An insured discovers that a specific provision in their property insurance policy is vaguely worded and can be reasonably interpreted in two different ways. If a claim dispute arises over this specific provision, how will a court generally interpret the ambiguous language?
- AThe ambiguity will be resolved in favor of the insurer because the insurer is the author of the document.
- The ambiguity will be resolved in favor of the insured because the policy is a contract of adhesion.Answer
- CThe court will rely on the agent's implied authority to decide the final meaning of the provision.
- DThe court will void the entire policy because an ambiguous provision constitutes a failure of consideration.
Answer
The ambiguity will be resolved in favor of the insured because the policy is a contract of adhesion.
Insurance policies are considered contracts of adhesion because they are drafted completely by the insurer and offered on a 'take it or leave it' basis. To balance this unequal negotiating power, courts apply the principle that any ambiguity in the contract language will be resolved strictly in favor of the insured.
Step-by-Step Solution
Key Concept
Contracts of Adhesion and Ambiguity