What term describes the characteristic of an insurance contract where one party sets the terms and the other can only accept or reject them?

• A. Adhesion
• B. Agency
• C. Conformity
• D. Equity

Answer: (A)

The term that accurately describes the characteristic of an insurance contract where one party sets the terms and the other can only accept or reject them is "Adhesion." This concept refers to contracts that are drafted unilaterally by one party, often the insurer, which offers the terms without negotiation. The other party, typically the insured, has limited power to change the terms and must either accept them as they are or not enter into the contract at all.

This nature of adhesion in insurance contracts is significant because it reflects the power dynamics in the relationship between insurers and insureds, where insureds often have little to no say in the specific provisions of the policy. Such contracts are designed to be simple and clear, but they can also lead to issues of ambiguity, as courts may interpret any vague or unclear terms in favor of the insured.

In contrast, terms like "Agency" refer to the relationship where one party acts on behalf of another, "Conformity" refers to aligning terms with legal and regulatory standards, and "Equity" generally refers to fairness and justice in the insurance process, but does not pertain specifically to the unilateral nature of contract terms.