Did you know: there is a further Latin phrase that is very relevant in the insurance context, and that is the phrase contra proferentem.
The phrase derives from the maxim verba chartarum fortius accipiuntur contra proferentem, and means that where there remains doubt and ambiguity as to the meaning of a term in a contract, it is to be resolved by construing the relevant words against the interests of the person who provided the wording – i.e. against the interests of the drafter. The rule exists to discourage drafting parties from intentionally using vague and ambiguous language to favour their own interests and seeks to put the burden of removing ambiguity on the party most capable of preventing that ambiguity – i.e. the person who wrote it!
Commonly, in an insurance context this includes the construction of:
- insurance policies;
- settlement documents and releases;
- insurance proposals, cover slips, endorsements, certificates of insurance, etc; and
- a multitude of other documents that arise during the formation of an insurance contract and during the resolution of claims and recoveries.
Importantly, the rule will only be applied where there is actually doubt or ambiguity and will not be used to create a doubt or magnify an ambiguity. It is a rule of last resort, used only where ordinary rules of construction do not solve the ambiguity.
It is especially relevant to insurers as in the context of insurance, the insurer is the one drafting and offering the insurance policy wording, which is often based on template and pre-prepared wording. Similarly, the majority of times it is the insurer who is drafting the relevant documentation resolving and finalising claims made on the policy, or during a recovery, again utilising precedent documentation.
Clarity is the key. Be clear in your language. If terms look ambiguous in your particular matter, even if they are based on ordinary template documents, look to remove that ambiguity – otherwise, if all else fails, the Court will construe the term against you – i.e. contra proferentem. But don’t fear, we are here to help if needed!
The content of this article is intended to provide a general guide to the subject matter. Specific advice should be sought about your specific circumstances.
