CR324 Interpretation Interpretation – ambiguity – application of the contra proferentem rule

CR324

Interpretation

Interpretation – ambiguity – application of the contra proferentem rule.

A Hospital Cash Back Plan provided the life insured with cover for the event of his hospitalisation. He became hospitalised for five days, and the issue that arose was the number of days for which the benefit was payable in terms of the policy. The insurer contended that it was liable for payment of the daily benefit from the third day onwards only, while the life insured contended that the payment was due for the full five days that he had been hospitalised.

The relevant portions of the policy clause at issue stipulated –

“Daily Cash Benefit
The company will pay Daily Cash Benefits from the third consecutive day of hospitalization due to sickness or Bodily Injury (after the deferred period of 2 (two) days).”

The only other feature of relevance was the fact that it was by way of a telesale that the policy had been taken by the life insured, and a recording of the relevant telephone call reflected that the insurer’s agent had said to the life insured –

“The daily cash benefit pays out from day three provided you have been admitted … for longer than forty eight hours.”

The office issued a determination in which it was held that, despite the abovesaid provision in the policy not having been ideal, it was sufficiently clear that the insurer would be liable for no more than the daily payments from the third day onwards.

Upon application the life insured was granted leave to appeal, and in upholding the appeal the Appeal Tribunal’s reasons were the following:

“The well known rule of interpretation of contracts is to determine the intention of the parties by giving the language used its ordinary meaning. All words that appear in the clause including those that appear in parenthesis must be considered If after this exercise there emerges some ambiguity, the “contra proferentem” principle will be invoked – that is, the particular clause will be interpreted against the person (in this case, the Insurance company) which has drafted and presented the clause to the other party – in the present case, its own policy document.

Now the words used in the sentence before those in parenthesis appear to stipulate only that the company is to pay the daily benefit from the third consecutive day of hospitalisation. What is not said, however, is what precise daily benefits are to be paid at that stage. To that extent, those words create a measure of ambiguity. I think that the oral recorded explanation given by the respondent’s consultant to the appellant at the outset does not provide more clarity on the above issue. Therefore the question arises, does that mean, as the respondent contends, that on day three the patient is only entitled to one payment, assuming that patient has been hospitalised for three full days and thus, the first two do not count? On the other hand, does it mean payment is made for these full three days – payment to be effected only on the completion of three days hospitalisation?

It is necessary now to look at the words in parenthesis in order to determine whether the clause as a whole can be given a clear and ascertainable meaning. At the outset the question is posed as to what was the draftsman’s purpose in inserting those words in parenthesis? It seems to me that the intention was aimed at clarification. The key words in the sentence are “after the deferred period of two days”. The dictionary definition of “deferred” is:-

“deferred adj 1. put off for a time; postponed.
2. with payments or benefits until a certain date.:
(see Macmillan Contemporary Dictionary)”

In my view payment is postponed or put off for the first two days depending on whether the hospitalisation endures for three days or more. If it does, then payment must be made for the full period of hospitalisation including the first two days. If the insured is hospitalised say, for one day, then no payment at all takes place.

I agree with the appellant’s contention regarding the plain meaning of “deferred”, which accords with my view that the payment for the first two days was to be held in abeyance and depended on whether the period of hospitalisation exceeded three days or more. In my view the use of the words “deferred period” admits of no other possible interpretation. Certainly, its use is wholly inconsistent with respondent’s contentions.”

The Appeal Tribunal therefore ruled that payment would have to be made for the full five days.

BG
January 2012

CR324

Ambiguity

Interpretation – ambiguity – application of the contra proferentem rule.

A Hospital Cash Back Plan provided the life insured with cover for the event of his hospitalisation. He became hospitalised for five days, and the issue that arose was the number of days for which the benefit was payable in terms of the policy. The insurer contended that it was liable for payment of the daily benefit from the third day onwards only, while the life insured contended that the payment was due for the full five days that he had been hospitalised.

The relevant portions of the policy clause at issue stipulated –

“Daily Cash Benefit
The company will pay Daily Cash Benefits from the third consecutive day of hospitalization due to sickness or Bodily Injury (after the deferred period of 2 (two) days).”

The only other feature of relevance was the fact that it was by way of a telesale that the policy had been taken by the life insured, and a recording of the relevant telephone call reflected that the insurer’s agent had said to the life insured –

“The daily cash benefit pays out from day three provided you have been admitted … for longer than forty eight hours.”

The office issued a determination in which it was held that, despite the abovesaid provision in the policy not having been ideal, it was sufficiently clear that the insurer would be liable for no more than the daily payments from the third day onwards.

Upon application the life insured was granted leave to appeal, and in upholding the appeal the Appeal Tribunal’s reasons were the following:

“The well known rule of interpretation of contracts is to determine the intention of the parties by giving the language used its ordinary meaning. All words that appear in the clause including those that appear in parenthesis must be considered If after this exercise there emerges some ambiguity, the “contra proferentem” principle will be invoked – that is, the particular clause will be interpreted against the person (in this case, the Insurance company) which has drafted and presented the clause to the other party – in the present case, its own policy document.

