Interpreting Insurance Contracts: Special Considerations – Part II

In part I of this blog, we have discussed some of the principles of interpretation set and relied upon by Courts whilst construing and interpreting insurance contracts, including that of strict construction, essentials of an insurance contract and the requirement of Uberrimei fidei i.e., good faith. In this part, we will delve into other principles which form the basis for interpretation of insurance contracts, including presumption as to materiality of information sought, effect of misrepresentation and the applicability of the rule of contra proferentem to insurance contracts

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Interpreting Insurance Contracts Special Considerations – Part I

Insurance is the act of providing against a possible loss, by entering into a contract with one who is willing to give assurance — that is, to bind himself to make good such loss should it occur. In this contract, the chances of benefit are equal to the insurer and the insured. The first actually pays a certain sum and the latter undertakes to pay a larger, if an accident should happen. The one renders his property secure; the other receives money with the probability that it is clear gain. The instrument by which the contract is made is called a policy; the stipulated consideration a premium.[i]

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Contract of service or contract for service - The Supreme Court Test

In Sushilaben Indravadan Gandhi v. The New India Assurance Company Limited,[1] the Supreme Court crystallised and clarified the tests to differentiate between a contract of service and a contract for service, while also interpreting an exemption of liability clause in an insurance policy.

Factual Background

Respondent No. 3 viz. the Rotary Eye Institute, Navsari (“Institute”) subscribed to a Private Car ‘B’ insurance policy offered by Respondent No. 1 viz. New India Assurance Company Limited (“Insurance Company”) on April 17, 1997 (“Insurance Policy”). The Insurance Policy, which inter alia covered death of or bodily injury to any person including occupants in the relevant motor car, expressly excluded the Insurance Company’s liability in cases of death or injury arising out of and in the course of the employment of the person so affected, by the Institute. The Insurance Policy also provided for compensation on a particular scale for bodily injury sustained by any passenger other than inter alia a person in the employ of the Institute, coming within the scope of the Workmen Compensation Act, 1923, and engaged in and upon the service of the Institute at the time when such injury is sustained.
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