Before delving into the decision, it is imperative to examine the principle of contra proferentem. It is etymologically traceable to the maxim verba chartarum fortius accipiuntur contra proferentem, which means the words of deeds are to be taken most strongly against he who uses them.
It is also relevant to refer to its meaning as contained in Halsbury’s Laws of England which defines the contra proferentem rule as,
“Where there is ambiguity in the policy the court will apply the contra proferentem rule. Where a policy is produced by the insurers, it is their business to see that precision and clarity are attained and, if they fail to do so, the ambiguity will be resolved by adopting the construction favourable to the insured. Similarly, as regards language which emanates from the insured, such as the language used in answer to questions in the proposal or in a slip, a construction favourable to the insurers will prevail if the insured has created any ambiguity. This rule, however, only becomes operative where the words are truly ambiguous; it is a rule for resolving ambiguity and it cannot be invoked with a view to creating a doubt. Therefore, where the words used are free from ambiguity in the sense that, fairly and reasonably construed, they admit of only one meaning, the rule has no application.”
As to what amounts to “ambiguity” is clarified in P Ramanatha Aiyar’s Advanced Law Lexicon, which defines the term “ambiguous” as doubtful or uncertain, particularly in respect of signification; equivocal; indeterminate; indefinite; unsettled; indistinct.
Therefore, but for the contractual terms which fall under the above classes of ambiguousness in insurance contracts, the principle has no application. Industry practice indicates that insurance contracts are generally standard form contracts containing certain clauses which many a time are not defined either in the policy or through interpretation even vide judicial precedents.
Such clauses therefore may not be equipped to handle peculiar situations that may arise, eventually leading to an unsettled ambiguity. Such ambiguities impinge on the issues of acceptance or non-acceptance of the claims by an insurer. In such cases, to resolve the ambiguity, credence is lent to the doctrine of contra proferentem and ambiguous terms would receive an interpretation favourable to the insured.
Source: Barandbench