Now the words used in the sentence before those in parenthesis appear to stipulate only that the company is to pay the daily benefit from the third consecutive day of hospitalisation. What is not said, however, is what precise daily benefits are to be paid at that stage. To that extent, those words create a measure of ambiguity. I think that the oral recorded explanation given by the respondent’s consultant to the appellant at the outset does not provide more clarity on the above issue. Therefore the question arises, does that mean, as the respondent contends, that on day three the patient is only entitled to one payment, assuming that patient has been hospitalised for three full days and thus, the first two do not count? On the other hand, does it mean payment is made for these full three days – payment to be effected only on the completion of three days hospitalisation?

It is necessary now to look at the words in parenthesis in order to determine whether the clause as a whole can be given a clear and ascertainable meaning. At the outset the question is posed as to what was the draftsman’s purpose in inserting those words in parenthesis? It seems to me that the intention was aimed at clarification. The key words in the sentence are “after the deferred period of two days”. The dictionary definition of “deferred” is:-

“deferred adj 1. put off for a time; postponed.
2. with payments or benefits until a certain date.:
(see Macmillan Contemporary Dictionary)”

In my view payment is postponed or put off for the first two days depending on whether the hospitalisation endures for three days or more. If it does, then payment must be made for the full period of hospitalisation including the first two days. If the insured is hospitalised say, for one day, then no payment at all takes place.

I agree with the appellant’s contention regarding the plain meaning of “deferred”, which accords with my view that the payment for the first two days was to be held in abeyance and depended on whether the period of hospitalisation exceeded three days or more. In my view the use of the words “deferred period” admits of no other possible interpretation. Certainly, its use is wholly inconsistent with respondent’s contentions.”

The Appeal Tribunal therefore ruled that payment would have to be made for the full five days.

BG
January 2012

CR324

Contra-proferentem Rule

Interpretation – ambiguity – application of the contra proferentem rule.

A Hospital Cash Back Plan provided the life insured with cover for the event of his hospitalisation. He became hospitalised for five days, and the issue that arose was the number of days for which the benefit was payable in terms of the policy. The insurer contended that it was liable for payment of the daily benefit from the third day onwards only, while the life insured contended that the payment was due for the full five days that he had been hospitalised.

The relevant portions of the policy clause at issue stipulated –

“Daily Cash Benefit
The company will pay Daily Cash Benefits from the third consecutive day of hospitalization due to sickness or Bodily Injury (after the deferred period of 2 (two) days).”

The only other feature of relevance was the fact that it was by way of a telesale that the policy had been taken by the life insured, and a recording of the relevant telephone call reflected that the insurer’s agent had said to the life insured –

“The daily cash benefit pays out from day three provided you have been admitted … for longer than forty eight hours.”

The office issued a determination in which it was held that, despite the abovesaid provision in the policy not having been ideal, it was sufficiently clear that the insurer would be liable for no more than the daily payments from the third day onwards.

Upon application the life insured was granted leave to appeal, and in upholding the appeal the Appeal Tribunal’s reasons were the following:

“The well known rule of interpretation of contracts is to determine the intention of the parties by giving the language used its ordinary meaning. All words that appear in the clause including those that appear in parenthesis must be considered If after this exercise there emerges some ambiguity, the “contra proferentem” principle will be invoked – that is, the particular clause will be interpreted against the person (in this case, the Insurance company) which has drafted and presented the clause to the other party – in the present case, its own policy document.

Now the words used in the sentence before those in parenthesis appear to stipulate only that the company is to pay the daily benefit from the third consecutive day of hospitalisation. What is not said, however, is what precise daily benefits are to be paid at that stage. To that extent, those words create a measure of ambiguity. I think that the oral recorded explanation given by the respondent’s consultant to the appellant at the outset does not provide more clarity on the above issue. Therefore the question arises, does that mean, as the respondent contends, that on day three the patient is only entitled to one payment, assuming that patient has been hospitalised for three full days and thus, the first two do not count? On the other hand, does it mean payment is made for these full three days – payment to be effected only on the completion of three days hospitalisation?

It is necessary now to look at the words in parenthesis in order to determine whether the clause as a whole can be given a clear and ascertainable meaning. At the outset the question is posed as to what was the draftsman’s purpose in inserting those words in parenthesis? It seems to me that the intention was aimed at clarification. The key words in the sentence are “after the deferred period of two days”. The dictionary definition of “deferred” is:-

“deferred adj 1. put off for a time; postponed.
2. with payments or benefits until a certain date.:
(see Macmillan Contemporary Dictionary)”

In my view payment is postponed or put off for the first two days depending on whether the hospitalisation endures for three days or more. If it does, then payment must be made for the full period of hospitalisation including the first two days. If the insured is hospitalised say, for one day, then no payment at all takes place.

I agree with the appellant’s contention regarding the plain meaning of “deferred”, which accords with my view that the payment for the first two days was to be held in abeyance and depended on whether the period of hospitalisation exceeded three days or more. In my view the use of the words “deferred period” admits of no other possible interpretation. Certainly, its use is wholly inconsistent with respondent’s contentions.”

The Appeal Tribunal therefore ruled that payment would have to be made for the full five days.

BG
January 2012

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