Legal Matters — Of Exclusion Clauses in Insurance Policies

It is often the case for holders of insurance policies to be denied compensation when levelling claims under the policies.

The reason evoked by the companies include clauses in the insurance contracts which exclude certain events from cover in the said insurance policies.

The exclusion clauses are often worded in a manner as not to make fully explicit events which will not be covered which, had they been clearly spelled out, would have led clients not to subscribe to the policies. The following is a case in which an insurance company had inserted certain standard exclusion clauses which the court held could not be invoked for non-payment of claims for having been inexplicitly stated in the policy.

In the recent matter of Liu Man Hin R P v La Prudence Mauricienne Assurance Ltée 2016 SCJ 271, the debate revolved whether an exclusion clause in an insurance policy could be invoked by the insurance company to prevent the insured person from claiming medical costs.

The plaintiff in the said matter had an insurance policy (‘Insurance Policy’) with La Prudence Mauricienne Assurance Ltee (the ‘Insurance Company’) in connection with a trip in France. While he was in France, he experienced a sudden pain and he was advised by doctors there that he had to undergo an urgent surgical operation.

The plaintiff subsequently made a claim with the Insurance Company to obtain a refund of the hospital fees he incurred being 5,202.79 Euros or its equivalent amount at the prevailing exchange rate at time of payment.

The Insurance Company refused and sought to trigger an exclusion clause in the Insurance Policy which inter alia provides that an exception to the scope of the insurance included “les affections médicales dont la survenance est prévisible en raison des antécédents”.

The representative of the Insurance Company explained that the latter had grounded its defence upon the exclusion clause to the extent that the plaintiff had a pre-existing medical condition at the time that he subscribed for the Insurance Policy.

However, she admitted in court that the exclusion clause did not extend to urgent surgical operations. Counsel for the Insurance Company argued that it was not bound to indemnify the plaintiff as the surgery which the latter did was directly linked to his pre-existing condition. On the other hand, Counsel for the plaintiff argued that the exclusion would be triggered for a disease and not for an unforeseeable surgical intervention.

In her judgement, her Ladyship A.D. Narain highlighted that an exclusion clause in an insurance contract has to be “formel” and “limité” in order for the exclusion clause to be valid and enforceable as per the Mauritius Civil Code.

By reference to French jurisprudence and doctrine, she explains:

«An exclusion clause is “formel” if it is expressed clearly, unambiguously and with precision so that there is no doubt as to the intention of the parties with regard to the exclusion of the guarantee in situations provided for in the clause, while the “caractère limité” implies that the exclusion clause must have “un contenu parfaitement déterminé et ne pas conduire à vider la garantie de sa substance”;

the combined effect of these requirements is that “l’exclusion doit être libellée de telle sorte que l’assuré soit en mesure de connaître très exactement les cas dans lesquels il ne sera pas garanti.

Aucune incertitude ne peut subsister après lecture de la clause ” »

With the above in mind, her Ladyship took the view that the exclusion clause in question was drafted in an ambiguous and unclear manner such that the Insurance Company could not rely on same.

On a different note (which may be of more interest for our readers), she observed that she did not consider other exclusion clauses in the policy to the extent that the Insurance Company did not invoke them and as per French doctrine, an exclusion clause in an insurance policy is to be viewed independently from other exclusion clauses in the same policy.

In all cases, exclusion clauses in standard insurance contracts may need a fresh review as they may not exclude the liability of insurance companies as they intend it to be and for the sake of clarity, subscribers of insurance policies should be fully briefed as regards the actual protection afforded by the insurance companies.

* Published in print edition on 22 July 2016

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