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In a recent Judgement of the Appeal Court, the issue of drafting clear and unambiguous exclusion clauses in insurance contracts was revisited.
Facts of the case
In Civil Appeal 10/18,17/12/25, the respondent held a comprehensive motor insurance policy and caused a single-vehicle accident due to negligence. Although alcohol readings were taken, she was acquitted of the criminal charge of driving under the influence due to the prosecution failing to prove compliance of the testing devices with statutory standards.
The insurer relied on a policy exclusion clause to deny indemnity excluding liability where the driver was under the influence of alcohol and either
(a) had been convicted or
(b) there was sufficient evidence on which the driver could have been convicted.
The issue was whether limb (b) could apply despite the criminal acquittal.
First instance
At first instance the Court denied the application of the exclusion clause deciding that the clause was not ambiguous and that it could not be interpreted to provide the insurance an opportunity to deny cover, stating that the limb (b) applied only on the occasion of no criminal case being filed, essentially inserting terms previously absent.
Appeal Court
The Appeal Court, although reaching the same conclusion, reaffirmed that insurance contracts are interpreted in line with general contractual principles, focusing on the meaning conveyed to the reasonable person with the relevant background knowledge, following the well-known Liperi v Ecclesiastical Insurance Office plc (2019).
Further, the Appeal Court, disagreeing with the first instance Court, found the clause to be ambiguous, applied the contra proferentem rule and interpreted the exclusion against the insurers. Consistent with Alexandrou v Eurolife Ltd (2006), the insurer failed to draft a clear exclusion and therefore remained liable to indemnify the insured.
Overall legal significance
This decision confirms that exclusion clauses in insurance contracts will only be enforced if drafted with absolute clarity. Any uncertainty will be resolved against the insurer, reinforcing consumer protection and contractual certainty in insurance law.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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