Briefly the Rules of Interpretation of a Policy :

Like any other contract, disputes do arise regarding liability, quantum, extent and duration of cover, especially in cases where the insurer may have earlier repudiated the claim. It follows therefore, that interpretation of the policy document, is of paramount importance even at the time of inception and during the currency of the policy and not only in a court of law.

The policy document being a standard document, drafted by the insurer, the benefit of doubt is always in favour of the insured, as a principle of natural justice. This is as per the contra preferentum rule which states that where the contractual language is capable of alternative interpretations, it will be construed or translated in favour of the insured, who accepts the standard contract.

Briefly, the following rules are applied-

• Printed and written portion of the policy is to be construed together as far as possible.

• In case of contradiction, the written portion over-rides the printed portion.

• The policy is to be interpreted as a whole.

• The words in the policy are to be given their plain, ordinary and popular meaning.

• Technical words are to be given their strict technical meaning.

• The ordinary rules of grammar shall apply.

Other Important features of a policy document-

1. Conditions – These describe the various conditions which must be followed or eschewed by the insured and may be quite detailed, depending on the nature of the risk and the extent and duration of cover required.

The conditions mention under what circumstances the policy would pay and the precautions safeguards to be taken by the insured, eg duty of assured consition prescribes that the insured must take all those steps necessary to mitigate the loss, as if he was not in fact insured. Other terms and conditions would related to arbitration, durty to disclose material facts including any amendment/alteration in the risk or subject matter of insurance. There are certain clauses such as cancellation, arbitration, jurisdiction etc which are recommended in every contract.

Implied/express conditions :

Generally express conditions are those that require the insured to do something – eg. in cargo insurance transit by road during monsoon. There are two types of express conditions,

(i) conditions, which are applicable to all policies of that class and are therefore, printed on the policy document.

(ii) Special conditions, which are applicable only to that specific policy. The special conditions are thus handwritten or typed or rubber-stamped on the policy. (e.g.,type of packing, compulsory excess, unloading survey, etc.)

Implied are those , which are so basic and material that their existence forms the very basis of the policy and cannot be In the absence of express conditions, the insurance contract is subject to implied conditions, which relate to

(i) Good faith

(ii) Insurable interest

(iii) Subject matter of insurance

(iv) Identification of the subject matter

Implied conditions can be expressed in a policy explicitly, or can be modified or excluded by the express conditions.

All conditions whether expressed or implied are the operative clauses of a policy. They are recited as conditions to be fulfilled by the insured for assuming the right to recover under the policy.

Conditions Precedent / subsequent to the contract

Conditions which are there prior to entering into a contract, which may be material to the contract being executed by either party. Whereas, conditions subsequent are due to the occurrence of a material event which may require the insurer to avoid the contract- condition subsequent to policy incepting, like discovery of a fraud or gross misrepresentation which alters the basic circumstances under which the contract was accepted.