Misclassifying the Insurance Policy: The Unforced Errors of Unilateral Contract Characterization
Hazel Glenn Beh
University of Hawaii
Jeffrey W. Stempel
University of Nevada, Las Vegas, William S. Boyd School of Law
Cardozo Law Review, Vol. 32, No. 1, 2010
UNLV William S. Boyd School of Law Legal Studies Research Paper
Insurance policies are traditionally classified as unilateral or “reverse-unilateral” contracts, a characterization we find largely incorrect, with problematic consequences for adjudication of insurance coverage disputes. In addition to the general difficulties attending the unilateral classification, the concept as applied to insurance policies is not only unhelpful but incorrect. Insurance policies are more accurately viewed as bilateral contracts. In addition, the unilateral characterization of insurance policies introduces error and inconsistency into the litigation of insurance controversies. In particular, the unilateral view tends toward excessive formalism and focus on so-called “conditions” precedent to coverage, eschewing material breach analysis and encouraging needless forfeitures as well as unwisely removing the concept of anticipatory repudiation and corresponding remedy from insurance law. Categorizing insurance policies as unilateral fails to appreciate the ongoing, iterative nature of insurance policies and the insurer-policyholder relationship. Recognizing the bilateral nature of insurance policies holds substantial potential for improving insurance coverage adjudication.
Number of Pages in PDF File: 73
Keywords: contracts, insurance, insurance policy, policy construction
JEL Classification: G22, K12
Date posted: September 9, 2010
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