What does the term "Contract of Adhesion" refer to in insurance?

The term "Contract of Adhesion" in insurance refers to agreements that are presented on a "take it or leave it" basis, where one party—typically the insurer—provides the terms and conditions of the contract, and the other party—the insured—must accept those terms as they are without the opportunity to negotiate. This type of contract is characterized by its one-sided nature, where the stronger party drafts the contract and the weaker party has little to no leverage or ability to alter its provisions.

Contracts of adhesion are common in the insurance industry because they allow insurers to streamline the process of providing coverage to a large number of policyholders. Since the insured does not have the power to negotiate the terms, they must carefully review the contract to understand their rights and responsibilities before agreeing to the coverage. This distinction emphasizes the importance of clear communication and understanding in insurance agreements, as the insured relies on the insurer to act in good faith.