An insurance policy is described as a contract of adhesion because it:
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
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.
Why the other options are wrong
- D) Insurance policies are standardized forms drafted by the insurer. Applicants generally do not negotiate the policy's terms line by line with the agent. The correct answer follows from the controlling authority, which this option does not follow.
- A) Neither party may unilaterally modify the contract at any time. Changes require agreement between the parties, usually accomplished through an endorsement. This common misconception is exactly what the governing rule rejects, so the option is incorrect.
- B) An insurance policy is a bilateral contract that imposes obligations on both the insurer and the insured, not a promise binding only the insured. This contradicts the governing rule explained above and therefore cannot be the correct answer.
Memory hook
Adhesion = take it or leave it. The drafter's ambiguity becomes the insured's benefit in court.