Rule of contra proferentem - Indian Laws - General

Rule of contra proferentem In Sushilaben Indravadan Gandhi v New India Assurance Company Ltd.- 2020 (4) TMI 902 - SUPREME COURT, paras 37-42, this Court charted the evolution of the rule of contra proferentem, and relied inter alia on its explanation as provided under Halsbury's Laws of England: 5th Edn., vol. 60, para 105. Contra proferentem rule.-Where there is ambiguity in the policy the court will apply the contra proferentem rule. Where a policy is produced by the insurers, it is their business to see that precision and clarity are attained and, if they fail to do so, the ambiguity will be resolved by adopting the construction favourable to the insured. Similarly, as regards language which emanates from the insured, such as the language used in answer to questions in the proposal or in a slip, a construction favourable to the insurers will prevail if the insured has created any ambiguity. This rule, however, only becomes operative where the words are truly ambiguous; it is a rule for resolving ambiguity and it cannot be invoked with a view to creating a doubt. Therefore, where the words used are free from ambiguity in the sense that, fairly and reasonably construed, they admit of only one meaning, the rule has no application. The rule of contra proferentem thus protects the insured from the vagaries of an unfavourable interpretation of an ambiguous term to which it did not agree. The rule assumes special significance in standard form insurance policies, called contract d adhesion or boilerplate contracts, in which the insured has little to no countervailing bargaining power. This consideration is highlighted in the facts of this case, since the risks that ECGC is mandated to cover is its business, and other insurers rarely foray into the field. [HARIS MARINE PRODUCTS- 2022 (4) TMI 1219 - SUPREME COURT] The Common Law Rule of construction verba chartarum fortius accipiuntur contra proferentem means that ambiguity in the wording of the policy is to be resolved against the party who prepared it. MacGillivray on Insurance Law deals with the Rule of contra proferentem as follows: The contra proferentem Rule of construction arises only where there is a wording employed by those drafting the Clause which leaves the court unable to decide by ordinary principles of interpretation which of two meanings is the right one. One must not use the Rule to create the ambiguity-one must find the ambiguity first. The words should receive their ordinary and natural meaning unless that is displaced by a real ambiguity either appearing on the face of the policy or, possibly, by extrinsic evidence of surrounding circumstances. (footnotes omitted) Colinvaux's Law of Insurance propounds the contra proferentem Rule as under: Quite apart from contradictory clauses in policies, ambiguities are common in them and it is often very uncertain what the parties to them mean. In such cases the Rule is that the policy, being drafted in language chosen by the insurers, must be taken most strongly against them. It is construed contra proferentem, against those who offer it. In a doubtful case the turn of the scale ought to be given against the speaker, because he has not clearly and fully expressed himself. Nothing is easier than for the insurers to express themselves in plain terms. The assured cannot put his own meaning upon a policy, but, where it is ambiguous, it is to be construed in the sense in which he might reasonably have understood it. If the insurers wish to escape liability under given circumstances, they must use words admitting of no possible doubt. But a Clause is only to be contra proferentem in cases of real ambiguity. One must not use the Rule to create an ambiguity. On must find the ambiguity first. Even where a Clause by itself is ambiguous if, by looking at the whole policy, its meaning becomes clear, there is no room for the application of the doctrine. So also where if one meaning is given to a clause, the rest of the policy becomes clear, the policy should be construed accordingly. [INDUSTRIAL PROMOTION INVESTMENT CORPORATION OF ORISSA LTD.- 2016 (8) TMI 1469 - SUPREME COURT]