martial law%.
o The insurers disclaimed liability contending that the circumstances under
which the money was stolen constituted a riot under the exclusion
provision. The term must be construed in accordance with its well known
legal meaning in the criminal law. The insured contended that the term
ought to be given its plain and ordinary meaning and in its ordinary sense,
it referred to a tumultuous disturbance of the peace and there was here
no such disturbance. (o one reading the policy would imagine that a
robbery committed by four men would have constituted a riot under the
exclusion provision even if the robbers may be indicted for riot.
o %OLIN'$
o The event constituted a riot and thus the insured could not recover. The
stated reason for the decision was that $riot% is a technical term which in a
criminal context reuires only three people executing a disturbance suchas might cause alarm to a reasonable person. &pplying this meaning to
the case, there was clearly a riot on the facts of the case.
99Birds: >owever it may not be entirely insigni#cant that the shop
was in Hublin and the robbery took place at a time of great
disturbances involving the !& and others. !t is not impossible that
such a body was behind the robbery and to talk in terms of riot
becomes a little more understandable.
99Birds: !t is instructive that an &merican court '7an &m v. &etna
-asualty /013L4) held that riot in an insurance policy meant what
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ordinary people would normally regard as a riot, distinguishing
Bolands for these reasons.
!n light of the traditional rules applying to technical words, the
decision in Bolands was clearly correct. ?hat may be
uestioned is whether it is a necessary or fair rule to apply to
an insurance policy the meaning from another context when
such a meaning may be totally dierent from the ordinarymeaning. !t may be that this traditional approach to $technical
words% will not survive the restatement of the principles of
construction in !nvestors -ompensation +cheme v. ?est
Bromwich Building +ociety /011=4 U*>.
o The term was a well known legal term and ought to be given its legal
meaning. 7er ord +umner:
There is no warrant here for saying that when the proviso uses a
word which is emphatically a term of legal art, it is to be con#ned, in
the interpretation of the policy to circumstances which are onlywithin popular notions on the sub5ect, but are not within the
technical meaning of the word. "urther the legal meaning applies in
relation to $martial law% and $acts of foreign enemies%. There is no
reason why riot should not include its technical meaning here as
clearly as burglary and housebreaking do.
997oh: ?hen a term has both an ordinary as well as a legal or
technical meaning, there is little doubt that an uninstructed layman
is likely to construe the term in its ordinary sense and as a result
might misconstrue the scope of the policy. The hardship to an
insured in such a situation is obvious 'see 7an &m).
+ee 7enal -ode ss. 0L0'c) and 0L@:
Unla3+ul asse2!l-
0L0. &n assembly of M or more persons is designated an unlawful assemblyV, if the common
ob5ect of the persons composing that assembly is W
'c) to commit any oenceA
[51/2007]
#o"ce used !- one 2e2!e" in "osecution o+ co22on o!4ect
0L@. ?henever force or violence is used by an unlawful assembly or by any member thereof,in prosecution of the common ob5ect of such assembly, every member of such assembly is
guilty of the oence of rioting
7oh: ?hen a term has no legal or technical meaning, the court is entitled to give
the term its plain and ordinary meaning.
The words $civil commotion% was a term with no technical meaning and the court
was entitled to give the term its plain and ordinary meaning. !n its plain and
ordinary meaning, the term referred to a situation where there was turbulence
or tumult coupled with an ob5ect to commit violence. !solated incidents with no
violence being committed would not constitute a civil commotion 'ondon anchester 7late Klass -o td v. >eath /010
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o #ACTS$
o The plainti insurers issued insurance to cover the risk of damage to plate
glass windows and reinsured the risk with loyd%s underwriters. The
reinsurance policies covered the plaintis against $damage to plate glass
caused directly by or arising from civil commotion or rioting%. & large
number of women simultaneously broke plate glass windows in dierent
parts of ondon. The women acting separately, did not resist arrest. Theplaintis paid out on the insurance and claimed under the reinsurance
policy.
o The reinsurers disclaimed liability on the ground that the loss was not
covered by the policy. The plaintis contended that the words $civil
commotion% was a term with no technical meaning and the term ought to
be construed in its plain and ordinary sense and therefore it referred to a
public disorder or disturbance, covering a state of aairs where the police
anticipated a breach of the peace.
