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Ambiguity in insurance contracts

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.
Where an insurance contract is unambiguous courts should give effect to its terms, and should not strain to find ambiguity when none exists:
[T]he courts must "fastidiously guard against the invitation to 'create ambiguities' where none exist."
(Riordan v. Lombard Insurance Co., 2003 BCCA 267 at para. 20 citing American Commerce Insurance Brokers Inc. v. Minnesota Mutual Fire & Casualty Company (1996), 551 N.W. 2d 224).
The special rules of interpretation of insurance policies (discussed below, e.g. give effect to the reasonable expectations of the parties) only apply once ambiguity is found and should not be relied on to create ambiguity:
The primary interpretive principle is that when the language of the policy is unambiguous, the court should give effect to clear language, reading the contract as a whole…
These rules of construction are applied to resolve ambiguity.  They do not operate to create ambiguity where there is none in the first place.
(Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33 at para. 22-24, citations omitted).
[T]hrough its long history, insurance law has given rise to a number of principles specific to the interpretation of insurance policies… They apply only where there is an ambiguity in the terms of the policy.
(Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada, 2006 SCC 21 at para. 27).
The above gives clear direction that the contractual interpretation rules specific to insurance law (discussed below) are only to be applied in the event of the policy wording being ambiguous.
Where certain parts of the contract are broadly worded that does not automatically lead to the conclusion that the contract is ambiguous, but it may be possible to determine the intention of the parties by reading the contract as a whole:
A clause is not ambiguous simply because it is of uncertain breadth or is difficult to interpret… Any uncertainty in clauses 2.a. and 2.b. can be reconciled on a reading of the policy as a whole.
(Danicek v. Alexander Holburn Beaudin & Lang, 2011 BCSC 65 at para. 74).
Further, although in a case not dealing with insurance issues, it has been noted that difficulty in interpretation is not synonymous with ambiguity:
It would also be wrong to confuse a difficulty in determining the "sense and meaning" of words used in an agreement, with the existence of an ambiguity.  As Cory, J.A. (as he then was) noted in Transcanada Pipelines Ltd. v. Northern & Central Gas Corp. Ltd. (1983) 146 D.L.R. (3d) 293 (Ont. C.A.), "The mere fact a contract is difficult to interpret is not fatal to its validity.  Nor, the authorities tell us, is the difficulty with the interpretation to be regarded as synonymous with ambiguity.  The contract may be effective even though it is open to more than one construction if the court can ascertain the intended meaning . . . ." (at 297)
(Tenneco Canada Inc. v. British Columbia Hydro and Power Authority, 1999 BCCA 415 at para. 23).
Despite the expressio unius est exclusio alterius rule which says that a specific list does not narrow a general category provided before the list (see Apex Corporation v. Ceco Developments Ltd., 2008 ABCA 125 at para. 41), it has been held that using a catch all phrase, followed by the word “including” to introduce specific examples is ambiguous (to a homeowner reading an insurance policy) as to whether the catch all phrase was really intended to create a broad category, or whether it should be limited to the items specifically enumerated:
The appellants submit that the endorsement is ambiguous as to whether any of the other Common Exclusions apply. The appellants point to the specific reference to some of the Common Exclusions in the endorsement itself….
Counsel for the appellants points out that Endorsement 33b exactly duplicates clauses 5, 8, 10 and part of 18. He submits that if the introductory language to this part of the endorsement -- "All other terms conditions and exclusions of this policy remain unchanged, including the exclusions regarding" -- was intended to incorporate all of the Common Exclusions, there would be no need for reference to these specific exclusions. If the respondent intended to have Common Exclusion 11 apply to the endorsement, it should have said so explicitly as it has with Common Exclusions 5, 8, 10 and part of 18….
The appellants submit that by including certain exclusions in the endorsement but intending nevertheless to include all the other Common Exclusions, Endorsement 33b has become a trap for the unwary. The homeowners would read the endorsement and understand that it covers all risks of direct physical loss or damage to their swimming pool, except the express exclusions; but, unbeknownst to them, all the other Common Exclusions apply, including Exclusion 11, which, it seems, would be the most likely and obvious source of loss or damage to a swimming pool.
… There is much to be said for the appellants' submission as to ambiguity of the endorsement….
(Cabell v. The Personal Insurance Company, 2011 ONCA 105 at para. 19, 20, 21, 23).