The JSH Reporter JSH Reporter - Fall 2017 | Page 34
REASONABLE EXPECTATIONS ARTICLE
034
applied to “boilerplate terms”); Averett v. Farmers Ins. Co. of
Arizona, 177 Ariz. 531, 532 (1994) (applying the doctrine to “non-
negotiated terms in a standardized agreement”).
These rulings harmonize with the original vision of the doctrine,
which was merely to protect what the Darner court called
the “dickered deal.” Darner, 140 Ariz. at 395. Of course, in the
insurance context fairly little actual dickering goes on. The
point appears to be that some portions of a policy are subject
to the insured’s control and others are not; some form part of
the negotiations and discussions between the insured and the
insurance agent or broker, others—generally the basic policy
boilerplate—do not.
So, properly applied, the doctrine of reasonable expectations
does not reward laziness on the part of the buyer of insurance. It
only penalizes a failure by a seller of insurance to deliver on what
was promised, and then only when the failure to deliver occurs
through boilerplate language that the insured could not have
changed even if he had known about it.
All of that suggests that if the doctrine of reasonable
expectations has any value, it would be to prevent an insurance
company from negotiating one deal in the endorsements, but
then knowingly delivering something different in the boilerplate.
The trouble is, we already have that pretty much covered. It
is well-settled that “an endorsement normally prevails over
inconsistent provisions of the policy.” Price v. Zim Israel
Navigation Co., 616 F.2d 422, 427 (9th Cir. 1980). “Provisions
in the body of the policy are . . . abrogated, waived, limited, or
modified by the provisions of an endorsement [if] the provisions
in the policy proper and the endorsement are conflicting.” Exch.
Ins. Co. v. Mar-Fran Enterprises, Inc., 169 Ariz. 187, 188 (App. 1991).
A conflict between the policy language and an endorsement
“must be resolved in favor of the endorsement, insofar as it
modifies, qualifies, or restricts the terms of the original policy.”
Mission Ins. Co. v. Nethers, 119 Ariz. 405, 408 (App. 1978)
(holding “an insurer has the right to limit coverage by use of
an endorsement, and when it has done so the plain language
of the limitation must be respected”). “[A]dditions to a policy
by a rider are usually for the purpose of modifying the general
terms of a policy, and, therefore, being specific, control the more
general terms of the policy.” N. River Ins. Co. v. Clark, 80 F.2d
202, 204 (9th Cir. 1935). Consequently, it is difficult to see why
it was helpful to introduce a new doctrine that—when handled
properly—serves only to repeat what courts have already said.
Nevertheless, because the doctrine of reasonable expectations
is a consumer-protection doctrine, it is probably not going to
disappear any time soon, even if its actual contribution to the
protection of consumers seems minimal. Hopefully, appellate
decisions will continue to limit its application to situations where
additional consumer protection is really needed. But absent a
Supreme Court ruling that overturns Darner, it remains the law
in Arizona that, under certain circumstances, a court can re-
write a completely unambiguous insurance contract in order
to grant coverage not provided in the policy, if that is what the
court judges the insured, or any reasonably intelligent consumer,
would have expected. So for now, at least, beware the insurance
consumer’s reasonable expectations.
ABOUT THE AUTHOR JOHN LIERMAN
John focuses his practice in the areas of premises liability, personal injury and general civil litigation. He
represents clients primarily in the retail and hospitality, insurance, and education industries. For several years
before pursuing a legal career, John taught undergraduate students at the University of Sioux Falls.
602.263.1750 | [email protected]