Although the dispute giving rise to this case arose over the application of crime insurance to a loss situation, we have placed our review in the "agents and brokers" category because of the pertinence of the court's conclusions to all forms of insurance and their significance for insurance agents and brokers as well as for insurance companies.

The owner of a major plastering company discovered that several employees at one of the firm's locations had formed a corporation of their own and funneled some of their employer's business to it. He sued the employees and their new company and, a year later, made claim under his employee dishonesty insurance.

The insurer denied coverage because of failure of the insured to comply with policy notice conditions and because "intellectual property" losses were not covered. (Covered Property was described in the policy as ". . . . money, securities and property other than money and securities . . . . ")

The insured sued the insurer to recover the losses under the policy, arguing that coverage existed either under the explicit policy terms or by virtue of his reasonable expectations that coverage was applicable. In the course of legal proceedings, the trial court, finding no Oklahoma precedent, certified questions of law to the Oklahoma Supreme Court under the Uniform Certification of Questions of Law Act, 20 O.S. 1991 par. 1601 et seq.

We focus upon the reasoning and conclusions of the high court, rather than the eventual resolution of the lawsuit brought by the insured against his insurer, for our better understanding of the principles involved and the effect on coverage determination.

The 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 for determining if an insured could reasonably expect coverage.

Research by the Oklahoma Supreme Court established that 32 of 36 states that considered the reasonable expectations doctrine adopted it. The insurer argued that " . . . . if the doctrine is to apply in Oklahoma, it should be limited to situations in which the policy contains an ambiguity or to contracts containing unexpected exclusions arising from technical or obscure language or which are hidden in policy provisions." The court agreed with such a limitation. It said, additionally, that care must be taken that insureds do not reasonably expect that justification can be found for coverage of any loss that occurs.

The high court found that Oklahoma case law tracked with the reasonable

expectations doctrine. It concluded that ". . . . under Oklahoma law, the reasonable expectations doctrine may be applied in the construction of insurance contracts and that the doctrine may apply to ambiguous contract language or to exclusions which are masked by technical or obscure language or which are hidden in a policy's provisions."

Oklahoma thus became the 33rd state to adopt the reasonable expectations doctrine.

Editor's Note: The widespread endorsement of the reasonable expectations doctrine underscores two steps by agents and brokers that will minimize problems associated with it. One is to urge insureds to read the important provisions of their policies, with special emphasis on exclusions. An informed insured is less likely to have unreasonable expectations. The other is to be thoroughly familiar with exclusions themselves, and to point out to the insured any that might be especially pertinent. If additional coverage is available for a significant exposure, it would warrant discussion.

(MAX TRUE PLASTERING COMPANY, Plaintiff v. UNITED STATES FIDELITY AND GUARANTY COMPANY, Defendant. Oklahoma Supreme Court. No. 85,860. February 27, 1996. CCH 1996 Fire and Casualty Cases, Paragraph 5621.)