Contract of Adhesion

Is prepared entirely by the insurer and offered to the applicant on a take-it-or-leave-it basis — An adhesion contract is one drafted by one party — the insurer — and presented to the other — the applicant — without opportunity to negotiate its terms. This characteristic leads courts to interpret ambiguous policy language in favor of the insured, since the insurer controls the wording. Adhesion is distinct from the aleatory, unilateral, and conditional characteristics, which describe the exchange of values, the promises made, and the conditions of payment.

National insurance concept

Is drafted by the insurer and presented to the applicant on a take-it-or-leave-it basis — A contract of adhesion is prepared by one party, the insurer, and offered to the applicant on essentially a take-it-or-leave-it basis; the applicant has little or no power to alter the standardized terms of the policy. Because the insurer drafts the contract and selects its wording, courts resolve ambiguous policy language against the insurer, the party responsible for the ambiguity. This doctrine is fundamental to understanding insurance contract interpretation. Insurance policies are standardized forms rather than negotiated instruments, and the contract binds both the insurer and the insured.

National insurance concept