A Products Liability Theory for the Judicial Regulation of Insurance Policies

75 Pages Posted: 10 Aug 2006 Last revised: 28 Mar 2014

See all articles by Daniel Schwarcz

Daniel Schwarcz

University of Minnesota Law School

Date Written: August 10, 2006


Many insurance law commentators believe that judges should regulate the substance of insurance policies by refusing to enforce insurance policy terms that are exploitive or otherwise unfair. The most common guide for the judicial regulation of insurance policies is the "reasonable expectations doctrine," which requires courts to disregard coverage restrictions that are beyond insureds' reasonable expectations unless the insurer specifically informed the insured about the restriction at the time of purchase. This Article argues that although the judiciary has a potential role to play in policing insurance policy terms, that role should not be defined by reference to consumers' reasonable expectations. Instead, by drawing on the parallels between insurance policies and ordinary consumer products, this Article advances a products liability framework for understanding how and why courts should regulate insurance policies. It proposes that, just as firms that make defective products must pay for the resulting injuries, insurers that issue "defective" insurance policies should have to provide coverage to insureds. The Article argues that the usefulness of the analogy to products liability law goes well beyond understanding the normative basis for the judicial regulation of insurance policies. Products liability law offers important insights into how courts can efficiently correct failures in insurance markets by encouraging effective disclosure to consumers and appropriately setting penalties so that insurers take an optimal amount of care in drafting policy terms.

Keywords: Insurance, Products Liability Law, Judicial Regulation, Reasonable Expectations Doctrine

Suggested Citation

Schwarcz, Daniel, A Products Liability Theory for the Judicial Regulation of Insurance Policies (August 10, 2006). William & Mary Law Review, Vol. 48, p. 1389, 2007, Minnesota Legal Studies Research Paper No. 06-70, Available at SSRN: https://ssrn.com/abstract=923423

Daniel Schwarcz (Contact Author)

University of Minnesota Law School ( email )

229 19th Avenue South
Minneapolis, MN 55455
United States

HOME PAGE: http://www.law.umn.edu/profiles/daniel-schwarcz

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