An insured submits a claim under a commercial general liability policy after a customer is injured on their premises. The insurer denies the claim based on a policy exclusion for injuries arising from "unconventional business operations." The policy does not define the term "unconventional." At the time of application, the insurance producer verbally assured the business owner that their specific daily operations were fully covered, although the producer's agency contract does not grant them the power to alter policy provisions. The insured sues the insurer for breach of contract.
Based on the distinctive characteristics of insurance contracts and related legal doctrines, which of the following describes the most likely court ruling and the correct underlying rationale?
- The court will rule in favor of the insured because the policy is a contract of adhesion, meaning any ambiguities in the undefined term "unconventional" must be strictly construed against the insurer as the drafting party.Answer
- BThe court will rule in favor of the insurer because in a contract of adhesion, the insured must adhere to the contract strictly as written, which grants the insurer the right to enforce their interpretation of any ambiguous exclusions.
- CThe court will rule in favor of the insured because the producer's verbal assurance represented express authority, legally overriding the written exclusions since the producer acts as the principal's representative.
- DThe court will rule in favor of the insured because the producer's verbal statement constituted a waiver, which is the legal doctrine that prevents an insurer from reasserting a right after a reasonable expectation of coverage is created.