Insurance Contracts CP - Law Reform Commission

verbal or written questions at formation stage, as well as at post formation stage vis-à-vis policy terms
and exclusions, the weight of Irish authority is in favour of viewing and interpreting ambiguous questions
in a proposal form, and provisions within the policy itself against the party who prepared the question or
contract term. In Rohan Construction Ltd v Insurance Corporation of Ireland Ltd 13 Keane J cautioned
against giving a meaning to a contractual term which is strained or artificial:
―if there is any ambiguity in the language used it is to be construed more strongly against the
party who prepared it, i.e. in most cases against the insurer. It is also clear that the words
used must not be construed with extreme literalism, but with reasonable latitude, keeping
always in view the principal object of the contract of insurance‖
4.09 In the context of ambiguities in a proposal form the leading case is Re Sweeney & Kennedy's
Arbitration. 14 An application form asked the proposer if any of his drivers are ―under 21 years of age or
with less than 12 months experience‖. The proposer truthfully answered in the negative but at a later
date he hired a driver who failed to satisfy these conditions. An attempt to avoid the policy on the basis
that a promissory warranty as to the future was implicitly built into the contract failed. In Analog Devices
BV v Zurich Insurance Company, 15 the Supreme Court has specifically endorsed the view that exclusions
from cover in an ―all risks‖ policy should be read contra proferens. More recently, in McAleenan v AIG
(Europe) Ltd 16 Finlay Geoghegan J has reaffirmed these propositions in the context of professional
indemnity insurance, pointing out however that contra proferens interpretation only arises if there is an
ambiguity in the first place, Finlay Geoghegan J finding such an ambiguity over whether the policy in
question was a composite and not a joint policy, creating individual contractual rights for employees of the
firm.
4.10 While Keane J‘s view in Rohan Construction and the contra proferens approach mandated in
Analog are not necessarily irreconcilable, there is a tension between these approaches in the sense that
reading a clause against the party who prepared it need not necessarily be the same approach as giving
the question or term the meaning that a reasonable person would deduce from the words themselves.
There are English cases that do not favour contra proferens interpretation of exclusions, 17 and after the
House of Lords had distanced itself from a priori rules of construction in Investors Compensation Scheme
Ltd v West Bromwich Building Society, 18 there is a clear movement away from using the contra proferens
approach in insurance contracts. In McGeown v Direct Travel Insurance 19 Auld LJ said that too early a
recourse to contra proferentem involved a danger of creating an ambiguity where there is none. Clarke J,
in Danske Banke v McFadden 20 has recently expressed agreement with the view that the contra
proferens approach to interpretation may not be suitable where contractual terms may have been
individually negotiated, and in any event Clarke J did not find it of assistance in interpreting the terms of a
guarantee coauthored as a joint effort by the parties.
4.11 It may be that the issue of how to interpret an ambiguous question should best be left for future
judicial development. In Analog the Supreme Court specifically endorsed both contra proferens
interpretation and Lord Hoffmann‘s speech in West Bromwich and the tension between these approaches
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[1986] ILRM 419. See also Walkers v London and Provincial Insurance Co (1888) 22LR Ir 572.
[1986] ILRM 419.at 423-4: see Griffin J‘s ―reasonable persons‖ test in the Supreme Court [1988] ILRM 373.
[1950] IR 85.
[2010] IEHC 128; Emo Oil Ltd v Sun Alliance [2009] IESC2.
See also O‟Reilly v Irish Life Assurance plc [2005] IEHC 449 (rejection of consumer insured test).
[1998] 1 All ER 98.
[2004] 1 All ER (Comm) 609. In Clear Homes v Sarcon No 177 Ltd [2010] NI Ch 16 Deeny J characterised
contra proferens, in the light of Lord Hoffmann‘s analysis, as a rule of last resort when all other rules of
interpretation fail.
[2010] IEHC 116, citing in particular Levinson v Farin [1978] 2 AllER 1149 and Oxonica Energy Ltd v Neuftec
Ltd [2008] EWHC 2127 (Pat).
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