Doctrine Deals With Possible Ambiguities
More recently, while courts recognize that all parties to a
contract benefit when there is a better understanding of how contracts will be
interpreted, the application of the reasonable expectations doctrine has
shifted...
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The shift in how reasonable expectations are applied by
various courts is illustrated by an Oklahoma
lawsuit. In one dispute, the Oklahoma Supreme Court handled a trial court’s
request for guidelines on questions of law that arose during a trial. The high
court observed that insurance policies are contracts of adhesion, defined as
contracts drawn completely by one of the parties. It said: "The doctrine
of reasonable expectations has evolved as an interpretive tool to aid courts in
discerning the intention of the parties bound by adhesion contracts." It
stated that an objective examination of policy language by courts was necessary
if an insured could reasonably expect coverage.
The court agreed with the limitation. It said, additionally,
that care must be taken that insureds do not expect to be able to justify
coverage for any loss that occurs. It said that, when the doctrine is applied,
it must be done objectively and even-handedly. Therefore, the high court
recognized the reasonable expectations of both the insured and the insurance
company in a particular circumstance.
Discussing Coverage
Agents and brokers can take several steps which will
minimize problems associated with the doctrine:
1. Urge insureds to read the
important provisions of their policies, with special emphasis on exclusions.
2. The insurance counselor must
become thoroughly familiar with policy exclusions, and to point out to the
insured any that might be especially pertinent
3. If other coverage options are available
for a significant exposure that is essentially excluded, they should be discussed.
An informed insured has clearer coverage expectations.
There should be no hesitation about calling attention to
exclusions. They are easily understood, in general, when read by the layperson.
The insurance industry has gone to great lengths to compose exclusions using simplified
language. They have been gathered together, to the extent possible, in one
prominent place.
Exclusions are reasonable, reflecting years of loss
experience by numerous insurers with the various forms of insurance and the
needs of insureds. The needs and concerns of insureds are further addressed by
input from consumer groups and their actual participation in discussions with
forms drafters when forms are reviewed and periodic changes are made in
coverage.
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Doctrine Is Adopted By Oklahoma
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