West Virginia Property and Casualty Licensing Practice Exam

What principle indicates that courts will resolve policy ambiguities in favor of the insured?

1. Adhesion

2. Indemnification

3. Utmost Good Faith

4. Subrogation

The correct answer is: Adhesion

The principle that indicates courts will resolve policy ambiguities in favor of the insured is known as the doctrine of "adhesion." This doctrine arises specifically because insurance policies are typically drafted by the insurer and presented to the insured on a take-it-or-leave-it basis. The insured often has little to no opportunity to negotiate the terms of the policy, which can create an imbalance of power between the parties. When a dispute arises regarding an ambiguous term within an insurance policy, courts tend to interpret these ambiguities in a manner that favors the insured. This approach is rooted in the belief that the insurer, having drafted the policy, bears greater responsibility for ensuring clarity and understanding. By interpreting ambiguous language in favor of the insured, courts uphold the principle of fair treatment for consumers in the insurance market. Other principles mentioned in the options, such as indemnification, utmost good faith, and subrogation, address different aspects of insurance and risk management. Indemnification refers to compensating an insured for a loss, utmost good faith pertains to the honest exchange of information relevant to the insurance contract, and subrogation involves the insurer's right to recover costs from a third party responsible for a loss. However, none of these directly address the resolution of ambiguities in