Parol Evidence Rule

What Does Parol Evidence Rule Mean?

The parol evidence rule is a legal principle that excludes evidence contradicting the terms of a written contract. It prioritizes the contents of the contract itself, disregarding any external statements or agreements, even if they may be true.

Insuranceopedia Explains Parol Evidence Rule

When a contract is written, agreed upon by all parties, and signed, the court will deem any evidence that contradicts its terms inadmissible if the contract is disputed.

Since insurance policies are themselves written contracts, the rule applies just as squarely to them. When a coverage dispute ends up in court, the policy document decides the outcome rather than anything an agent said verbally before the sale, so it pays to learn the common business insurance terms in a policy before signing one.

For instance, if Ben and Frank enter into a contract where Ben agrees to sell an asset to Frank on a specific date and for a specific amount, and Ben fails to meet both conditions, he might claim to the court that he informed Frank of his change of mind and that Frank agreed to cancel the sale. However, the court will uphold the written contract and dismiss Ben’s account, as it contradicts the terms of the signed agreement.

The same point applies to anyone buying insurance. A verbal promise about coverage that doesn’t appear in the written policy is unlikely to hold up later, which is why reading through the basics of a homeowners insurance policy before purchase makes sense for buyers in that market.