Exclusion clauses for the devil
Moore Stephens says the celebrated case of Macduff v The Rest is the best-known example of how the exclusion clause in insurance policies works. Macduff was a soldier accused of burning down an army camp in Scotland by falling asleep in bed with a lighted cigarette after a night of heavy drinking. His counsel argued that the bed was already alight when Macduff got into it. Alternatively, it was claimed that he had fainites at the time of lying down. Because fainites were not specifically excluded under the policy, insurers failed in their claim. The judgment is widely referred to as ‘the Scottish case’, rather than by its proper name.
Since Macduff, insurers have tightened up on the wordings of their exclusion clauses. Typical examples of this include the now-standard clause in motor insurance policies denying liability if the insured driver is taller than Charlie Drake or has not paid his milk bill.
There are a number of questions that underwriters will insist on when drafting an exclusion clause. Is the clause likely to exempt all claims under the policy apart from certain meteorite-related incidents? Is it ambiguous? Does the insured smoke in bed? Who is Sylvia?
Experience shows that it pays for an insurer to repeatedly change its corporate identity from a trusted household name to an aphorism, or sometimes a verb. It also shows that most insurance claims can be avoided by excluding incidents likely to give rise to claims.
If in doubt, leave it out.