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Coverage and Exclusions 10/12/2009 12:08:41 AM EST Is the Reasonable Expectations Doctrine dead? Associate Dean for Academic Affairs, Professor of Law, University of Missouri, Kansas City If you run a search for “reasonable expectations” in an insurance database, it will return thousands of cases that use that phrase. But does the use of that phrase reflect a robust “reasonable expectations doctrine”? I think not. In the course of working on Chapter 5 of volume 1 of the New Appleman on Insurance Library Edition, I reviewed the literature and scores of cases, and while the language of “reasonable expectations” is being used, the doctrine, which was that such expectations should be honored in spite of policy language to the contrary, has virtually disappeared.
The birth of the doctrine
Nearly 40 years ago an article written by Professor Robert Keeton (who passed away just a couple of years ago) in the Harvard Law Review initiated the doctrine of reasonable expectations. He suggested that:
The objectively reasonable expectations of applicants and intended beneficiaries regarding the terms of insurance contracts will be honored even though painstaking study of the policy provisions would have negated those expectations. [1]
In almost text-book like fashion, this doctrine was picked up by “more than 100 cases decided by courts in nearly half the states” becoming what one professor declared to be the “single most prominent recent development in the common law of insurance. [2] Twenty years after its origination, another professor concluded that the reasonable expectations doctrine had matured into a body of law so that “any confusion over the nature of the doctrine itself will rapidly dissipate. [3]
Current state of the doctrine
Much of the confusion has indeed dissipated, but not because of maturation of the case law. Instead, the doctrine has morphed into a hollow version of the original that has collapsed into the doctrine of contra proferentem. Rather than following the “objectively reasonable expectations” of the insured when they are contrary to the language of the policy, courts use those “expectations” only when they conclude that the insurance policy is ambiguous. [4] This is virtually the same as contra proferetem, which requires that ambiguous provisions are to be construed in favor of the insured, [5] except that one can imagine where an ambiguous provision might actually be construed in favor of the insurer because such an interpretation is objectively more reasonable.
A recent review of the case law by Susan Randall at University of Alabama concluded that only two jurisdictions, Alaska and Hawaii follow the reasonable expectations doctrine as propounded by Professor Keeton. [6] Another two early adherents of the doctrine, Iowa and Arizona, also apply a version of the doctrine that is still fairly close to the original.[7] This is far from a universal rule or even a significant rule at the national level.
I intend to explore more of the details of the current state of the doctrine in future posts, but for now I want to ask readers:
Do you believe that the reasonable expectations doctrine is dead?
[1] Robert Keeton, Insurance Law Rights At Variance With Policy Provisions: Part One, 83 Harv. L. Rev. 961, 967 (1970).
[2] Mark C. Rahdert, Reasonable Expectations Reconsidered, 18 Conn. L. Rev. 323, 323-324 (1986).
[4] See, e.g., Safeway Ins. Co. of Ala., Inc.. v. Herrera, 912 So.2d 1140, 1145 (Ala. 2005); State v. Allstate Ins. Co., 201 P.3d 1147, 1154 (Cal. 2009); Am. Family Mut. Ins. Co. v Hadley, 648 N.W.2d 769, 779 (Neb. 2002); Hardy ex rel. Dowdell v. Abdul-Matin, 965 A.2d 1165, 1168-69 (N.J. 2009); State Farm Mut. Auto. Ins. Co. v. Glinbizzi, 780 N.Y.S.2d 434, 435 (N.Y. App. Div. 2004).
[5] See, e.g., Nationwide Mut. Ins. Co. v. CPB Int’l, Inc., 562 F.3d 591, 595 (3rd Cir. 2009); Auto Owners Ins. Co. v. Redland Ins. Co., 549 F.3d 1043 (6th Cir. 2008); E.M.M.I. v. Zurich American Ins., 84 P.3d 385, 389 (Cal. 2004); State Farm Fire & Cas. Co. v. CTC Dev. Corp., 720 So. 2d 1072, 1076 (Fla. 1986); Outboard Marine Corp v. Liberty Mut. Ins. Co., 607 N.E.2d 1204, 1212 (Ill. 1993); McGregor v. Allamerica Ins. Co., 868 N.E.2d 1225, 1227 (Mass 2007); In re Mostow v. State Farm Ins. Cos., 668 N.E.2d 392, 394 (N.Y. 1996).
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