Question

When an insurance policy is not clear, the court will usually interpret in favor of the insured, because the policy is a contract of ________?

1) Indemnity
2) Good faith
3) Uberrimae fidei
4) Adhesion

Answer 1

Courts often favor the insured when an insurance policy is ambiguous because it is a contract of adhesion, where terms are set by insurers without negotiation, and ambiguities are resolved in favor of the insured.

Step-by-step explanation:

When an insurance policy is not clear, the court will usually interpret in favor of the insured, because the policy is a contract of adhesion. As a contract of adhesion, the insurance policy is drafted by the insurer without negotiation with the insured, leading to any ambiguities being resolved in favor of the non-drafting party, in this case, the insured.

Insurance serves as a method of protecting an individual or entity from financial loss by distributing risk amongst a group who pay premiums. Policyholders are less inclined to mitigate risks due to the concept of moral hazard, as they are protected against financial consequences. Understanding the terms and intentions behind insurance policies helps in navigating issues of interpretation and clarity.