Contract of Adhesion: Everything You Need To Know

Homeowners’ Insurance and Contract of Adhesion

When you purchased your first house, you had to go out and get a homeowners’ insurance policy, right? Certainly, buying insurance protection for your new home was a wise thing to do. However, if you remember, you couldn’t get a mortgage unless you had a homeowners’ policy. Both the mortgage you signed and the homeowners’ policy, which is basically an insurance contract, are called contracts of adhesion.  Indeed, contracts of adhesion and homeowners’ insurance policies go hand-in-hand.

Insurance Policies Are Contracts of Adhesion

First and foremost, in contract law, a contract of adhesion is one that is drafted solely by the party with superior power. In fact, consider your homeowners’ insurance policy.  For instance, did you contact a law firm and then sit down with your insurance agent to cross out the terms and conditions you didn’t like. Not surprisingly, that is because the insurance company does not negotiate the general terms of the homeowners’ insurance policy with the insured.  For this reason, we can conclude that the homeowner is the weaker party. To repeat, this is because they don’t have the power to change the general terms of the contract.  Therefore, they are the weaker party.  In summary, this strong and weak positioning within contracts is referred to as a contract of adhesion.

Can Contracts of Adhesion be Modified

While the general terms of the contract are not changeable other are changeable.  For instance, you may want to increase the insurance coverage limits for a dwelling.   Moreover, you might be buying an expensive house. Indeed, it might have lavish wood paneling or expensive light fixtures, etc. Remember, changes to an adhesion contracts will require additional costs.

Likewise, you and your spouse may own expensive antiques, paintings and jewelry. In that instance, you can increase the limits for personal property coverage. But, again, you will have to pay for it.

Moreover, other general terms of the homeowners’ policy are part of form contracts and are not negotiable. For instance parts of the contract that deal with exclusions; or the time given to notify the carrier of a covered event, and dates policy premiums are due.  In short, there are things that you can negotiate and things you can’t.  Most Importantly,  with contracts of adhesion any changes usually add to the cost of the premium.  In short, it costs the customer (insured) more to make changes.

If you do not like the terms, remember, you do not have the ability to negotiate. In short, you are stuck with what they give you.  Remember, the insurance company does not care about you, because you are the weaker party.  In fact, they structure it this way so that there is unequal bargaining power between the insurance company and the insured.  Indeed, you can take your business elsewhere and try to get a homeowners’ policy from another insurance company.

However, you probably will not be able to do that. In fact, any homeowners’ insurance company will give you the same adhesion contract.

What Other Industries Use Standard Contracts?

Actually, standard form contracts are widely used. You signed a standard contract when you got a mortgage or other loan from a bank. In fact, you didn’t negotiate with the bank, other than the amount and possibly the period to repay the loan.

Furthermore, when you rent a car or buy one, you sign a standard contract prepared by the rental agency or car dealer.

Additionally, when you get a credit card, the credit card company gives you a form contract/customer agreement.

Are Form Contracts Always Enforced by Courts?

Yes, most standard form contracts are enforceable. However, there may be instances in which a person can successfully challenge a contract of adhesion such as an insurance policy.

State regulations require that insurance contracts be written in simple language.  In short, ordinary people should be able to read and understand an insurance policy without the help of a Harvard law graduate.

If a particular contract provision is too complicated to understand, then a court may strike that provision.

Also, if a court felt that all or part of a contract of adhesion was an unconscionable contract, then the court could strike all or part of that contract.

If You Need a Public Adjuster for a Property Damage Claim Call AllCity Adjusting

We are a family-owned claims company with five decades of combined adjusting experience, including reviewing homeowners’ insurance contracts. As a result, if there’s one thing we understand, it’s that you need 100% of your claim value.

Commonly, Insurance companies undervalue your claim 8 out of 10 times. Moreover, they hire expensive adjusters to ensure they maintain a strong profit margin. Additionally, they have experienced actuaries that create insurance agency guidelines that help their team of agents challenge your insurance claim’s validity. Lastly, remember you have already gone through a tumultuous event. For this reason, get an agency that gets you more and back in your property quickly.

At AllCity Adjusting we work to ensure you get 100% of your claim value. Equally important, with over 50 years of combined adjusting experience, we know insurance companies and understand where they cut corners.

We are experts on homeowners’ insurance contracts. You did not negotiate the terms of your homeowners’ policy. Nevertheless, that policy has contract provisions that require the insurance company to treat you fairly. We will make sure that is exactly what the insurance company does.

Moreover, we help you build a larger claim, maximize your claim value, and get you back to normal fast. Don’t get fooled, get the company that gets you more.

If you have received a low-ball offer from the insurance company, they are taking too long to process your claim or you just want to talk to someone on your side, call us at 844.692.3587 or email us at info@allcityadhjusting.com.