Private Law Theory

ABSTRACT
Modern contract law assumes that consumers meaningfully assent to the standard forms that govern their daily lives. However, this assumption is widely regarded as a legal fiction for two key reasons: first, most consumers do not read standard forms, and second, even those who do often struggle to fully comprehend their terms and implications. While the lack of consumer reading has been well-documented through empirical research, consumers’ ability to comprehend standard form contracts has received surprisingly little attention. This Article addresses the latter issue by empirically examining whether providing excerpts from the dominant standard form homeowners insurance policy improves consumer understanding of coverage. Through a series of survey-based experiments, we compare consumers’ general beliefs about homeowners insurance with their beliefs when provided with key policy excerpts. Our main finding is that providing policy language only moderately improved consumer understanding in some scenarios, while affirmatively decreasing accuracy in others. Respondents often struggled with partial reading or misinterpretation of policy provisions, especially when broad coverage grants were later restricted by specific exclusions-a common structural feature of insurance policies. These findings carry significant legal and regulatory implications. Even if most consumers do not read standard form contracts, improving the readability and comprehensibility of standard form terms can limit firms’ discretion in disputes, enhance regulatory oversight of unfair provisions, and empower markets to penalize firms relying on excessively one-sided terms. This Article argues that addressing these challenges is essential to fostering fairer and more effective consumer protections.

Schwarcz, Daniel and Cude, Brenda J and Logue, Kyle D and Marquez Alcala, German, Read But Not Understood? An Empirical Analysis Of Consumer Comprehension In Homeowners Insurance (February 1, 2025), University of Michigan Law & Economics Research Paper No 24-043; Minnesota Legal Studies Research Paper No 25-13.