Policy definitions, exclusions and conditions
What the exam tests
Interpretation: how definitions, exclusions and conditions decide a claim. The exam favours scenario questions where one word in a definition changes the outcome.
Core rules
- Definitions fix meaning: "insured", "vehicle", "accident", "market value", "excess", "period of insurance" and "territorial limits". Read them before the exclusion.
- Conditions are obligations: notify claims promptly, cooperate, protect property, do not admit liability, maintain the vehicle and pay premium. A condition precedent can bar a claim if breached.
- Exclusions remove cover: unlicensed or disqualified drivers, drink or drugs, unroadworthiness, racing, use for hire and reward, deliberate acts, war and terrorism.
- Contra proferentem resolves ambiguity against the drafter, but clear words apply. Causation matters where an excluded factor contributed to the loss.
Worked example
A car has bald tyres and skids on a wet road. The policy excludes loss while the vehicle is unroadworthy. If the bald tyres caused or contributed to the skid, the insurer may reduce or reject the claim. If the accident was caused solely by another driver running a red light, the tyre condition may not be causative, so the exclusion may not apply.
Traps
Do not treat every definition as an exclusion. "Wear and tear" excludes the worn part, not necessarily consequential damage. Conditions and warranties are not interchangeable. An exclusion of "use for hire and reward" can catch a lift-sharing payment if it looks like a fare. Always ask: did the excluded factor cause the loss?