Policies may be classified according to the description of the subject-matter or according to the amount recoverable in the case of a loss. There are no restrictions on the form in which the policy is to be expressed, and the insurers are free to insert such terms in the policy as they think fit. Standard forms of policy, however, are normally used. The form and the contents of the policy will vary according as to whether the policy is issued by an insurance company or whether it is a Lloyd’s form of policy.
Generally the rights of the parties are governed by the terms of the policy alone. But sometimes another document, e g the proposal form is incorporated by reference into the policy, and then both the proposal form and the policy must be read together.
Normally parol evidence in relation to the policy is inadmissible, but there are exceptions to this rule, e g such evidence is admissible to show that the policy is void or that it does not contain the correct terms.
The date of commencement of the policy depends on the intention of the parties, and normally there will be an express term in the policy stating when it is to start. Normally the policy remains in force for the period specified in it, but may be brought to an end beforehand, e g if the parties consent or the insurance company goes into liquidation.
If there has been fraud or misrepresentation on the part of the assured inducing the insurers to issue a policy, they are entitled to apply to the Court for an order that it should be delivered up to them so that it can be cancelled.
If there is any material alteration in the terms of the policy made by the assured without the consent of the insurers, they are at liberty to avoid liability under it.
Where the parties are agreed as to the terms of the contract, but a mistake has been made in reducing their agreement into writing, i e the policy does not properly set out the terms agreed upon an application may be made to the Court for the rectification of the policy.
On the expiration of the period of insurance the policy can usually be renewed, though often there are express terms in the policy as to whether renewal is possible and on what terms. If the policy is not renewed before the current period of insurance or the ‘days of grace’ allowed under it, it will lapse, though in certain cases the policy may be revived.
The policy sets out the details of the event which is insured against, and also a list of exceptions specifying the circumstances in which the insurers will not be liable. In certain cases where the event insured against has been brought about by the conduct of the assured, he will not be entitled to recover under the policy.
Some terms of the policy amount to ‘conditions’ on the fulfillment of which the validity of the policy or the liability of the insurers depends.
These ‘conditions’ deal with a variety of matters, amongst them being those relating to the alteration of the risk under the policy, the assignment of the subject-matter insured under the policy, and the taking out of ‘other insurances’ by the assured.
The assured during the currency of the policy is generally entitled to assign it, though in some cases the consent of the insurers will be required.
The Court is guided by certain rules of construction when the meaning of the words of the policy falls to be considered.