How are insurance policies interpreted?
Insurance policies are a contract between the insurer and the insured and, as a consequence, the general rules of interpretation of contracts apply to insurance policies. The first rule of interpretation of contracts is that the court will consider the contract as a whole to search for an interpretation that is consistent with and promotes the intention of the parties to the contract. (Consolidated Bathhurst v Mutual Boier & Machinery, [1980] 1 S.C.R. 888) The application of this general rule is not, however, always straight forward. Generally, courts tend to broadly interpret coverage clauses and narrowly interpret exclusions. ( Reid Crowther v Simcoe & Erie General Insurance (1993)13 C.C.L.I. (2d) 16) Further, if there is any ambiguity in the policy, such ambiguity is almost always resolved in favour of an interpretation that benefits the insured. This is an application of the doctrine known as contra proferentem, which means the words of a contract should be interpreted against the
