Opinion ID: 1369036
Heading Depth: 4
Heading Rank: 2

Heading: Meaning of Darner

Text: Arizona recognizes that an adhesion contract is a different creature than the traditional bargained-for exchange of terms to which the courts apply the ordinary meeting-of-the-minds contract rules. Darner, supra ; Note, Insurance Law  Challenging Boilerplate Exclusions, 1984 ARIZ.ST. L.J. 751. To enable the courts to treat standardized adhesion contracts realistically while maintaining some consistency, Darner adopted the Restatement (Second) of Contracts test governing the enforceability of boilerplate terms in an adhesion contract. The rule adopted recognizes modern commercial practice by business entities which ... effect a large volume of transactions through use of standardized forms. Darner, 140 Ariz. at 393, 682 P.2d at 398. Darner allows businesses that use standardized forms to write their own terms for a transaction. Customers submit to these terms knowing that they are not and cannot be fully aware of them. Id. at 393-94, 682 P.2d at 398-99. However, [ Darner ] stops short of granting the drafter of the contract license to accomplish any result. It holds the drafter to good faith and terms which are conscionable; it requires drafting of provisions which can be understood if the customer does attempt to check on his rights; it does not give effect to boilerplate terms which are contrary to either the expressed agreement or the purpose of the transaction as known to the contracting parties. Id. at 394, 682 P.2d at 399. By adopting Restatement § 211 in Darner, we held that in proper circumstances an insured would be relieved from certain standardized clauses of agreements which had not been negotiated, providing they were clauses which, because of the nature of the enterprise, customers will not be expected to read and over which they have no real power of negotiation. Id. at 394, 682 P.2d at 399. The grounds for such relief  somewhat vaguely referred to as the reasonable expectations doctrine  include the factors described in Restatement § 211 and Darner. Accordingly, under Restatement § 211, courts will enforce a boilerplate term unless the drafter had reason to believe that the adhering party would not have assented to the particular term had he or she known of its presence. The drafter's reason to believe that the adhering party would not have assented to the term can be shown through prior negotiations or inferred from various facts. See Restatement § 211 comment f (cited extensively in Darner ). Thus, the court of appeals erred when it held that Darner was inapplicable simply because the terms in question, taken by themselves, were unambiguous. Our cases show that the Darner methodology was not intended to be limited to the precise facts presented in that case (a boilerplate term that undercut the dickered deal) or to ambiguous contracts only. In Zuckerman, 133 Ariz. at 139, 650 P.2d at 441, a precursor of Darner, we refused to enforce an unambiguous special statute of limitations in a fire loss policy because the term was oppressive when used as a method to avoid payment of just claims. See also State Farm Mutual Automobile Insurance Co. v. Bogart, 149 Ariz. 145, 717 P.2d 449 (1986) (other insurance clause unenforceable because it defeated the insured's reasonable expectations); Sparks v. Republic National Life Insurance Co., 132 Ariz. 529, 647 P.2d 1127 (as a matter of law, pamphlet given to insureds before they purchased insurance created expectations of coverage), cert. denied, 459 U.S. 1070, 103 S.Ct. 490, 74 L.Ed.2d 632 (1982). These cases demonstrate our reliance on the doctrine of reasonable expectations to refuse enforcement even to unambiguous boilerplate terms. As a synthesis of the cases and authorities demonstrates, Arizona courts will not enforce even unambiguous boilerplate terms in standardized insurance contracts in a limited variety of situations: 1. Where the contract terms, although not ambiguous to the court, cannot be understood by the reasonably intelligent consumer who might check on his or her rights, the court will interpret them in light of the objective, reasonable expectations of the average insured ( see Bogart, supra; Wainscott v. Ossenkop, 633 P.2d 237 (Alaska 1981) (application of resident of same household definition, while not technically ambiguous, defeats reasonable expectations of spouse)); 2. Where the insured did not receive full and adequate notice of the term in question, and the provision is either unusual or unexpected, or one that emasculates apparent coverage ( see Zuckerman, supra );