Forgiving failures in drafting – insurance contract interpretation

  • United Kingdom
  • 02/19/2019
  • Eversheds Sutherland

This judgment cautions against reading too much into drafting anomalies when interpreting insurance contracts. The dispute concerned whether or not the medical negligence section of a combined liability insurance policy provided for aggregation of limits. The Court of Appeal approved the lower Court’s decision that it did, notwithstanding various failures in drafting relied on by the insured. Those criticisms included that the aggregating language was not present in a specific Limits of Indemnity Schedule to the Policy, but rather in a proviso in the wording itself. Moreover, the proviso did not clearly refer to the Schedule and could thus be a standard provision that served no purpose in light of the Schedule. Further, the proviso did not express that its effect was to aggregate claims “consequent on or attributable to one source or original cause” as a single “Claim” for limits purposes, whereas another clause in the policy did do so in relation to linked events. Finally, it was argued that ambiguities should be resolved in the insured’s favour per the contra proferentum principle.

In rejecting these arguments the Court of Appeal noted that (i) the schedule and the wording should be given equal weight, (ii) the reasonable reader of the policy would be a sophisticated insured with the benefit of professional advice and would read the entirety of the policy, (iii) the Court will construe the contract as it is and not as it might have been drafted, (iv) aggregation clauses must be read in a balanced way given their propensity to work in favour of either party, (v) the contra proferentum rule only applies where there is real doubt or uncertainty over the meaning of the clause and (vi) as the lower court had observed, neatness and elegance of drafting are often lost in frequently used, modified and revised policies of insurance. The Court ultimately concluded that the schedule and wording did together create a “coherent” scheme for the amounts payable for 3 categories of claim, one of which included claims to be aggregated on the basis set out in the proviso.