Contract Wording

By Wollner, Kenneth S. | Risk Management, January 2000 | Go to article overview

Contract Wording


Wollner, Kenneth S., Risk Management


Risk managers have access to a wide array of policy wordings offered by competing insurance companies. Not satisfied with off-the-rack forms, they demand customized policies matching specific exposures and risk financing arrangements. However, establishing coverage goals and negotiating terms is not the end of the process. The risk manager must be in a position to depend on contract language to define the rights and duties of the parties to an insurance transaction. The following are a few ideas on how to get the wording right.

Review complete terms before accepting a proposal--It is nice to imagine that the people involved in negotiating an insurance transaction would, in the event a term in a coverage document is uncertain, agree on what was intended. Unfortunately, once a claim takes place, the task of interpreting policy language usually shifts to claims specialists and others. While courts consider the negotiating history, in most cases that history is significant only if the contract language is ambiguous.

Any insurance document, whether a binder, cover note, policy or reinsurance contract, should express the terms of the agreement with easy and certain interpretation. Unambiguous wording minimizes the chance of a coverage dispute.

Do not give up the advantage of interpretation--Most risk managers understand the importance of interpretation against the drafter doctrine (contra proferendum) in insurance coverage disputes. But the exceptions to this doctrine are not well known. The main rationale for contra proferendum is that the policyholder did not have an opportunity to negotiate the language of the policy. This is true even if the policyholder mixes and matches optional features. In such cases, the insurer still offers policy text on a take-it-or-leave-it basis--the policyholder merely has a choice of what to take and what to leave.

The rule does not apply, however, when a policyholder or their representative participates in drafting the policy language. Control suggestions regarding policy wording submitted by the broker to the underwriter. Ascertain whether the broker is representing your organization or the insurance company. If the broker is acting as an agent of your organization, ask for a stipulation in the policy that the language is regarded as drafted by the insurance company.

A policyholder should not accept a label or other description implying negotiation of the policy text when, in fact, the insurer offered the text on a take-it-or-leave-it basis. Insurers have used such policy descriptions as "manuscript" and "custom" to avoid application of the doctrine. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Contract Wording
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.