A small retail business purchases a commercial general liability policy. Several months later, a customer is injured by a falling display rack, and the business files a claim. The insurer denies coverage, citing a specific property and operations exclusion. Upon review in court, the judge determines that the wording of this exclusion is highly vague and could reasonably be interpreted in two completely different ways. Because the insurance company drafted the exact language without allowing the business owner to negotiate the terms, what is the legally mandated outcome of this dispute?
- The ambiguity will be interpreted in favor of the insured because the policy is considered a contract of adhesion.Cevap
- BThe ambiguity will be interpreted in favor of the insurer because they are the original authors of the contract.
- CThe court will apply the doctrine of estoppel to permanently alter the confusing policy language.
- DThe court will void the policy entirely due to a failure of mutual consideration between the parties.
Cevap
The ambiguity will be interpreted in favor of the insured because the policy is considered a contract of adhesion.
Because insurance policies are contracts of adhesion—meaning they are drafted entirely by the insurer with no negotiation allowed by the insured—any ambiguity in the contract language is strictly interpreted in favor of the insured. The courts protect the party that had no opportunity to alter the confusing terms.
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Anahtar Kavram
Contract of Adhesion and Ambiguity Resolution