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However, as Schwarcz notes, the reasonable expectations doctrine fails in practical use for several reasons. Whie th doctrine may have widespread support from insurance law commentators, "Only a handful of state courts follow the rule, and the case law endorsing it is confused and inconsistent. Moreover, contract law scholars have largely debunked the contracts-of-adhesion argument on which the reasonable expectations doctrine was originally justified. They have established that neither consumer assent nor government regulation is necessary to lead firms to design efficient standard forms when market forces work sufficiently well" (Schwarcz para. 5). Because the doctrine has a record of stunted evolution in the courts and because there has been an academic undermining of its core rationale, many view it to be both antiquated and largely irrelevant. Still, the reasonable expectations doctrine has served as the primary theoretical and doctrinal construct for the judicial regulation of insurance over the past forty years, so the demise of the reasonable expectations doctrine has corresponded with the demise of judicial intervention in the content of insurance policies, a move which satisfies only insurance companies.
Schwarcz thus proposes that limited judicial regulation might be in the best interests of insurance consumers and that using product liability as the underlying doctrine may produce better results. Products liability law first clarifies the normative case for why courts should occasionally deviate from insurance policy terms, and it also provides a practical and theoretically sound doctrinal structure for implementing this principle. As Schwarcz notes, products liability law first suggests that informing consumers about product information is not as easy as the reasonable expectations doctrine supposes:
Because consumers can only digest a limited amount of information, requiring firms to perfect consumer information is not sensible. Instead, products liability law requires firms to inform consumers about particularly important safety risks and to provide instructions in an easy-to-read and obviously visible manner. (Schwarcz para. 7)
One major element in the development of insurance policy has been the campaign waged by the insurance industry to keep the courts from making insurance policy or for keeping judges adhering to pro-business policies.
The industry has spent millions on a massive public-relations campaign against "runaway jury awards" and "greedy trial lawyers" as a way of pressuring states to restrict citizens' rights to sue:
In California, insurance companies spent more than $44 million in 2000 to overturn two-year-old state laws that allowed a person injured in an auto accident to sue the other (at-fault) driver's insurance company for refusing to settle or lowballing payment on a legitimate claim. Similar campaigns are under way in states like West Virginia, where such laws are still on the books. Meanwhile, the U.S. Chamber of Commerce plans to fork over $40 million this year in lobbying for federal restrictions on citizens' legal remedies. Much of that money comes from insurance companies. (Mencimer 60)
As Mencimer notes, lawsuits and the threat of high damage awards "are often the only recourse consumers have, not only to learn about insurance companies' business practices but also to prevent insurance companies from abusing them with abandon" (Mencimer 61).
The various federal and state laws are both confusing and contradictory and largely shaped for the benefit of the insurance companies. Strict contract law is often the base for insurance law, which is why the exact language of policies is scrutinized so closely and why what is in the contract counts for more than what insureds may be told or how the companies may manipulate the consumer to sell policies on the one hand and to avoid paying claims on the other.
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