Tennessee Insurance Practice Exam

If a contract of adhesion contains complicated language, whose interpretation would it favor?

1. The insurer

2. The insured

3. An independent third party

4. A regulatory body

The correct answer is: The insured

A contract of adhesion is a type of insurance contract where one party, typically the insurer, drafts the terms and the other party, the insured, has little to no ability to negotiate the terms. These contracts are often characterized by their one-sided nature, which can lead to ambiguity or complicated language that may not be easily understood by the average consumer. In cases where the language in such a contract is complex or unclear, the principle of "contra proferentem" typically applies. This legal doctrine dictates that any ambiguity in a contract should be interpreted in favor of the party that did not draft the contract—in this case, the insured. This is designed to protect consumers, who may be at a disadvantage due to a lack of bargaining power and an understanding of the contract's terms. Thus, when interpreting complicated language within a contract of adhesion, the interpretation leans toward favoring the insured, ensuring that they are protected from potentially misleading or obscure provisions created by the more knowledgeable insurer. This fundamental principle helps maintain fairness in insurance practices, underscoring the importance of clarity in contracts meant for consumers.