Misclassifying the Insurance Policy: The Unforced Errors of Unilateral Contract Characterization

73 Pages Posted: 9 Sep 2010  

Hazel Glenn Beh

University of Hawaii

Jeffrey W. Stempel

University of Nevada, Las Vegas, William S. Boyd School of Law

Abstract

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.

Keywords: contracts, insurance, insurance policy, policy construction

JEL Classification: G22, K12

Suggested Citation

Beh, Hazel Glenn and Stempel, Jeffrey W., Misclassifying the Insurance Policy: The Unforced Errors of Unilateral Contract Characterization. Cardozo Law Review, Vol. 32, No. 1, 2010; UNLV William S. Boyd School of Law Legal Studies Research Paper. Available at SSRN: https://ssrn.com/abstract=1674044

Hazel Glenn Beh

University of Hawaii ( email )

2515 Dole St.
William S. Richardson School of Law
Honolulu, HI 96822
United States
(808) 956-6553 (Phone)
(808) 956-5569 (Fax)

Jeffrey W. Stempel (Contact Author)

University of Nevada, Las Vegas, William S. Boyd School of Law ( email )

4505 South Maryland Parkway
Box 451003
Las Vegas, NV 89154
United States
702-895-2361 (Phone)
702-8952482 (Fax)

HOME PAGE: http://law.unlv.edu

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