Applicant’s Duty to Read Application for Auto Insurance
The contractual agreement entered into when a policy of auto insurance is created is based on the application for insurance made by a prospective insured to an insurer. In situations where there are disparities between the policy as issued and the insured’s understanding of the coverage he or she was applying for, or where errors or inaccuracies are found to exist in matters asserted or acquiesced in by the insured in the application, legal issues may arise concerning the extent of the insured’s duty to have read the application so as to assure its accuracy and completeness.
The traditional rule applied by the courts in such cases is that parties who have the legal capacity to enter into binding contracts have a duty to fully read and understand the documents they sign in the course of entering into such contracts. The strictness of this rule has recently been somewhat relaxed as to the duty to read the insurance contract itself, many courts having recognized that the language found in insurance policies is detailed and complicated and that such policies are mass-market contracts rather than highly personalized agreements between the insurer and the insured. In the case of applications, however, which consist of statements made by the applicant concerning his or her status as a prospective insured, the traditional duty to read is more likely to be found to exist. The situation is often further complicated by the employment of insurance agents, who have their own interests at stake in the making of a contract between the insurer and insured, during the application process.
The business of insurance in the United States, including that of motor vehicle insurance, has traditionally been governed by the individual laws of the separate states rather than by a single unified body of federal law. As a result, the answers to questions about an applicant’s duty to read and understand the material contained in an application for an auto insurance policy will vary from state to state, and will be found in state statutes regulating the business of insurance and in the decisions of courts dealing with issues of insurance law.