The Supreme Court of Appeal judgment of Centriq Insurance Company Limited and Oosthuizen contains a useful summary of the general principles of interpretation of insurance policies and other contracts:
- Insurance policies are contracts like any other.
- Contract provisions must be construed having regard to their language, context and purpose in what is a unitary exercise.
- A business-like or commercially sensible meaning must be preferred.
- The analysis is objective and is aimed at what the parties must have intended having regard to the words they used in the light of the document as a whole and the factual matrix in which they concluded the contract.
- Provisions which place a limitation on the insurer’s obligation to indemnify are usually restrictively interpreted.
- Exclusion clauses, like other clauses, must be interpreted in accordance with their language, context and purpose with a view to achieving a commercially sensible result.
- The literal meaning of words in the contract must yield to a fair and sensible application if the literal meaning is likely to produce an unrealistic and unanticipated result which is at odds with the purpose of the policy.
- Courts are not entitled, simply because the policy appears to ‘drive a hard bargain’ to lean towards a construction more favourable to an insured than the language of the contract, properly construed, permits.
- It is not for the courts to construe exclusions in favour of the insured simply because it considers them to be unfair or unreasonable.