Chipping Away at the Insurance Bedrock

The bedrock principle of New Jersey insurance coverage law is that the insurance policy is an adhesion contract drafted solely by the insurance industry. As our Supreme Court stated more than 50 years ago:

Insurance contracts are unipartite in character. They are prepared by the company’s experts, men learned in the law of insurance who serve its interest in exercising their draftsmanship art. The result of their effort is given to the insured in printed form upon the payment of his premium. The circumstances long ago fathered the principle that doubts as to the existence of coverage must be resolved in favor of the insured.

Kievit v. Loyal Protective Life Insurance Co., 34 N.J. 475 (1961). See also, Voorhees v. Preferred Mutual Insurance Co., 128 N.J. 165 (1992) ("But because insurance policies are adhesion contracts, courts must assume a particularly vigilant role in ensuring their conformity to public policy and principles of fairness.").

This principle has been reiterated time and time again by the Supreme Court since 1961 as the court established the structure of modern New Jersey insurance law. This principle lies at the base of New Jersey’s rules of insurance policy interpretation: courts give terms in an insurance policy their ordinary meaning; interpret ambiguities in favor of coverage; construe exclusions narrowly; and respect the objectively reasonable expectations of policyholders.