Fairness and Standard Form Insurance Contracts

Abstract

Since the beginning of the 20th century, freedom of contract based on an assumed “meeting of minds” has been eroded steadily by judicial and legislative conceptions of fairness which, noble though they are, have never been authenticated by empirical testing of consumer opinion. Unfairness can spring from a provision inherently unjust in the context of a particular contract (“contextual”) and from the manner a provision is introduced into the contract (“procedural”). In a previous study an attempt was made to determine whether the public thought certain provisions in an insurance policy were contextually fair or unfair. It indicated that judicial/legislative assumptions of unfairness were not universally shared by the public but threw little light on why participants in the survey adopted the views they did. In this survey the focus is widened to explore why these provisions may be thought unfair. It expands on contextual unfairness by identifying two aspects within that category which have been labeled “legalistic” and “unforgiving” unfairness respectively. Legalistic unfairness was the focus of the first survey with both aspects of unfairness becoming the focus of the second survey thereby permitting more accurate comparison and the possibility of ranking the significance of each in the minds of consumers. The second survey also looks at procedural unfairness introduced through the use of Standard Form Contracts (“SFCs”). The consumer insurance context of the first survey is retained partially because that survey left unanswered certain questions of interest to insurance lawyers. However, given that the insurance policy is a paradigm SFC, it is a convenient vehicle for the investigation of procedural unfairness generally; many lessons from insurance being equally applicable in other consumer settings. The survey is online and has a projected completion date of 30 September 2011. Trends thus far show a clear condemnation by consumers of unforgiving unfairness compared with legalistic unfairness and a sharply penal approach, regardless of contextual fairness, to any form of procedural unfairness by which information is concealed from the consumer prior to making the insurance contract.