On The Interpretation Of The Terms Of Insurance Contract

Under the autonomy of private law and the principle of freedom of contract，thesigning of a contract should be based on the free will of the relevant parties，andshould be initiated from free choice and negotiation. As one kind of contract，insurance contract should also be based on the free will and choice of the two parties.Both the insurer and the policy holder should adhere strictly to the content of thecontract and fulfill their respective duties. Judges presiding over insurance casesshould also decide the case according to the contract entered by the two parties. Withsocial and economic development，driven by enormous economic interests，insurerstry their best providing low-price and competitive contract to win a better hand in thecut-throat competition with their peers. In terms of the quality of the contract，insurerstry to maximize their profit by attracting the preference of consumers of marginalutility. With a view to the scale production and the increase of profit，insurers employtheir advantageous position compared to the policy holders to draft terms of theinsurance contract，to be repeatedly used in their transactions with future policyholders，hence the production of format contract. Its outstanding feature is itsemployment of format stipulations. In the drafting of format contracts，the inequalityof the ability to bargain on the part of prospective policy holders is not taken intoconsideration. The rights of insurers are maximized while their duties are minimized.Policy holder cannot negotiate with the insurers in a equal fashion，and has to acceptall or nothing of the format contract. Policy holders accept all the format terms ofinsurers passively and thus are somewhat under the control of the latter. This results inthe initiation of the conception of the protection of policy-holders’ interests. In thispaper，efforts have been made to analyze and study the rules guiding the interpretationof format terms of insurance contract. The logical starting point is the exploration of the relationship between general doctrine of contract interpretation and theinterpretation of terms of insurance contract. In the whole process，the practices ofdifferent countries will also be taken into consideration. With as our basis the presentstate of affairs and defects of our legislation and judicature and those of the insurancebusiness，efforts have been made in this paper to present suggestions and advices onthe improvement and perfection of the legal rules concerning the interpretation ofterms of insurance contracts. Besides the introduction and the conclusion，this paperconsists of five parts:Part one dwells on the general doctrines and principles of the interpretation ofinsurance contracts. The general principles in the interpretation of contract are firstintroduced and then those concerning the interpretation of insurance contract.Comparison and contrast between these two groups of principles is performed. Thereasons of contract interpretation and the general principles concerning contractinterpretation are of great importance to the development and perfection of the theoryof the interpretation of insurance contract. The principles guiding the interpretation ofinsurance contracts are derived from the traditional theories of contract interpretation.The former inherits and learns from the latter while push the latter forward. They areinterrelated while at the same time different.Part two explores the effect of format insurance contract on the principles ofcontract interpretation. The process of the establishment of format contract is also thatof the formation and development of the rules and principles guiding theinterpretation of insurance contact. The format insurance contract is a must and has itsreasons in the contemporary development of society and economy，while on the otherhand，its defects and problems coming with it should also be reflected upon. One ofthe striking features of format insurance contract is the wide application of formatterms and stipulations in the insurance contract. The particularity of the format termsof insurance contract is that it is the source of the inequality between the insurer andthe policy holder. The two parties often disagree concerning their understanding of theterms，therefore，interpretation is needed to balance the interests of the two parties. special. It bends towards the support of honesty and credit，justice and the balancebetween different interests.Part three is about the general rules and principles guiding the interpretation ofthe terms and articles of insurance contracts. With the method of comparison andcontrast，different rules and principles from the continental legal system，theAnglo-American system as well as China，are explored. In the expounding of theserules and principles and the process of their development，it is found that under theinfluence of the continental legal system，our rules and principles guiding theinterpretation of the terms of insurance contract are similar. Comparatively speaking，we are far behind western countries in terms of theoretical studies and judicialpractice concerning the interpretation of insurance contracts. Efforts should bedirected to the rationality and the improvement of relevant shortcomings and defects.This is of vital importance to the system of the interpretation of insurance contracts.Part four of this paper is directed to the research on the special rules andprinciples of the interpretation of the terms of insurance contracts. With thedevelopment of the insurance industry，the types of insurance become varied whichresults in the fact that the present types of insurance contracts cannot cover all thetypes of insurance transaction. With the insurgence of such conflicts，there arises theneed for the special rule in the interpretation of the terms of insurance contracts.However，if these special rules and principles are beneficial to the policy holders，theyare destined to be detrimental to the insurers. Therefore，these special rules andprinciples should bend to justice ad the balance of interests. On the one hand，sufficient consideration should be directed to the protection of the interests of thepolicy holders and the overall development of the insurance industry. These rules andprinciples should be employed prudently and can never be abused. On the other hand，special attention should be paid to the protection of the interests of the disadvantaged.These rules and principles should be used to counterbalance the injustice done by theinsurance contracts per se. The development of our age somewhat will disturb thescale of interests，these rules and principles should be aimed to protect the interests of the policy holders. In our Insurance Law，the special rule of interpretation onlysupport those which are beneficial to the relevant party，the practices of othercountries should be imported to implement and perfect our own practice. Theprinciple of reasonable expectation improves the traditional theory of contractinterpretation. It is set by American case law and has not been employed in China. Itagrees with our aim of the protection of the insurers and policy holders byemphasizing the reasonable expectations of both parties. The contemporarydevelopment of our insurance industry also provides a sound outer environment forour absorption and employment of these rules and principles.Part five of this paper is devoted to the presentation of effective advices for thelegal construction of the system of interpretation of the terms of insurance contracts.With reality as our starting point，efforts have been made to the analysis of theproblems and defects in the legislation，judicial practice and the actual practice in theinsurance industry concerning the interpretation of the terms of insurance contracts.The defects of legislation should be improved，and the desirable rules and principlesshould be applied in our judicial practice. With the state of affairs of our country as abasis，with the successful practices and experience of other countries as usefulreference，it is hope that valuable advices and suggestions can be raised for theperfection of the mechanism of the interpretation of the terms of insurance contractsin our country.