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Overview of contractual interpretation principles that apply to insurance policies

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This book was written by Michael Dew, a Vancouver lawyer who practices civil litigation, including representing persons who have been denied coverage under property insurance policies, or liability insurance policies. If you have been denied insurance coverage and require assistance with making a claim against your insurer call Michael at 604 895 3160.
In Lombard General Insurance Company of Canada v. 328354 B.C. Ltd., 2012 BCSC 431 the court provided the following useful summary of the basic principles that apply when interpreting insurance contracts in British Columbia:
The basic principles may be summarized as follows:
1.      Courts should prefer interpretations that are consistent with the reasonable expectations of the parties, so long as such an interpretation can be supported by the wording of the policy;
2.      Courts should avoid interpretations that would give rise to an unrealistic result or one that would not have been in the contemplation of the parties at the time the policy was concluded;
3.      Courts should also strive to ensure that similar insurance policies are construed consistently;
4.      Courts should not apply these rules to create ambiguity where there is none in the first place; and
5.      When these rules of construction fail to resolve ambiguity in an insurance policy, courts will construe the policy contra proferentem – against the insurer.  A corollary of the contra proferentem rule is that coverage provisions are interpreted broadly, and exclusion clauses narrowly.
(Lombard General Insurance Company of Canada v. 328354 B.C. Ltd., 2012 BCSC 431 at para. 26).
Certain of the above principles are discussed in more detail below.