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 | jlierman@jshfirm.com