Arizona Policyholders’ Weapon: the Reasonable Expectations Doctrine
In Danner Motor Sales v. Universal Underwriters Insurance Company, the Arizona Supreme Court adopted the reasonable expectations doctrine as codified in the Restatement (Second) of Contracts §211. In doing so, Arizona joined a substantial number of states who recognized that special rules need to be applied to standardized contracts over which consumers have no control. In these types of contracts, a court should seek to interpret the contract in accordance with the “reasonable expectations of the average member of the public who accepts it.” In other words, the court will not allow insurers to use an unexpected loophole or technicality to deny coverage.
In adopting the reasonable expectations doctrine, the Arizona Supreme Court has observed that an insured has no choice as to the terms of the policy and has seldom seen the policy before the purchase. In addition, insurance policies can be difficult to understand, and the policy is usually read neither by the person who sells it or the person who buys it.
Arizona courts have held that the doctrine applies in the following situations:
- When the terms could not be understood by a reasonable consumer attempting to check on his or her rights
- Where the insured did not receive full and adequate notice, is unexpected, and eliminates expected coverage.
- Where the insurer’s actions have done something to generate a different expectation of coverage than is set out in the policy, for instance with a statement in a pamphlet or a commercial.
The reasonable expectations doctrine can be a valuable weapon for the policyholder in situations where the insurer denies a claim for an unexpected, unusual, or highly technical reason.