An exclusion clause is only valid if it is unambiguous.

On September 16, 2008 the Alberta Court of Appeal confirmed in Duke v. Clarica Life Insurance Co. 2008 ABCA 301 that an ambiguous term in a critical illness policy exclusion clause should be construed against the insurer.

The insurance company had issued a critical illness policy to Mr. Duke. When Mr. Duke developed Parkinson’s disease, the insurance company denied his claim, relying on an exclusion clause which stated: “if the insured person had a covered critical illness or any symptoms associated with a covered critical illness before the date the Policy came into effect”.

The insurance company argued that although Mr. Duke was unaware of having Parkinson’s disease and had not had a diagnosis of the disease at the time the policy came into effect, the progressive nature of Parkinson’s disease meant that Mr. Duke had symptoms of the disease at the time the policy came into effect, thus triggering the exclusion clause.

At trial the court held that the exclusion clause was ambiguous and should be interpreted, contra preferentem, against the insurance company. On appeal the court upheld this interpretation and concluded that Mr. Duke was entitled to receive critical illness benefits. Martin, J.A., writing for the unanimous court, held, at para. 19, that:

The appellant submits that the clause was intended to exclude coverage to those individuals already suffering from a listed critical illness. That may be so, but the chosen words do not make that intention clear and the policy specifically uses the phrase “associated with”. Indeed, the intent of the clause would be more clear if those words had not been used at all.

The insurance company further argued that Mr. Duke should not be entitled to critical illness benefits because the symptoms of his illness were not sufficiently disabling. The Court of Appeal dismissed this argument, holding at para. 27 that:

Herculean efforts by an insured to avoid the assistance of attendants for reasons of pride or privacy should not disentitle him to the benefit he contracted for.