How will courts interpret a standard form contract such as an insurance policy regarding loopholes or ambiguities?

Courts will generally interpret standard form contracts, such as insurance policies, in favor of the consumer when there are loopholes or ambiguities present. This principle is anchored in the doctrine of contra proferentem, which means that any unclear or ambiguous terms in a contract should be construed against the party that drafted the contract. The rationale is that standard form contracts are often created by one party who has stronger bargaining power and greater control over the language used, leaving the other party—usually the consumer—with little to no room for negotiation or modification.

When dealing with standard contracts, the intention is to protect consumers from unfair terms that could leave them exposed to unexpected liabilities or losses. This interpretation aims to uphold fairness and promote transparency in contractual dealings. Courts are particularly cautious with consumer contracts to ensure that the power imbalance between the parties does not lead to unjust outcomes.

In contrast, interpretations that favor the drafting party do not apply here, as that could perpetuate the unfair advantage the drafting party holds. Equity and consumer protection laws focus on maintaining a balance and preventing exploitation, which is why courts lean toward interpretations that protect consumers. Therefore, the approach taken by courts reinforces consumer rights and ensures that ambiguous clauses do not disadvantage individuals who may not fully understand complex legal language