A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
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Rules of Interpretation, Construction of Insurance Polices

(i) The intention of the parties to the contract must prevail. In the words of Lord Mansfield “these contracts are to be taken with great latitude, the strict letter of the contract is not to be so much regarded as the object and intention of it.” (ii) The Policy is to be interpreted in its entirety. To quote Lord Halsbry “in looking to a document between the businessmen, I do not think it is wise to look at technical rules of construction. I think it is well to look at the whole document, to look at the subject matter with which the parties are dealing, and then to take the words in their natural and ordinary meaning, and construe the document in that way.” (iii) In Blockett V. Royal Exchange Assurance Co. the Court observed, “the rule of construction as to exceptions is that they are to be taken most strongly against the party for whose benefit they are introduced. The words in which they are expressed are considered as his words; and if he does not use words clearly to express his meaning. He is the person who ought to be the sufferer. Thus, if there is any doubt as to the meaning and effect of the words used or if there is any ambiguity in the Policy, the benefit of doubt is given to the insured.”

Rules of Practice

The Customs of Lloyd’s were adopted by the Association of Average Adjusters which was formed in 1874 and were called the Rules of Practice. These are amended from time to time by the Association for the guidance of its members in adjustment of average. The object of the rules is to secure uniformity of practice in average adjusting.

Run-Off

A termination provision of a reinsurance contract that stipulates that the reinsurer remains liable for loss as a result of occurrences taking place after the date of termination for reinsured policies in force at the date of termination until their expiration or for a specified time period.
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UK: the continuing liability of an insurers in respect of a block of past business, for example where a reinsurance contract has been terminated but a liability remains in respect of risks or cessions accepted during the period of the agreement, or where an insurer has ceased to accept new business but has not settled all outstanding claims arising on old business.

Run-off account

A year of account of a Lloyd’s syndicate which has been left open after the date at which that account would normally have been closed by reinsurance. See OPEN YEAR.
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A year of account which has not been closed as at the date at which it would normally have been closed and which remains open.

Run-Off Basis

A valuation basis that assumes an insurer will cease to write new business, and continue in operation purely to pay claims for previously written policies. Typically expenses and reinsurance arrangements change after an insurer ceases to write new business.

Run-off broker

A broker that provides the broking support for business in run off. At Lloyd’s, Lloyd’s brokers that undertake to limit their business to acting as a run off broker are given a dispensation from a number of requirements that otherwise apply to Lloyd’s brokers.

Run-off liability

The potential liability of a losses-occurring liability insurer in respect of occurrences that occurred while they were on risk being reported as claims after the expiry of their policy. Contrast with claims-made policy where the run-off risk attaches to the insured who may be faced with a claim after the policy has terminated. See LONG-TAIL.