What defines a contract of adhesion in insurance?

• A. The insurer determines contract terms with a take-it-or-leave-it approach, and ambiguities are interpreted in the policyholder's favor
• B. The policyholder drafts all terms and negotiates freely
• C. Both parties negotiate terms equally
• D. The contract has no ambiguities and is always clear

Answer: (A)

Adhesion contracts are standard-form agreements where one party—usually the insurer—drafts the terms and the other party must accept them as written, with little or no room to negotiate. Because the insurer controls the language, any unclear or ambiguous provisions are interpreted in the insured’s favor. This protection for the weaker party stems from the unequal bargaining power inherent in standardized forms. So the best description is: the insurer sets terms in a take-it-or-leave-it fashion, and ambiguities are interpreted in the policyholder’s favor. The other scenarios—policyholder drafting terms, equal negotiation, or a contract free of ambiguities—don't describe adhesion.