Research Handbooks in Financial Law series
Edited by Julian Burling and Kevin Lazarus
Chapter 5: Contract Terms: Judicial Approaches to the Interpretation of Insurance Contracts
Oliver Brand 1. INTRODUCTION In his learned treatise on Insurance Law in Ireland Buckley informs us about the lament of a fourteenth-century Tuscan cloth merchant who did not receive (full) coverage for the loss of a galley at sea from his insurer: ‘When they insure it is sweet to them to take the monies but when disaster comes it is otherwise and each man … strives not to pay’.1 Time did not prove to be a good healer. Today, insurers still labour under the notorious reputation of interpreting contract terms in an unduly narrow fashion and of hiding behind small print in order to avoid payment to the policyholder. If this is true, the problem is compounded by the fact that insurance contracts are often ‘contracts of adhesion’, that is, agreements in which one of the parties – the policyholder – has no option other than to adhere to the terms dictated by the other party – the insurer – or reject the conclusion of the contract.2 In particular, where the policyholder is a consumer, legal systems feel obliged to account for his or her inability to negotiate terms and the corresponding risks of being exploited. The extent and manner of intervention affecting the terms of insurance contracts varies remarkably from country to country. In general, intervention may take one of three different forms.3 Either the legislature may create binding rules of law that override the conﬂicting terms of contracts or it may empower an administrative authority to administer control of terms and clauses...
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