An exclusion clause in an insurance policy is only valid if it is unambiguous

An ambiguous term in a critical illness policy exclusion clause should be construed against the party who drafted the clause.

Duke v. Clarica Life Insurance Co., 2008 ABCA 301, Alberta Court of Appeal, C.M. Conrad and P.W.L. Martin JJ.A. and A.G. Park J. (ad hoc), September 16, 2008

The Appellant insurance company had issued a critical illness policy to the Respondent.  When the Respondent developed Parkinson’s disease, the Appellant denied coverage, relying on an exclusion clause which stated: “if the insured person had a covered critical illness or any symptoms associated with a covered critical illness before the date the Policy came into effect”.  The Appellant argued that although the Respondent was unaware of having Parkinson’s disease and had not had a diagnosis of the disease at the time the policy came into effect, the progressive nature of Parkinson’s disease meant that the Respondent had symptoms of the disease at the time the policy came into effect, thus triggering the exclusion clause.

At trial the court held that the exclusion clause was ambiguous and should be interpreted, contra preferentem, against the insurance company.  On appeal the court upheld this interpretation and concluded that the Respondent was entitled to receive critical illness benefits.  Martin, J.A., writing for the unanimous court, held, at para. 19, that:

“The appellant submits that the clause was intended to exclude coverage to those individuals already suffering from a listed critical illness.  That may be so, but the chosen words do not make that intention clear and the policy specifically uses the phrase “associated with”.  Indeed, the intent of the clause would be more clear if those words had not been used at all.”

The Appellant further argued that the Respondent should not be entitled to critical illness benefits because the symptoms of his illness were not sufficiently disabling.  The Court of Appeal dismissed this argument, holding at para. 27 that: “Herculean efforts by an insured to avoid the assistance of attendants for reasons of pride or privacy should not disentitle him to the benefit he contracted for.”

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