UK: The High Court Rules on Interpretation of Single Premium With-Profits Policy

    In Phoenix Life Assurance Limited v The Financial Services Authority [2013] EWHC 60 (Comm), the High Court upheld the interpretation of the claimant, Phoenix Life Assurance Limited (Phoenix), in respect of a single premium with-profits policy (the Policy).

    Phoenix had sought a declaration on the proper interpretation of the Policy, which was sold to policyholders between 1986 and 1992. The Policy guaranteed certain minimum benefits that would be paid to the policyholders on an annual basis.

    The Financial Services Authority (the FSA) agreed to act as the defendant in the matter, due to the need for an urgent resolution and the lack of a representative policyholder as party to the proceedings.

    The Court was called upon to examine the Policy, in particular, a provision which dealt with payment of the minimum benefits. The provision in dispute stated the minimum benefits to be the sum of £34,634 (the Sum), and guaranteed "this amount" to be sufficient to cover the annual payments to the Policyholders. The FSA argued that the phrase "this amount" referred to the Sum alone and did not include any bonuses that may be paid in addition to the Sum. Phoenix, however, contended that the Sum was to be inclusive of any additional bonuses. Phoenix highlighted further uses of the same term within the Policy, and submitted that an interpretation which provided a consistent use and application was to be preferred.

    The Court found in favour of Phoenix and in doing so held that the interpretation was clear from the wording of the Policy itself, provided the most consistent outcome when reviewing the Policy as a whole, and was further reinforced by the statutory background.

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