Limitation or exclusion of liability: Potential anomalies

It is self-evident that any contract should clearly and accurately reflect the intentions of both parties, and an insurance contract is no different. This is especially important when recording any limitation on the obligation of the insurer to indemnify the insured for a loss. Although any ambiguity in an insurance contract will generally be interpreted to the benefit of the insured, the time to check if the policy says what you want it to mean is before it is signed, not when it is time to claim.

In the 2007 case of Hollard Life Assurance Company Ltd vs Van Der Merwe N.O. the insurance policy provided that in the event of the insured dying before discharging his liability to WesBank in terms of an Instalment Sale Agreement, Hollard would pay the outstanding liability. The policy excluded liability in the event of "…suicide, self-inflicted injury or self-inflicted illness, whether intended or not, or voluntary exposure to danger or obvious risk of injury" (our emphasis). The insured accidentally shot himself with his own firearm whilst still indebted to WesBank. Although it was accepted that the deceased's death was accidental, Hollard repudiated liability, arguing that the death resulted from a self-inflicted injury.

The trial court ruled that on a strict interpretation of the words in the contract, all of the other acts mentioned in the exclusion clause, namely suicide, self-inflicted illness and voluntary exposure to harm, presuppose the common element of deliberate intent.

From that conclusion the trial court found that the phrase 'whether intended or not' did not apply to the words 'self-inflicted injury', but only applied to the words 'self-inflicted illness'. The trial judge accordingly held that the exclusion did not apply and that Hollard was liable in terms of the policy to settle the indebtedness to WesBank.

The Supreme Court of Appeal disagreed with the trial court and held that "the ordinary rules of grammar dictate that the comma before and after the phrase ‘self-inflicted injury or self-inflicted disease’ in the exclusion clause makes the qualification ‘whether intended or not’ (appearing immediately after such phrase) applicable to both instances and not only to ‘self-inflicted disease’".

In coming to this conclusion the appeal court referred to its own judgement in the 1995 case of Fedgen Insurance Ltd vs Leyds in which it had held that the ordinary rules relating to the interpretation of contracts apply equally to the interpretation of a policy of insurance. In the event of ambiguity, a limitation of liability must be restrictively interpreted for it is the insurer's duty to make clear what specific risks it wishes to exclude.

The respondent argued that the appeal court's interpretation would lead to absurd results and in this regard the trial court had listed some examples, such as falling into an uncovered manhole, eating contaminated sardines and driving into an invisible stationary object at night. The appeal court found no absurdity and interpreted the words "self-inflicted injury" and "self-inflicted disease" restrictively, finding that "only injuries or diseases which are entirely inflicted upon himself or herself by the insured will be covered. An injury or disease which is caused partly by the actions or omissions of the insured, but in conjunction with the action or omission of some other party or some other contributory factor, will fall outside the ambit of the exclusion clause".

The appeal court found that in the examples listed by the trial court there was in each case intervention by someone else or some other contributory factor "(the removal and non-replacement of the manhole cover, the manufacture and/or sale of contaminated sardines, the leaving of the offending object in the path of traffic)" without which the injury or disease would not have occurred. The court found on the ordinary meaning of the words used that the exclusion applied in this case as the insured died of a self-inflicted injury and liability was excluded whether this injury was intended or not.

One has to wonder what the insured would have thought of that outcome.