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12. Will the homeowner likely succeed in an action against the insurance company to recover for the loss?
An insurance company issued an insurance policy to a homeowner. The policy failed to contain certain coverage terms required by a state insurance statute. When the homeowner suffered a loss due to a theft that was within the policy's terms, the insurance company refused to pay, claiming that the policy was unenforceable because it violated the statute.
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A is incorrect. The statement accurately states that the insurance policy is not a divisible contract. The doctrine of divisibility allows a party to recover a portion of the contract price if the party has completed a portion of the work. However, in this case, the doctrine of divisibility is not relevant because the focus of this question is whether a contract that violated a statute is enforceable.
B is incorrect. Generally, a contract that violates a regulatory statute may be unenforceable if enforcing the contract is against public policy. However, the opposite applies here because declaring the contract unenforceable would be contrary to the public policy of protecting policy owner. Thus, because the homeowner is within the class of persons the policy is intended to protect, the court will not declare the contract unenforceable and the insurance company will be liable despite the policy failing to include certain coverage terms required by the statute.
D is incorrect. While this statement accurately states the law, strict construction against the drafter usually applies in disputes involving the interpretation of contract language. Here, the central issue is whether a contract that violated a statute is enforceable.