Houghton v Trafalgar Insurance Co - 1954

Houghton v Trafalgar Insurance Co. Ltd [1954] 1 QB 247

Interpretation of ambiguous terms in insurance contracts, interpretation contra proferentem

Facts

The claimant and the defendant had entered into an insurance contract (with the defendant being the insurer). The contract included an exemption clause, which stipulated that the Defendant was not liable to pay out where the claimant’s vehicle had an excess load at the time of an accident. The specific wording of the exemption clause was that coverage was excluded for “loss, damage and or liability caused or arising whilst the car is conveying any load in excess of that for which it was constructed”. The Claimant suffered a car accident and attempted to claim on his policy. At the time of the accident there were 6 people in the vehicle. The vehicle was designed to seat only 5. 

Issues

The issue in the case was the meaning of the word “load” in the exclusion clause and if it could apply to carrying too many passengers.

Decision/Outcome

It was held that the meaning was ambiguous and that in such cases the meaning would be interpreted in the interests of the insured, in other words – contra proferentem.

“If there is any ambiguity, it is the company’s clause and the ambiguity would be resolved in favour of the assured” (Somervell LJ)

Therefore, it was held that the word load did not apply to passengers and that the Defendant could not avoid paying out on the policy. The court grounded its approach in a reluctance to allow the application of (and arguably proliferation of) exclusion clauses, which seek to exclude liability in a vague and far reaching manner.