by Tom Stilp JD, MBA/MM, LLM, MSC, DBA, May 2nd, 2025
What is a product you hope you will never have to use? It is the same product the company selling it to you hopes you will never use. And when you have to use the product, you usually cannot. Insurance.
One recent Insurance Policy was over 300 pages (we will refer to this as the “Sample Policy”). Full of Endorsements, Exceptions and Exclusions, what was insured by one part of the Policy was excluded by another part.
According to Professor Boardman, customers do not read their insurance policies, and insurance companies do not draft policies to be read by customers (Boardman, 2010).
Insurance companies prepare policies to be read by attorneys and the courts.
Therein lies the problem.
Customer do not understand what they are buying. The boilerplate of insurance policies is hopelessly confusing and incomprehensible. Studies suggest that comprehension is significantly reduced when a sentence reaches 43 words (Hyman, 2025). The first sentence of the first section of the Sample Policy was 145 words long.
Professor Boardman found that insurance companies are encouraged to retain murky provisions (Boardman, 2006). Courts follow other courts because even the courts have difficulty understanding what the insurance policies mean. The simple fact that a court has interpreted language in a policy allows for predictable results in the future. Courts adhere to precedent under the doctrine of stare decisis, “standing with what has already been decided.”
The South Carolina Supreme Court stated about insurance policies that:
“Ambiguity and incomprehensibility seem to be the favorite tools of the insurance trade in drafting policies. Most are a virtually impenetrable thicket of incomprehensible verbosity. It seems that insurers generally are attempting to convince the customer when selling the policy that everything is covered and convince the court when a claim is made that nothing is covered” (S.C. Inc. Co. v Fid & Guar. Ins., 1997).
Oddly, most companies have reputational concerns about breaking their agreements with customers, which has been studied as a form of exploitation that makes customers feel like “suckers” (Wilkinson-Ryan, et al., 2010). But not insurance companies. Insurance companies appear to be in the business of collecting premiums and denying claims.
Insurance policies are not negotiated. Policies are prepared in legalese, favor the insurance company, and are usually given to the customer after the policy has begun. It is no wonder that customers are often disappointed, disillusioned and feel betrayed when claims are denied. Customers are unable to understand a policy until it is too late – when the loss has occurred – and the time for the insurance company to pay has arrived.
We have successfully litigated dozens of commercial insurance cases to judgment for clients. Experienced counsel provides an advantage to level the playing field in coverage disputes.
References
Boardman, M. (2006). Contra proferentem: The allure of ambiguous boilerplate. Michigan Law Review, 104, 1105-1128.
Boardman, M. (2010). Insuring understanding: The tested language defense. Iowa Law Review, 95, 1075-1124.
Hyman, M. (2025). Communicating in the language of the people. Illinois Bar Journal, 113(2), 38-39.
S.C. Ins. Co. v. Fid. & Guar. Ins., 489 S.E.2d 200, 206 (S.C. 1997).
Wilkinson-Ryan, T and Hoffman, D. (2010). Breach is for suckers. Vanderbilt Law Review, 63(4), 1001 – 1045.
