Insurance Policy and Interpretation : An Important Decision
Introduction
In this case [Hugh Roderick Catherwood v. Asteron Life Limited [2023] GCtR 2450 (New Zealand, CA)], the life insurance policy provided that an insured is terminally ill if his or her “life expectancy is, due to sickness and regardless of any available treatment, not greater than 12 months”. Insured said that when he made the claim for the death benefit in early 2019, he was sick, that the policy requires that the treatments available to him be ignored and that, when they are ignored, his life expectancy at the time was not greater than 12 months.
The dispute between the parties was narrow. It turned on the meaning of the words “regardless of” found in the definition of the words “terminally ill”. Insured says that the words “regardless of” mean “ignoring the effect of”. Insurance Company says that the words “regardless of” mean “despite the effect of”.
Findings
It was held that the effect of the terminal illness benefit was to accelerate payment of the sum insured when an insured was terminally ill, presumably so that the insured could ease his or her final months and better arrange his or her affairs.
Traditionally, the courts in New Zealand applied the “plain meaning” rule — if the words of the contract were plain and unambiguous as they stood, they were treated as speaking for themselves and evidence of context was not admitted to show that the parties intended something different. More recently, the courts have become more willing to receive evidence of surrounding circumstances for the purpose of interpreting written contracts. The courts have held that evidence of the context in which a contract was entered into can be admitted, because it is always possible that what appears to be the plain meaning of the document may, on further examination, turn out not to be. "In interpreting a contractual provision, the courts will endeavour to identify what the parties meant through the eyes of a reasonable reader."
"The definition of terminal illness and terminally ill, construed objectively, was intended to take account of available medical treatment and that this was the only reasonable interpretation available."