A recent decision by the UK Court of Appeal (Civil Division) offers valuable insights into the role of the disclosure of pre-contractual documents and communications in interpreting insurance policies. The judgment, overturning a High Court decision, confirms that such documents may be highly relevant to understanding the true scope and meaning of policy terms.

The case involved AmTrust Speciality Limited enforcing claims against Endurance Worldwide Insurance Limited arising from a failed litigation funding scheme. A critical Incorporation Clause in the policies stated that the proposal forms and other pre-contractual information provided would be incorporated into the insurance agreements. The High Court refused to order disclosure of pre-contractual correspondence, finding it had little bearing on the interpretation of the contractual terms. The Court of Appeal disagreed.

The Court found that the High Court erred in excluding specific documentation from consideration in the construction of the policies. It emphasised that it was for the trial judge to assess the relevance of such documents, particularly where they expressly incorporated into the policy by agreement. The Court of Appeal held that it was 'realistically arguable' that the trial judge might find the referenced documents are significant in interpreting both the insuring and exclusion clauses, whether as part of the contract itself or as part of the factual matrix.

The Court rejected the argument that coverage and exclusion clauses are purely legal questions, reaffirming the importance of documentary context in contractual construction.

Importantly, the Court restated the well-established principle that an insurance policy, like any other contract, "must be interpreted objectively by asking what a reasonable person, with all the background knowledge which would reasonably have been available to the parties when they entered into the contract, would have understood the language of the contract to mean." It further held that it could not be concluded that the requested pre-contractual documentation lacked probative value, either in support of AmTrust’s claim or Sompo’s defence. It found it unsatisfactory to interpret a contract without considering all of its terms, particularly where the relevant documentation was expressly incorporated.

This judgment serves as a timely reminder to underwriters and brokers, including those operating in the South African market, that the entirety of the information exchanged during the negotiation and placement of an insurance policy may be critical. Pre-contractual material can be important not only for discovery but also for interpreting the contract and identifying the parties' true intentions.

Ideally, all relevant terms should be expressly included in the contract in clear and unambiguous language to minimise legal uncertainty. However, where a dispute over interpretation arises, underwriters should retain comprehensive records of pre-contractual communications, including proposal forms and correspondence, particularly where a policy includes an "Incorporation Clause".

For brokers, this ruling highlights the importance of accurately conveying information between the insured and the insurer. All material information should be disclosed, and relevant detail carefully incorporated into policy wording. When resolving interpretative disputes, courts may consider the full factual matrix surrounding the placement of the policy.

Written by Sandra Sithole, Partner, Rethabile Shabalala, Senior Associate & Yandisa Xakata, Candidate Attorney at Webber Wentzel