- Where there is an ambiguity, courts should be aware of unequal bargaining power in the negotiation of an insurance contract and interpret it accordingly through
The contra proferentem rule
Broad interpretation of coverage provisions, narrow interpretation of exclusions
- Courts should try to give effect to the reasonable expectations of parties without reading in windfalls in favour of either of them
Court shouldn’t support a construction that would enable insurer to pocket the premium without risk, or the insured to achieve recovery which could not be sensibly anticipated at time of contract
- As per Reid Crowther, a “claim” is made where there must be some form of communication of a demand for compensation or other form of reparation by a third party upon the insured, or at least communication by the third party to the insured of a clear intention to hold the insured responsible for the damages in question
A claim at CL requires a third party to communicate an intention to hold the insured responsible for damages
If a third party communicates through a representative, latter must accurately communicate the intent of the claimant, and it must be done with the claimant’s full knowledge and approval
Analysis
- First, court had to determine what type of policy was involved
While the policy required reporting of both occurrence and claims, this did not change the nature of coverage offered under the policy
In a claims made policy (which is what was present), insurer may insist that it be informed of relevant circumstances or accidents prior to a related claim as this allows them to anticipate possible future claims
- Court then had to determine what was a ‘claim’
The contract also distinguished between accidents, occurrences, claims and suits, so these terms all had distinct meaning
- Duty to defend only arose w.r.t. C’s claim, since he had lawyer send a letter, thus communicating to insurer of intention to hold Jesuits responsible for his injuries
There was a letter sent to insurer during policy period mentioning nine other victims, but the victim’s representative did not have the permission to communicate any intention to bring a claim on behalf of victims, also unclear whether victims ever had such an intention, therefore no claim
Principle behind indemnity insurance is that money is paid for damages to property
Principle behind non-indemnity insurance is that there is to be payment of insurance money upon occurrence of specified event regardless of resulting financial loss
Rationale for indemnity principle is to prevent people from engineering a loss, or being less diligent in avoiding a loss
An insured making claim on policy must prove a peril occurred and resulting loss
- During the journey, a los occurred and the commissioners (D) sought to make a claim under the policies stating that the interest was vested in the King
- Insurance company claimed that D only had contingent right in ships
Issues
- Whether an insurable interest must encompass a legal interest in the property or does a factual expectation of possession of property suffice?
Rules
- Factual Expectation test: insurable interest is a “right in the property, or a right derivable out of some contract about the property, which in either case may be lost upon some contingency affecting the possession or enjoyment of the party”
I.e. Insurable interest exists where insured stands in a legal relationship to the property or otherwise stands to suffer loss as a result of its destruction
