What Is Adhesion Insurance?

Adhesion insurance is an insurance policy that uses an adhesion contract — a type of contract where one party has all negotiating power over the other.

Adhesion Contract Definition

An adhesion contract is designed to give one party disproportionate bargaining power over the other and does not allow the weaker party to negotiate for different terms. Usually, adhesion contracts look like standardized contracts that the more powerful party uses to sell consumers goods or services. Because the contract is weighted in favor of the corporation, the consumer bears all the risk.

Characteristics

Adhesion contracts are “take it or leave it,” meaning you, the consumer, can’t negotiate for more favorable terms. To buy the product or service you want, you must sign the contract as is. Signs a contract may be a adhesion contract include:

• Bargaining power skewed in favor of the corporation: If you are not able to negotiate any aspect of your contract, and all terms are determined by the company you are signing with, it’s likely you are dealing with an adhesion contract.
• Uniform Language: Typically, adhesion contracts use the same language over and over, meaning many identical contracts will have been signed by other customers.
• Only benefits one party: Though the consumer is likely to receive something for signing the contract — such as a lease or a cell phone — the terms of the contract tend to benefit the corporation at the expense of the consumer, making it more likely any dispute would be settled in the corporation’s favor.
• Lengthy document: Many adhesion contracts are verbose and long winded, to deter the customer from reading the full terms and services.

Examples of Adhesion Contracts

• Insurance, including auto insurance policies
• Leases
• Deeds
• Mortgages
• Used and new car purchases
• Other consumer credit forms

While adhesion contracts are very much weighted in favor of the corporation, there can be some benefits to the consumer. Because there is no variation in language, these contracts are usually very efficient. They offer the same, consistent contract to all customers, meaning all customers are subject to the same terms and receive the same services.

Many companies use adhesion contracts, and refusing to sign one could prevent you from accessing useful or important services, for example auto insurance.

Although adhesion contracts may seem relatively straightforward, many legal and ethical questions arise when dealing with them.

Can You Change the Terms of an Adhesion Contract?

Typically, the weaker party cannot change the terms of an adhesion contract, which calls their fairness into question.

Depending on their provider, auto insurance customers should be able to to modify certain aspects of their coverage contracts, for example:

• Rideshare coverage 
• Accident forgiveness
• New car replacement coverage
• Rental car coverage
• Roadside assistance

While customers may be able to add or remove certain types of coverage to their policies, in the majority of instances they cannot change the terms or conditions of their contract.

What Do Courts Review Adhesion Contracts For?

When the weaker party wants to get out of an adhesion contract, they may sue the more powerful party and get a court to review the contract itself. Here is what the court will look for.

• Doctrine of reasonable expectations: The contract must have terms that a “reasonable person” would expect to be in a contract. While this is subjective, the court will reject a contract with terms that a “reasonable person” would not have accepted if they had known those terms were in the contract.
• Doctrine of unconscionability: Unconscionability focuses less on the customer’s expectations and more on the intentions of the company. The language of the contract must be clear and unambiguous or conscionable. If fraud, duress, undue influence, or fine print is involved, the contract may be declared unconscionable, and therefore null and void. Some factors that a court would find oppressive include inflated prices, unfair disclaimers, immoral clauses, or terms that contradict public policy. They may also consider factors such as lack of notice, lack of good faith, and exploitation.

Are Adhesion Contracts Enforceable?

Not all adhesion contracts are signed in the same way. That could affect their enforceability beyond the content they include. Even if an electronically signed contract is declared reasonable and conscionable, it could still be found unenforceable, depending on how the consumer signed the contract online.

• Browse-wrap contracts: This type of contract requires the consumer to click through multiple hyperlinks to accept a company’s terms and conditions. Courts do not enforce these contracts because the terms are buried, so the contract falls under unconscionability.
• Click-wrap contracts: Click-wraps appear in an immediately available pop-up window, requiring the consumer to click “I agree.” Courts enforce click-wrap contracts, unlike browse-wrap contracts.
• Sign-in-wrap contracts: Sign-in-wraps fall somewhere in between browse-wraps and click-wraps. They include a hyperlink labeled either “terms of service” or “terms and conditions.” To accept, users must click “I agree” or “I accept” as the last step of a process before using a product or service.¹ Courts enforce sign-in-wraps.

Although online auto insurance does exist, most people today still buy car insurance over the phone or in person. The process isn’t as quick as clicking “I accept” on a few paragraphs you skimmed. Whatever and however you’re signing, it’s important to read the so-called “fine print,” especially if the contract is a click-wrap or sign-in-wrap. Remember, courts enforce these contracts, so you’ll most likely be required to adhere to the terms and conditions. Working with local agents can also help customers customize their policies to best suit their needs