Supreme Court says insurance companies use ‘ambiguous’ and ‘sloppy’ policy terms to evade liability

The Supreme Court on Monday (July 20, 2026) observed that the practice of insurers drafting “ambiguous” and “sloppy” insurance policies to escape liabilities they ought to bear had caused ordinary policyholders to suffer. The court said such “uncertainty” was also creating hurdles in the timely disposal of motor accident compensation claims.

A Bench of Justices Sanjay Karol and N. Kotiswar Singh observed that insurance companies must use clear and precise language while drafting standard-form insurance contracts to avoid multiple interpretations. “When the party with all the drafting power writes an ambiguous policy, it is the ordinary policyholder who suffers. Insurers have, in many cases, exploited this ambiguity, either to escape liability which they should rightfully bear, or, conversely, found themselves burdened with liability they never intended to assume simply because their policy language was sloppy,” the Bench observed.