Tennessee Insurance Practice Exam

How can an insurance company legally modify the terms of a policy of adhesion?

1. Through mutual agreement

2. By providing a written notice

3. Legally in court

4. Only by the insurer

The correct answer is: Only by the insurer

In the context of insurance policies, a policy of adhesion is a contract that is drafted by one party (the insurer) and is offered to the other party (the insured) on a "take-it-or-leave-it" basis, without allowing for negotiation on the terms. This makes it essential for the insurer to adhere to the terms as originally presented, as the insured typically has no ability to modify any of the main provisions. For an insurance company to legally modify the terms of such a policy, it must be able to do so unilaterally, as it holds the primary responsibility for crafting the contract. Therefore, the insurer has the authority to change the terms of the policy when necessary. This reflects the principle that the insurer retains control over the policy’s content, which is a fundamental feature of contracts of adhesion. Other possibilities, such as mutual agreement or providing written notice, do not apply in this situation since the insured lacks bargaining power, and modifications must come solely from the insurer to maintain the contract's validity and enforceability.