A retail store owner and their insurance provider disagree on the interpretation of a vague exclusion clause in a commercial liability policy. A judge reviews the policy and determines that the wording of the exclusion is ambiguous. Under the legal doctrine of adhesion, how must the court resolve this ambiguity?
- The court will interpret the clause in favor of the policyholder, because the insurer had exclusive control over drafting the contract.Answer
- BThe court will interpret the clause in favor of the insurer, since the policyholder voluntarily agreed to the terms upon paying the premium.
- CThe court will declare the ambiguous clause to be a legal waiver, preventing either party from enforcing that specific policy provision.
- DThe court will void the entire policy due to a lack of clear legal consideration between the involved parties.
Answer
The court will interpret the clause in favor of the policyholder, because the insurer had exclusive control over drafting the contract.
Insurance policies are considered contracts of adhesion because they are drafted entirely by the insurance company on a 'take-it-or-leave-it' basis. The applicant cannot negotiate the terms. Therefore, established legal doctrine dictates that if any policy language is vague or ambiguous, a court will interpret that language in favor of the insured (policyholder) and against the insurer.
Step-by-Step Solution
Key Concept
Contract of Adhesion and Ambiguity