ARTICLE · 23 OCTOBER 2017

Which principles should be applied when interpreting insurance policies?

Norton Rose Fulbright Australia

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The case confirmed that in the end, the natural and ordinary meaning of a word is still the key to policy interpretation.

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Victoria Chalmers

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A recent Victorian Supreme Court decision has confirmed that a court, when interpreting a policy of insurance, will assess the matters by reference to the 'natural and ordinary meaning' of the word/clause. Simple, right? But determining the 'natural' or 'ordinary' meaning of words is not always straightforward and rarely receives universal acceptance.

Guastalegname v Australian Associated Motor Insurers Ltd [2017] VSC 420 provides a succinct summary of the principles to be applied when interpreting a policy of insurance.

The case concerned the interpretation of the soil movement exclusion in a Home Building Insurance policy. Under the policy, the insurer agreed to indemnify the policyholder in respect of loss, damage or destruction to the building caused by a number of insured events, including storm.

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