o %OLIN'$o The isolated incidents did not constitute a civil commotion because there
was no turbulence or tumult. 7er Buckley 8:
-ommotion connotes turbulence or tumult and violence or intention
to commit violence. The evidence here is a number of separate
criminal acts committed by violence in the sense that a hammer
was used to break a window but without violence or intention to
commit violence in the sense of assault upon any one. The acts
were in fact done without causing any tumult or disturbance. This
does not disclose a state of facts upon which it could be found that
there was civil commotion.
7oh: &n insurer is invariably the party responsible formulating the terms of an
insurance contract. !f there is any ambiguity in the contract, the ambiguity is to
be construed more strongly against the insurer, the party responsible for putting
the contract together. To resolve an ambiguity, the court will apply the contra
proferentemrule. The rule is applied whenever a patent ambiguity appears on
the face of the contract. The rule is intended to resolve any ambiguity in the
terms of the contract. !t is however, not intended to create an ambiguity in a
contract which is otherwise clear.
Birds: The maxim that provides for ambiguities to be construed against the
party responsible for drafting them may be brought to the aid of the insured.
o The application of the contra proferentem maxim can hardly be said to be
free from doubt. !t is clear that there must be a genuine ambiguityA
ambiguity must not be created simply to apply the maxim. >owever
whether or not a word or phrase is ambiguous is not always apparent. The
cases tend to illustrate that even the 5udges cannot always agree as to
whether or not su6cient ambiguity exists 'see for e.g. ;nglish v. ?estern).
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?hen an exclusion provision 'a term in an insurance contract) lends itself to
more than one possible construction and an ambiguity arises in the meaning of
the term, the construction which was more favourable to an insured ought to be
adopted as the insurer is responsible for formulating the terms of the contract
';nglish v. ?estern /01LC4 U*-&).
o #ACTS$
o & motor policy eected by a 03 year old youth covered his liability forin5ury to all persons except, inter alia, in respect of $death or in5ury to any
member of the assured%s household% travelling in the car with the insured.
>e negligently in5ured his sister when she was his passenger. The insurers
argued that they were not liable to indemnify the insured against his
liability to her by virtue of the above exception.
o %OLIN'$
o !t was held that the expression $any member of the assured%s household%
was eually capable of meaning any member of a household of which theassured was the head as any member of the same household of which the
assured was a member. !t was therefore ambiguous and the meaning
more favourable to the insured 'the former meaning) was adopted so that
the insurers were liable.
o The term was ambiguous as it was capable of two possible constructions.
The term ought to be construed against the insurers. 7er -lauson 8
'Koddard 8 dissenting that the provision was not ambiguous): !f the
phrase used in the policy is in this sense ambiguous, that meaning must
be chosen which is the less favourable to the underwriters who have put
forward the policy.
& term in an insurance policy was ambiguous if it was inapt or could not be
reasonably understood and the ambiguity was to be resolved against the
insurers '>oughton v. Trafalgar !nsurance -o td /01ML4 U*-&).
o #ACTS$
o The motor policy involved an exception which excluded liability when the
car was conveying $any load in excess of that for which it was
constructed%. The insurer argued that the carriage of six persons in a cardesigned for #ve was within the exception.
o %OLIN'$
o This was not a $load%. ?hile the carriage of persons could be so
considered, it eually, indeed more naturally, referred to the carriage of
goods.
o The exclusion provision in the policy was not only ambiguous but it was
also inapt when applied to a passengerDcarrying vehicle. 7er +omervell 8:
!f there is any ambiguity, the ambiguity will be resolved in favour of the
assured. The words only clearly cover cases where there is a weight loadspeci#ed in respect of the motor vehicle, be it lorry or van.
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o The court did not know what the provision meant when applied to a
private motorcar. 7er omer 8: &ny clause or provision that purports to
have that eect ought to be clear and unambiguous so that the motorist
knows exactly where he stands. This provision is neither clear nor
unambiguous. !f applied to a private motorcar, ! have not the least idea
what it means.
