What Is Adhesion In Insurance

What is adhesion in insurance? I know you are curious to know about it, so keep following me as I enlighten you. 

An adhesion contract is also called a contract of adhesion, which is an agreement between two parties where one party has significant power to settle the terms of the agreement. 

Also, take a look at a consumer and a cell phone provider. In these examples, the consumer has little to no real negotiating power. 

Although it can be difficult to effect any real changes to the terms of adhesion contracts. It can be important to recognize the characteristics of these contracts because the average person enters into them regularly. 

There are some steps that the little guy can be able to take to provide some protection in these situations. 

READ MORE:  What is adhesion insurance?

What Is An Adhesion Insurance Contract? 

These insurance contracts are good examples of classic adhesion contracts. Also, every insurance policy agreement a prepared solely by the insurance company. 

These agreements are lengthy and the insured party, particularly an individual, has little if they have any ability to change any of the terms. 

When purchasing insurance, the insured party will have options to set limits and certain other terms of coverage like deductibles. 

However, when it comes to issuing the policy, the insurance company is in the driver’s seat. Most of the terms of the insurance policy are boilerplate with no variance between policyholders. 

Adhesion insurance contracts are used for efficiency. At least from the insurance industry’s perspective, it would be very costly and unmanageable to sit down and negotiate specific terms of the policy with the applicant of the new insurance. 

Characteristics of An Adhesion 

There are common characteristics that most adhesion contracts share. These factors make it easier to identify when the party is entering into a contract of adhesion. 

Understanding these common elements can help you better understand adhesion contracts and advocate for yourself where possible.  

An adhesion contract is usually: 

• A Form Contract or Boilerplate 

Identical language is mostly used among broad groups of consumers. Automobile lease agreements, property and consumer product sales are good people where adhesion contracts are usually employed. 

• Unequal Bargaining Power 

The weak party in these situations has little in the negotiating terms. Moreover, the party with superior power can afford to use a take it or have it approach because of the volume of business involved. 

• One-sided

The more powerful party writes the language, an adhesion contract is very one-sided. For instance, the contract can include specific ways for disputes to be resolved that favour the more powerful party. 

Also, resolutions can call for the state law that applies to an agreement that the weak party consents to arbitration and can not file a lawsuit. 

READ MORE: What Is a Car Insurance Premium

Is Car Insurance An Adhesion Contract? 

Car insurance policies are certainly adhesion contracts. The insurance company drafts the policy terms, nearly all of which will not be subject to negotiations. 

It can also be classic to take it or leave it. There can be certain cases where powerful consumer or business customers can ask for and get certain modifications to the terms. 

However, these situations are rare. The insurance company had ultimate control because the driver needed coverage and had little choice other than to accept the policy terms dictated by the company. 

Are Adhesion Contracts Enforceable? 

The Uniform Commercial Code (UCC), which has been adopted in all states with only minor variance does give that courts can enforce adhesion contracts. 

However, due to the unequal nature of adhesion contracts, the UCC provides that these contracts should be carefully scrutinized for fairness. 

For example, courts always apply the reasonable expectations doctrine to even out some of the aspects of the one-sided nature of adhesion contracts. 

Also, the doctrine gives the court to interpret the language policy, for instance, policy.  For instance to give certain protections that the insured would reasonably have expected. 

The doctrine could apply even where the interpretation is different from the actual policy language. Moreover, the UCC specifically calls attention to unconscionable contracts. 

Applying the doctrine, courts can invalidate an adhesion contract or a portion of it if the court determines that the contract was unconscionable at the time it was made. 

Moreover, courts can also loom to see if the terms are so unfair or burdensome to the weaker party that it appears to have been abusive when it was formed. 

Can You Change The Terms of An Adhesion Contract? 

Though it can be difficult, there are some limited ways that you might be able to modify adhesion contracts. 

For automobile insurance policies, certain riders and add-on provisions have been developed to give some valuable modifications. 

Examples of these are: 

• Accident Forgiveness 

The additional coverage can give you one covered accident without any change to your insurance rate. 

• New Car Replacement Coverage 

The add-on can allow you to replace your newer one with the latest model if your car is totaled in an accident. 

• Roadside Assistance Coverage 

Roadside assistance can be added to the car insurance policy to cover things like breakdowns, towing, flat tires or battery repair or replacement. 

READ MORE: Adhesion Contract: Definition, History, and Enforceability

Conclusion 

This is important for individuals purchasing to carefully review the terms of the policy seek professional advice if needed, and be aware of their rights and responsibilities. While adhesion in insurance reflects the industry’s need for efficiency, maintaining a fair balance between the insurer and the insured is important to ensure ethical business practices and uphold the principle of justice in the realm of insurance contracts.