Insurance as Contract: The Argument for Abandoning the Ambiguity Doctrine

Modern contract law is the best approach because it protects consumers against potential oppression by preventing unconscionable terms.

“Commentators argue that modern contract law is the best approach because it protects consumers against potential oppression by preventing unconscionable terms (terms that no reasonable person would agree to) (Miller, 1988).”

Contract law is a flexible and interpretative device for the foundation of the insurance business, the standard form contract.

“First, contract law is a flexible and interpretative device for the foundation of the insurance business, the standard form contract (Miller, 1988).”

Contract law principles discern the parties' true intent better than contra proferentem.

“Indeed, though more difficult to apply, commentators agree that contract law principles discern the parties' true intent better than contra proferentem (Rappaport, 1999) and (Miller, 1988).”

The inflexible nature of strict construction against insurers causes courts to give standard-form language an interpretation at odds with the actual intentions of the parties at hand.

“Miller notes that the inflexible nature of strict construction against insurers causes courts to give standard-form language an interpretation at odds with the actual intentions of the parties at hand.”

Both the Uniform Commercial Code and the Restatement (Second) of Contracts provide courts with flexibility to interpret standardized agreements in favor of consumers.

“More specifically, both the Uniform Commercial Code (UCC) and the Restatement (Second) of Contracts provide courts with flexibility to interpret standardized agreements in favor of consumers (Miller, 1988).”

The end result of strict contra proferentem is insurance market inefficiency and, consequently, higher insurance premiums.

“The end result is insurance market inefficiency and, consequently, higher insurance premiums (Miller, 1988).”

The uncertainty is exacerbated because even the extension of coverage is indeterminable.

“Furthermore, the uncertainty is exacerbated since even the extension of coverage is indeterminable (Miller, 1988).”

General rules of contract interpretation offer adequate protection for individual consumers with unequal bargaining power by finding terms unconscionable or against public policy.

“Second, general rules of contract interpretation offer adequate protection for individual consumers with unequal bargaining power by finding terms unconscionable or against public policy (Miller, 1988).”

Another rationale for applying general contract law principles is the importance of protecting vulnerable insurance consumers.

“Another rationale for applying general contract law principles is the importance of protecting vulnerable insurance consumers (Miller, 1988).”