7oh: The contra proferentem rule has also been consistently applied by thecourts in alaysia and +ingapore.
?hen the construction of an insurance policy was open to doubt, the doubt was
to be resolved against the insurer '-entral orry +ervice -o +dn Bhd v. &merican
!nsurance -o /01=04 alaysia).
o #ACTS$
o The plaintis were insured under a policy which covered loss or damage
$whilst in ordinary or customary course of transit, occasioned by the
carrying vehicle or conveyance being on #re, derailed, overturned or in
collision, struck by lightning or other accident to the vehicle or
conveyance such as involuntarily leaving the road, breakdown of bridges
and conseuent damage to the conveyance or vehicle and the interest
assured hereby%. The nearDside wooden Nap of the plainti%s lorry carrying
goods gave way and fell from the Noor and were stolen.
o The insurers disclaimed liability on the ground that the loss did not come
within the ambit of the policy. The loss was covered if it was occasioned by
the insured vehicle involuntarily leaving the road or by the breakdown of
bridges.
o %OLIN'$
o The two situations described in the policy were intended as illustrations of
what would constitute an accident and did not exhaustively de#ne the
scope of what constituted an accident.7er &Jmi 8:
There is only doubt and ambiguity in the clause as to whether the
policy covers any accident to the vehicle or is merely con#ned to
accidents caused by the vehicle involuntarily leaving the road or by
breakdown of bridges.
!n construing insurance policies, the contra proferentemrule shouldapply if there is ambiguity or doubt as to the extent of the policy.
+ince the policy is prepared by the insurance company, the doubt
and ambiguity should be construed in favour of the insured.
The policy therefore covers all accidents to the vehicle and the two
events described in the clause are mere examples and not
exhaustive. !t cannot be said that the accident is reasonably
foreseeable so as to take it out from the risk covered by the policy.
The occurrence is similar to the vehicle involuntarily leaving the
road which is expressly included in the policy.
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5. Seci6c esc"itions and Seci6c 7o"ds
+ee Birds pgs 2LMD2L3.
5.1 Accidents
Birds: oss caused by or arising out of an accident or by accidental means or
some similar phrase is a fairly common form of wording in insurance policies
and an essential one in particular types. &s we have seen, insurance prima faciecovers only unintentional acts anyway, so one problem is how the presence of
the word accident uali#es this. ¬her is that even a deliberate act by
someone may well be accidental from the point of view of the victim. +imilarly
an insured may be engaged in a deliberate course of conduct when something
happens which he did not intend. !s this an accidentE
o !f it suggested that the answers to these and other problems are best
considered by a separate examination of #rst those #rst party insurances
where the description $accident% is to be found and secondly, cases of
third party or liability insurance where the liability of the insurer toindemnify exists only if the insured acted accidentally. The cases however
do not necessarily adopt this distinction.
7oh: &n insurance policy is intended to cover the occurrence of a fortuitous
event. !n many types of insurance policies, the occurrence of an accident
constitutes a common risk undertaken by the policies. The term $accident%
connotes an event which happens unexpectedly or fortuitously.
& policy insuring against a liability caused $by accident% was intended to cover
an event which took place unexpectedly 'ills v. +mith /01@L4).
o 99Birds: &n important point in this context concerns the relevance of
natural causes to a third party policy insuring against liability caused by
accident. &s has been seen, in the context of personal accident policies, if
the real cause of the loss is natural, it will not be covered, indeed it will
usually be expressly excepted, and of course it is a general principle that
insurance does not cover natural wear and tear.
o #ACTS$
o The plainti%s house was damaged by a neighbour%s oak tree. The
foundations of the house collapsed when too much water was withdrawnfrom the clay subsoil underneath the house by the roots of the oak tree.
