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Clear Terms Examine how the courts deal with terms which are clear.
Stakeholders
Stakeholders
Regulator - MAS
Insurer
Policyholder
Beneficiary
Courts
MAS
Market Forces - MAS is less involved with achieving a level playing field for the
parties and market forces are left to operate. MAS does not prescribe standard or
basic terms for insurance contracts.
No Regulatory Control
Unfair Contract Terms Act - Sections 2 to 4 do not extend to (a) any contract of
insurance (including a contract to pay an annuity on human life).
Consumer Protection (Fair Trading) Act 2003 - Act does not apply to transactions
regulated under the Insurance Act. See section 2, First Schedule.
Level Playing Field Is the playing field level for both the insured and the insurer?
Courts Objectives
Parties Situation
Dominance - When a layman contracts with an insurer, who is the dominant party in
the transaction?
Legal Formalities
Form - Is an insurance contract subject to any prescribed legal formalities?
Writing
Contract Is an insurance contract required by law to be in writing?
Common Law
Formalities
Writing - Is it correct to say that all insurance policies need not be in writing?
Exceptions - Why is it that some policies like life insurance, marine insurance and
motor insurance are required to be embodied in a written document?
UK and Singapore
UK - Section 2 of the Life Assurance Act 1774 requires all insurance contracts based
on the occurrence of a specified event to be in writing.
Singapore - Under section 62(4) of the Insurance Act, all contracts of indemnity are
not required to be in writing.
UK and Singapore
Variation What is the fundamental difference between the UK Life Assurance Act
1774 and the Singapore Insurance Act?
Oral Contract
Potential Problems - What are some of the potential problems associated with oral
or verbal insurance contracts?
Insured - Would an insured benefit from having an oral contract instead of a written
contract?
Written Policy
Bankes L.J.:
Binding Effect: I am rather afraid of the doctrine that you can get out of clauses by
saying they are difficult to read. There may be extreme cases. I have in mind the bill
of a well-known shipping line printed on red paper which was calculated to produce
blindness in anyone reading it.
Binding Effect: We think it apposite and timely to remind the general public that
under the law of contract, a person who signs a contract which is set out in a
language he is not familiar with or whose terms he may not understand is
nonetheless bound by the terms of that contract. Illiteracy, whether linguistic,
financial or general, does not enable a contracting party to avoid a contract whose
terms he has expressly agreed to be bound by. The principle of caveat emptor applies
equally to literates and illiterates in such circumstances.
Robertson v. French
Lord Ellenborough C.J.: There were no special rules to govern the construction
of an insurance contract.
When a contract was partly printed and partly written, greater weight would be
given to the written part of the contract.
An insurance policy taken out on a ship and her cargo stated that the risk was to
commence from the loading of the ship at any place along the coast of Brazil.
Cargo was loaded at the Cape of Good Hope. The ship was taken into possession by
the Admiralty while it was off the coast of Rio Janeiro on suspicion of smuggling.
Robertson v. French
Would giving an ordinary word its plain and ordinary meaning favour the insured or
the insurer?
Ordinary Meaning
Beneficiary - Who would benefit more from the rule that ordinary words are to be
given their plain and ordinary meanings?
Written Policy
Printed/Written Words - When a contract is partly printed and partly written, why
should the written words be given greater weight?
Responsible Party - Who is the party primarily responsible for putting together an
insurance contract?
Ambiguity - When a term in a policy is unclear or doubtful, who should shoulder the
responsibility for the ambiguity?
Construing Terms
Specific Term When a dispute arises, should the court focus exclusively on the
specific term in dispute and ignore the rest of the document?
Context - Should the courts be influenced by the context in which a term is deployed
in the policy?
Insured dislocated the cartilage of his knee while stooping to pick up a marble
dropped by a child as it rolled away from him down a sloping floor.
Why did the court refuse to give the term external its literal meaning?
Malaysian Federal Court: The meaning of a word might be gathered from the
context in which the word was used. (noscitur a sociis maxim).
Why did the court refuse to give the term motor-cycling its literal construction as
urged by the insurer?
Policy Terms
Clear Terms - When a term is reasonably clear, is the court bound to apply the term?
Delvin J.: When a policy used an ordinary word, the word was to be given its
plain and ordinary meaning.
Depot was in an enclosed compound surrounded by high brick walls and topped with
barbed wires. Lorry was stolen when thieves broke into the compound of the depot.
Could the court have avoided applying the plain and ordinary meaning of the term
warehouse?
Chiew Swee Chai v. British American Insurance Co. (M) Sdn. Bhd.
Shankar J.: When a term was clear, effect had to be given to the term.
As Milton says, they also serve, who only stand and wait. - limp arm serves a
cosmetic purpose - it is still there for the whole world to see.
Life policy stipulated that it was: understood that loss shall mean with regard to
hands and feet, dismemberment by severance at or above the wrist or ankle joint.
Insured injured his left arm in a road accident. Doctors recommended amputation of
the arm.
Insured declined saying that the experience would be too traumatic and the operation
cost too much.
Chiew Swee Chai v. British American Insurance Co. (M) Sdn. Bhd.
Insurer: No liability as gasoline was kept on the insured premises at the time of the
fire.
Privy Council: In the context of a domestic fire insurance policy, the term must
be construed as intending to prohibit the storage or keeping of gasoline for a
commercial purpose. It was not intended to prevent an insured from having a
small quantity of the item for household purposes.
A fire insurance policy provided: The company is not liable ... for loss or damage
occurring while ... gasoline ... is ... stored or kept in the building insured.
Why was the plain and ordinary meaning of the term stored or kept not applied by
the court in this case?
LECTURE REVIEW
Stakeholders MAS less concerned with terms and the courts play a major rule in
construction of insurance contract.
Construction Giving a term its plain and ordinary meaning often benefits an
insured but can sometimes also work against the insured.
Clear Terms Courts have little choice but to apply terms which are clear even
though it might work against the insured.