Insurers at receiving end : ‘Contra Proferentem or Reasonable Expectations’ !!

The Insurers find themselves at receiving end many a times – it is often felt that the decisions / interpretations of Courts and especially Consumer Forums are against the Insurers – some tend to dismiss this stating that this is a negative perception !!  -  here is something that occurred more than 12000 kilometers away but still you might get a ‘desi’ feeling.

British Columbia  is the westernmost of Canada's provinces and is known for its natural beauty, as reflected in its Latin motto, Splendor sine occasu ("Splendour without Diminishment"). Its name was chosen by Queen Victoria in 1858. In 1871, it became the sixth province of Canada.  Its capital is Victoria.  Its climate encourages outdoor recreation and tourism, though its economic mainstay has long been resource extraction, principally logging and mining.  Still people from here  do travel outside also..

It is a claim brought on travel insurer claiming for medical expenses incurred whilst on vacation…  the plaintiff were :John Turpin and Sandra Turpin against The Manufacturers Life Insurance Company,  First North American Insurance Company, and  Pottruff & Smith Travel Insurance Brokers Inc. Here is something extracted from the judgment of  The Honourable Mr. Justice R.D. Wilson pronounced on 26^th Aug 2011 at Victoria, B.C

This lawsuit is about coverage under a travel insurance policy. Specifically, the  Emergency Hospital, Medical & expenses provisions of the Policy.  It is reported that the plaintiff  experienced generalized abdominal pain, went to Doctor and was treated and was free of pain during Sept. 2007.  Immediately thereafter she took travel insurance policy and in a few days their family went to Southern California on vacation to Disneyland and other places.  At California, she was unwell and presented with complaints of abdominal pain.  Subsequently she was confined to a hospital, returned to Victoria and underwent an appendectomy.  She preferred a claim for reimbursement of expenses incurred at California amounting to $27,170.81

In Jan 2008, the Insurers denied coverage stating that the expenses fell within the exclusionary provisions of the policy.  They relied upon the condition that no benefits would be payable for pre-existing conditions or related medical conditions which were not stable and controlled during the 90 day period immediately preceding your effective date.   The Policy defined – Medical condition as an irregularity in  health which required or requires medical advice, consultation, investigation, treatment, care, service or diagnosis by a physician. Pre-Existing Condition means a medical condition for which treatment has been received or taken, or which exhibited symptoms, prior to the insured trip in question and within the period specified in this policy . . .

It was contended on behalf of the plaintiffs that the Insurers failed to meet the onus of proof  that there was no medical evidence to prove a connection between the complaints of pain in Victoria and the complains of pain in Southern California; and there is no medical evidence that medical treatment was required.  They also contended that the wording of the definition in the policy was ambiguous.

The Court concluded that “abdominal pain” in Victoria, is related to “abdominal pain” in Southern California and stated that the plaintiff was not eligible for medical coverage because she suffered an irregularity in her health, three days before the policy issued. the medical coverage is nullified. But added that the policy holder had sought coverage of medical insurance from the agent    for her planned trip and the agent  presented a travel insurance policy, “off the shelf” as it were, without inquiry.  The plaintiff paid the premium and left the office without reading the policy, notwithstanding the caution on the policy cover  “PLEASE READ CAREFULLY”.

The Court stated that, however, that if she had read the policy, she would have found it difficult to understand, with its myriad of excluding conditions, variously applicable, or not applicable, to an infinite array of possible risks.  This was held to be a  proper case to apply the reasonable expectations principle. Accordingly, the plaintiffs  were allowed to  recover their expenses for medical services in Southern California in the sum of $27,170.81 plus court order interest.

It is an established doctrine [of Contra proferentem] that an ambiguous term will be construed against the party that imposed its inclusion in the contract – or, more accurately, against (the interests of) the party who imposed it.  i.e., any ambiguous term will be held against the Insurers as they are the ones who have drafted the Policy of insurance.  Here there is no ambiguity but the principle of ‘Reasonable expectations’  is :  - whether a reasonable insured could have expected coverage. An arguable case for coverage may exist, for example, if the policy is difficult to read or understand and if the insurer, either by its marketing practices or by giving its policy a misleading name, created or contributed to a reasonable expectation of coverage. Coverage may also be warranted where the insurer's interpretation of the relevant policy provision would virtually negate the coverage the insured expected by paying a premium. In these circumstances the court may be justified in looking beyond the words of the contract and holding the insurer responsible for the insured's reasonable expectation of coverage.

Whether ‘ambiguity or clarity’ – there could be circumstances / cases which only go against the Insurer………

With regards – S. Sampathkumar.