The plainti brought an action for nuisance and in negligence.
o The insured was held liable in damages to a neighbour for settlement
damage to the neighbour%s house caused by the root action of a tree in
the insured%s garden taking water from the soil on the neighbour%s land.
o The neighbour%s comprehensive policy covered against legal liability 'a
householder%s liability policy indemni#ed the insured against liability) $in
respect of claims made by any person ... for... damage to property...
caused by accident%. The insurers disclaimed liability contending that thepolicyholder%s liability was not caused by an accident. ?here damage to
2@
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property arose in the course of nature, the damage could not be
attributed to an accident.
o %OLIN'$
o &n accident could be said to have taken place when the event was
unexpected. &n analogy could be drawn from the cases decided under the
?orkmen%s -ompensation &cts where an in5ury suered by a workman in
the course of his employment as a result of exertion in carrying out hiswork had always been held to be an in5ury caused by accident. 7er 7aul 8:
0) >as there been at any moment of time 'or at particular moments
of time) some unexpected event 'or events) which has 'or have) led
to damageE There is no accident until the overstepping 'of the
safety limit of movement) takes place. 2) ?hat was the cause of the
overstepping of the safety limitE The cause was the nuisance of the
roots of the tree penetrating into the plainti%s soil and draining
away the moisture necessary to keep the movement of the house
from overstepping that limit.o This was caused by accident.
99Birds: The 5udge was clearly disposed to give a wide meaning to
these words in a householder%s policy and the insured obviously did
nothing that was intended or expected in any way. Fn the other
hand, it could be argued that the real cause of the insured%s liability
was entirely natural, namely the action of the tree roots, albeit there
was an $accident% when the neighbour%s foundations dropped.
o 7aul 8 regarded it as signi#cant that the insurers had chosen to use the
same words as used to appear in the ?orkmen%s -ompensation &cts and
felt able to rely on leading decisions under those &cts with appropriate
ad5ustments. That led him to the conclusion that there were two uestions
to be answered on the facts. The #rst was whether there had, at any
moment in time, been some unexpected event leading to damage. >ere
the settlement was this event, being more that the natural movement of
foundations. The second uestion involved determining the cause of this.
>is answer was that it was the action of the roots of the tree and that this
meant that the insurers were liable.
99Birds: This reasoning is di6cult to follow. !f the real cause of the
loss was the action of the tree, that was surely natural and not
$caused by accident%. !f the causa proxima rule means anything in
this sort of case, the decision can hardly be supported on this
ground. !f it can be supported, it must be on the ground that the
event must he looked at solely from the point of view of the insured,
ignoring underlying $natural% factors. !f so far as he was concerned,
the event was unexpected and unintended, then the loss was
caused by accident. 7erhaps underlying this is a rationale ofproviding broad support to the individual insured without too much
regard to narrow principles of de#nition and causation.
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99Birds: Two further points can be made. 0) -hanges in wording
might make a dierence to the result in this case. !f for e.g., the
policy had provided an indemnity in respect of damage $caused by
an accident% or $by accidental means%, it would have been more
di6cult to reach the same result. &ccident by itself is much more
capable of a wide meaning than an accident and the use of
$accidental means% reuires that the entire causal history must beaccidental 'see Hhak v. !nsurance -ompany of (orth &merica 'U*)
td /011@4). 2) ?orkmen%s compensation cases 'being relied on in
third party policy cases) may be useful when the wording of a policy
is the same as that used in the &ct, in other words $in5ury or damage
caused by accident%. But it is also true that workmen%s
compensation policies were construed more liberally than other
insurance contracts because they were the system of #rst party
insurance established for the bene#t of employees before the days
of state insurance under the social security system. "or e.g. death orin5ury from natural phenomena has been held covered under a
workmen%s compensation policy, whereas it would not be so
regarded under a personal accident policy. ?orkmen%s
compensation cases are therefore no more than useful and are
certainly not binding in this context.
