The rights of the parties are normally governed by the terms of the policy alone. Any other document which is not incorporated into the policy has, in general, no effect. But if the terms of another document have been incorporated, then they form part of the policy and must be read as one with it.
The Court is entitled to look at other documents where there is any ambiguilty as to the meaning of the words used in the policy.
A. EFFECT WHERE THE OTHER DOCUMENT IS NOT INCORPORATED
Preliminary statements and documents, which are made and put forward during the negotiations, are not in themselves contractual. Unless, therefore, they are incorporated into the policy, they form no part of the contract of insurance, and cannot be referred to for the purpose of construing the policy or of extending or modifying the rights or duties either of the insurers or the assured in a manner inconsistent with its terms. It is immaterial whether the statement is made verbally or whether it is contained in a document, e g a prospectus issued by the insurers, or a proposal form filled up by the assured, or the correspondence that passed between the parties.
The policy may contain an express stipulation showing that the parties intend the policy to be the complete and final statement of the contract, and that nothing done during the negotiations should be considered as binding between them.
B. EFFECT WHERE THE OTHER DOCUMENT IS INCORPORATED
Although the policy contains the contract, it is not necessary that all the terms of the contract should actually form part of the engagement printed on the face of the policy itself. It is sufficient if they are incorporated into the policy by reference.
Where a term is thus incorporated into the policy, it is immaterial whether it is indorsed on the back of the policy, as is the usual practice in the case of conditions, or whether it is contained in a separate and distinct document, such as a schedule or another policy, e g in the case of reinsurance. Further, where there is another policy in existence effected by the same assured with an insurance company, it is not unusual to insert in a Lloyd’s policy a clause referring to the company’s policy and giving the underwriters the benefit of its terms.
The contents of the proposal or of any other documents employed during the preliminary negotiations may be made part of the contract by express incorporation.
C. LOOKING AT OTHER DOCUMENTS TO RESOLVE AMBIGUITIES
Where there is an ambiguity on the face of the policy, and a question, therefore, arises as to its meaning or effect, the Court may take into consideration any documents, such as the prospectus, the proposal form, a letter which the insurers have written, or even the back of the policy, if not incorporated into the policy, in which the insurers profess to set forth or explain the purport and effect of their policies, and any verbal explanations given by themselves or their agents.
In this case the assured does not seek to set up a contract different from and inconsistent with the contract contained in the policy. The documents and explanations show the interpretation which the insurers themselves place on the policy, and they are, therefore, precluded by their own words from relying on any other interpretation.
The onus of proving that he knew and acted upon such interpretation rests upon such interpretation rests upon the assured, though especially in a case where prospectuses are issued, the onus is not difficult to discharge.