Insurers as Contract Influencers

By DAVID A. HOFFMAN & RICK SWEDLOFF. Full Text.

Contract boilerplate degrading consumers’ litigation options is omnipresent, but a little mysterious. And that’s not just because no one reads it. We know that terms mandating arbitration, exculpating liability, requiring individualized litigation, and shifting risk have proliferated in the last generation. But consumer contracts’ production and efficacy has been understudied. We bring to bear a new source of information about these questions from the insurance-as-governance literature, asking how insurers influence boilerplate’s adoption and content.

Interviewing participants in the liability insurance industry, we show that insurers refine boilerplate language, teach policyholders about its efficacy, and decline coverage when it is absent. At the same time, they rarely offer price breaks for adopting boilerplate, suggesting that at least some of the cost savings from consumer boilerplate may end up in the coffers of insurance firms rather than those of their clients. Insurers are surprisingly skeptical about the value of terms that have particularly ex cited proceduralists and consumer contract scholars—arbitration and liability waiver clauses—and believe their spread does not materially affect the risks that they insure. Overall, these qualitative findings suggest the value of a new, systematic approach to the study and regulation of boilerplate.