14-1 THE CONTRACT, AND THE PAROL EVIDENCE RULE

This book is about insurance contracts, for which the law does not in general require any particular form (above, 11-2A1). For contracts generally the question whether the parties have reached final agreement is determined objectively and thus depends on whether it would appear to a reasonable person that the parties had reached agreement on the terms which they had determined were essential. These matters are judged from the words and conduct of the parties.1 The approach is the same for insurance contracts. Such problems do not commonly arise in the context of insurance contracts if only because of the formality of the process which insurers tend to adopt, at least as between primary insurer and the insured. In most insurance cases, at least at this primary level of insurance, the contract is recorded in a document called a policy. To construe the policy, the reader must first know whether the policy stands alone. When are the terms of the contract of insurance or the meaning of the terms in the policy found by evidence of party intention emanating from outside the policy? This is a question of evidence, not a question of construction, but it is a necessary precursor of any discussion of rules of construction.2