Haris Marine Products

v.

Export Credit Guarantee Corporation (ECGC) Limited

Civil Appeal No. 4139/2020

Policy type- Single Buyer Exposure Policy

The Supreme Court delved into the term business common sense to interpret terms of a credit risk insurance policy. The Court relied on the UK Supreme Court’s judgment in Arnold v. Britton [2015] UKSC 36 and observed that the business common sense was a decisive method was suggested to construe the ambiguity of a term used in a commercial contract. On contra proferentem, the Court observed that an ambiguous term in an insurance contract is to be construed harmoniously by reading the contract in its entirety.

If after that, no clarity emerges, then the term must be interpreted in favour of the insured, i.e., against the drafter of the policy. The Rule of contra proferentem thus protects the insured from the vagaries of an unfavourable interpretation of an ambiguous term to which it did not agree. Importantly, the Court emphasized the role of contra proferentem in standard form insurance policies, called contract d’ adhesion or boilerplate contracts, in which the insured has little to no countervailing bargaining power. Accordingly, ECGC was held to have incorrectly interpretated an ambiguous term and was directed to pay the claim amount to the insured since the parties had transacted on several previous occasions.

Series Navigation<< Role of exceptions in an insurance policy?Can reliance be placed on definition of words in specific statutes when the insurance policy itself defines those words? >>

Author

This entry is part 10 of 12 in the series March 2023 - Insurance Times

Byadmin

Leave a Reply

Your email address will not be published. Required fields are marked *