Often insurance is quickly arranged on urgent annual basis through a broker attracted by the commission on the premium.
However, should an accident occur and cover under the insurance be required, the policy will receive more stringent examination and perhaps a contest over the meaning of its exclusion clauses.
There is authority that the courts will take a reasonably favourable attitude to the interpretation of the policy in favour of the insured.
In the words of Lord St. Leonards in Anderson -v- Fitzgerald (1853) 4 HLC 484 at 510-511 the insurer has a duty to provide clean policies: “A policy ought to be framed with such deliberate care, that no form of expression by which, on the one hand, the party assured can be caught, or by which, on the other, the company can be cheated, shall be found upon the face of it: nothing ought to be wanting in it, the absence of which may lead to such results.
Accordingly, a policy is usually interpreted against the insurer if the policy has ambiguous terms.
Further the courts have said in Carlingford Australia General Insurance Ltd v EZ Industries (1988) VR 349 where the exclusion clause in a public liability policy exempted the insurer from claims for personal injury or property damage arising out of the release of fumes, toxic chemicals, liquids or pollutants unless such release was due to a sudden and unexpected happening.
The exclusion clause was held to be of such wide operation as to produce an unexpected and irrational result if given effect.
Carlingford is authority for the principle that when the plain words of an exclusion clause lead to an absurd result, the Court will strike down the clause.
Loss sometimes occurs in respect of insurance which has been designed to give peace of mind. Where there has been a failure to indemnify promptly in accordance to the policy and that will inevitably cause distress to the insured then consequential damages may be awarded.
Further where an insurance policy covers the interests of a number of insured the failure of one insured to honour his obligations under the policy will often be found not to effect the recovery of the other insured where the policy is one which protects their separate interests.
Accordingly, whether before a claim occurs or after a claim has been rejected, a careful review of the authorities and the terms of the policy should be carried out in order to insure the appropriate recovery is made.