There have been many cases on how to interpret insurance policies. The principles of policy interpretation are reasonably succinctly stated but it is their application and their interaction which can be difficult.
The most recent decision from the NSW Court of Appeal (Zhang v ROC Services (NSW) Pty Limited; National Transport Insurance by its manager NTI Limited v Zhang [2016] NSWCA 370) is a helpful reminder of not only the principles but also the factors to take into account in how to apply those principles.
The decision highlights the care that needs to be taken in both drafting and interpreting policies of insurance.
The Court was asked, among other things, to examine, the meaning of the following exclusion in a commercial motor vehicle policy:
“…We will not pay:
…..
(8) for any liability for death or bodily injury arising out of or in any way connected with a defect in Your Motor Vehicle, but in Queensland only if it causes loss of control of the vehicle whilst it is being driven;
…..”
A plaintiff was injured in NSW as a result of an accident when a large metal ramp attached to a trailer fell on him. The accident occurred as the result of a defect which resulted in the failure of a weld on the trailer. The trailer was insured under the commercial motor vehicle policy but was not being driven at the time of the accident.
So far as is relevant, the issue was whether the words “whilst it is being driven” should apply to all the preceding words of the exclusion or only to the words after the comma, i.e. the words: “but in Queensland only if it causes loss of control of the vehicle”. On the former interpretation the exclusion would not apply and the policy would respond. On the latter interpretation the exclusion would apply and the policy would not respond.
The Court of Appeal held by a majority that the words “whilst it is being driven” should apply to all the preceding words of the exclusion. In coming to this conclusion it held that the words of the exclusion were ambiguous, a conclusion which many (including the minority judge) may struggle to agree with. In coming to its conclusion the Court of Appeal paid attention to the principles of construction but had particular regard to the commerciality of the outcome especially how the policy interacted with compulsory third party policies.
One comment, regarding punctuation, also needs to be highlighted: “…..punctuation informs the meaning of a provision, but the significance of punctuation is reduced if the policy uses punctuation in an inconsistent or haphazard manner.”
Post by Paul Hendriks