&n accident covers an unexpected or unusual event external to a passenger 'e
Heep Pein Thrombosis &ir Travel Kroup itigation /2CC@4 U*>: !t is an integral
part of the test of what amounts to an accident that it must have a cause
external to the passenger. &n event or happening which was no more than the
normal operation of the aircraft in normal conditions could not constitute an
accidentV).
o #ACTS$
o &n action was brought by passengers or their personal representatives
against 20 international air carriers under &rticle 03 of the ?arsaw
-onvention. The article provided that $the carrier is liable for damage
sustained in the event of the death or wounding of a passenger or any
other bodily in5uries suered by a passenger, if the accident which caused
the damage so sustained took place on board the aircraft or in the course
of any of the operations of embarking or disembarking.
o The claimants alleged that they suered HPT, resulting in serious in5uries
and in some instances, death, while on board the carriers% aircraft. They
contended, inter alia, that the in5ury arose from the cramped sitting
arrangements together with insu6cient levels of oxygen and fresh air in
the cabins. The defendants also failed to warn the defendants of the risks
of HPT.
o
%OLIN'$o &rticle 03 distinguished between the bodily in5ury to the passenger on the
one hand and the accidentV by which the bodily in5ury was caused on the2=
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other, so that the in5ury could not itself be the accidentA that it was the
in5ured passenger who must suer the unintended and unexpected
happening which constituted the accident and it was from his perspective
that the happening must be consideredA that an event or happening which
was no more than the normal operation of the aircraft in normal conditions
could not constitute an accidentV for the purposes of article 03 A that in
order to be an article 03 accident, the event or happening that caused thedamage of which complaint was made must be something external to the
passengerA that the onset of HPT during the normal operation of the
aircraft was not an unexpected or unusual event which was external to the
passenger, and that the cramped seating arrangements in the aircraft and
the failure by the airline to warn passengers of the precautions that might
be taken to guard against HPT could not be regarded as causative links in
the onset of HPT, particularly when there was no established practice of
airlines generally to issue such warningsA and that, accordingly, on the
agreed facts, HPT sustained during the course of or arising out ofinternational carriage by air was incapable of being an accidentV causing
bodily in5ury within the meaning of article 03.
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passengers travelled on Nights 'with cramped seating and the
like) were not capable of amounting to an event that satis#ed
the #rst limb of the de#nition of an accident which $took place
on board the aircraft or in the course of any of the operations
of embarking or disembarking%.
3M The present case involved carriage by air in an aircraft and in a
manner, which were, in terms of industry standards and practice, atthe relevant times, normal, usual and expected. ike the -&, there is
no basis on which the permanent features of the aircraft, or the
sub5ecting of the passengers to carriage in aircraft with these
features could amount to an accidentV within article 03 . That is not
of course the same as saying that an unexpected event during the
Night must always be instantaneous and immediately noticeable,
rather than continuous and unrecognised.
The term $accident% contemplated a distinct event, not part of the usual, normal
and expected operation of the aircraft, which happened independently ofanything done or omitted by the passenger 'Barclay v. British &irways 7lc /2CC14
U*-&).
o #ACTS$
o & passenger%s right foot suddenly slipped on a plastic strip embedded in
the Noor of the aircraft as she lowered herself into her seat. +he heard and
felt her knee $pop% as it gave way and struck the armrest. +he sustained
bodily in5ury. The insured contended that the in5ury was caused by an
accident taking place on board an aircraft.
o The claimant was taking her seat as a passenger aboard the defendantGs
aircraft when her foot slipped on a plastic strip embedded in the Noor and
she sustained bodily in5ury. The strip was a standard #tting and the cabin
environment was in normal working order. The claimant sought damages
from the defendant carrier for bodily in5ury caused by an accidentV on
board the aircraft pursuant to article 03'0) of the ontreal -onvention
0111 which was the successor provision to and materially to the same
eect as article 03 of the ?arsaw -onvention 0121.
o %OLIN'$
o The term accidentV in article 03'0) contemplated a distinct event,
external to the passenger, which was no part of the usual, normal and
expected operation of the aircraft and which happened independently of
anything done or omitted by the passengerA that, therefore, where bodily
in5ury was caused by an event constituted by some contact or interaction
between the passenger and the aircraft in its normal state, such an event
was not capable of amounting to an accidentV within the meaning of
article 03'0)A that the claimantGs slip was not an event external to her, nor
had it happened independently of anything done or omitted by her, butrather was an instance of her personal, particular or peculiar reaction to
the normal operation of the aircraftA and that, accordingly, the 5udge had
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been correct to have found that the claimantGs slip was not capable of
amounting to an accidentV within the meaning of article 03'0).
