The Illusion of Insurance Contracts

55 Pages Posted: 3 May 2016 Last revised: 10 Aug 2016

Christopher C. French

Pennsylvania State University, Penn State Law

Date Written: May 2, 2016


Insurance policies commonly are understood to be a species of standardized contracts. This Article challenges that conventional wisdom and argues that insurance policies do not qualify as contracts when the doctrinal and theoretical bases underlying the requirements for the formation of a contract are analyzed. In making the argument, the Article examines the process by which insurance policies are created and sold, as measured against the requirements for the formation of a contract. It also distinguishes insurance policies from other types of standardized contracts such as the various types of wrap agreements that currently are the subject of much litigation and scholarly commentary. The Article then explores the doctrinal and theoretical bases underlying the specialized rules that courts have developed to interpret insurance policies, which incorporate public policies such as ensuring that injured parties are compensated and that powerless consumers receive protection against overreaching by insurers, to explain how courts already implicitly have recognized that insurance policies are not simply a type of standardized contract.

Then, in order to avoid the current problem of regulatory capture associated with the approval of policy language, the Article proposes to reform insurance law by having an independent third party draft insurance policies into shorter, understandable documents with input from both insurers and policyholders. And, instead of using the current rules of insurance policy interpretation, the canons of statutory interpretation would be used to interpret insurance policies with consideration given to the drafting history, societal interests, overriding purpose of insurance, and with Chevron deference given to the drafter’s interpretation.

Keywords: contracts, insurance, Chevron, reasonable expectations, contra proferentum, wrap agreements, standardized contracts, public policy, compensation injured parties, adhesion

Suggested Citation

French, Christopher C., The Illusion of Insurance Contracts (May 2, 2016). 89 Temp. L. Rev. __ (Forthcoming); Penn State Law Research Paper No. 10-2016. Available at SSRN:

Christopher C. French (Contact Author)

Pennsylvania State University, Penn State Law ( email )

Lewis Katz Building
University Park, PA 16802
United States

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