Insurance policies are typically interpreted in favor of the insured because they are classified as what type of contract?

The correct response is based on the classification of insurance policies as contracts of adhesion. This type of contract is characterized by one party (the insurer) offering terms that the other party (the insured) must accept as is, without the ability to negotiate the terms. Because the insurer drafts the policy, any ambiguity or unclear terms within the contract are typically interpreted in favor of the insured. This principle serves to protect the insured, who may not have the same level of expertise or bargaining power as the insurer.

In contrast, contracts of indemnity focus on restoring the insured to their financial position prior to a loss, which does not inherently carry the same interpretative leniency as contracts of adhesion. Contracts of utmost good faith emphasize the need for both parties to act honestly and disclose all relevant information, but this concept does not directly address how ambiguities in the contract are resolved. Lastly, contracts of service pertain to agreements for services rendered rather than insurance policies, which primarily deal with risk coverage. Thus, the classification of insurance contracts as contracts of adhesion is key in understanding why they are interpreted in favor of the insured.