7oh: !n the context of a workmen%s compensation insurance policy, the term
accident has been construed to include an in5ury suered by a workman as a
result of exertion in carrying out his work. ;ually if a workman is suering from
a preDexisting disease and the disease is accelerated by the exertion of the
workman to a point where it causes in5ury, the resulting in5ury is attributable toan accident.
& workman who suered a fatal heart failure in the course of digging a drain
died as a result of an accident 'Kolden >ope ubber ;state td v. uniammah
Frs /01@M4 alaysia).
o #ACTS$
o & workman was employed as a #eld worker and his duties included the
digging of new drains and the clearing of old ones. >e suddenly collapsed
and died while clearing a drain with a changkol. >e died from heart failure
and the exertion of his work had contributed to the heart failure.o The ?orkmen%s -ompensation Frdinance 01M2 provided for payment of
compensation when a workman suered $personal in5ury by accident
arising out of and in the course of the employment%. The employers
appealed against an award made under the ordinance. The court was
asked to consider inter aliawhether the in5ury suered by the deceased
was due to an accident.
o %OLIN'$
o The workman%s heart failure was due to an accident arising out of and in
the course of his employment. 7er Kill 8: !t has been held that the fact that
a man%s condition predisposes him to a cardiac failure is immaterial where
such failure takes place in the course of and is caused by his work, unless
it can be shown that the work itself did not contribute to or accelerate the
death.
7oh: &n in5ury suered by a workman is due to an accident if the in5ury happens
unexpectedly or fortuitously. Thus a workman who is infected with a disease in
the course of his work may be said to have suered the in5ury by accident.
& workman whose 5ob involved the sorting of wool suered an in5ury by accidentunder the ;nglish ?orkmen%s -ompensation &ct 0=13 when he became infected
with anthrax as the in5ury was unexpected 'Brintons td v. Turvey /01CM8 U*>).
o #ACTS$
o The workman was employed to sort wool at a factory and became infected
with anthrax and died #ve days later. ?orkmen%s compensation was
awarded by the arbitrator. The employer appealed against the award on
the ground that for an in5ury to come within the provisions of the &ct,
there must be an occurrence which could properly be described as an
accident, where the in5ury must have been caused by some force applied
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to the body, for instance, a pinDprick, scratch, contact with a sharp tool,
bruise, wound or some similar event.
o %OLIN'$
o The death of the workman could be attributed to an accident as the event
causing the in5ury happened unexpectedly and fortuitously. 7er ;arl of
>alsbury -:
!t was an accident that the thing struck the man. !t must have beenthough some accident that the poison found entrance into the
man%s system. The man%s death was attributable to personal in5ury
by accident arising out of and in the course of his employment.
Birds: The cases illustrate that $accident% is a di6cult concept to de#ne
accurately. The following tentative conclusions can be drawn. The meaning of
accident is wider in the context of personal accident cover than in third party
cover.
o !n the former, the event need only be either unexpected or unintended,
provided that the insured does not expose himself to a deliberate risk.o !n the latter, it should be both unexpected and unintended.
o >owever the degree of foresight that is relevant to determine whether or
not an event is unintended is not clearly established.
Kray v. Barr /01304 suggests that not a great deal of foresight of an
event is needed before it is so regarded as intended for these
purposes whereas obinson v. ;vans /01@14 &ustralia held that the
insured as a reasonable man must have foreseen the event before
he is denied indemnity. !t may be that Kray should be regarded as
incorrect on this point and treated solely as an authority on
causation and public policy.
5.* Const"uing a )e"sonal Accident )olic- Total )e"2anent isa!le2ent
7oh: The amount of indemnity recoverable under a personal accident policy is
often dictated by whether an insured%s in5ury is of a temporary or permanent
nature and whether the in5ury aects the employment prospects of the insured.
"or this reason, the disability suered by an insured is often classi#ed as a
$partial disablement% or a $total disablement%. &n insurer may provide his ownde#nition as to what constitutes each. The task of determining the scope of
these two terms in any given case is largely one of construction.
o The term $total disablement% has been construed to cover a situation
where an insured is unable to pursue the business he was involved in prior
to suering the in5ury or some substit