Summary: Much attention has been given to the doctrine of reasonable expectations, a legal doctrine stating that “the objectively reasonable expectations of applicants and intended beneficiaries regarding the terms of insurance contracts will be honored even through painstaking study of the policy provisions would have negated those expectations,” (from Professor Robert Keeton's seminal 1970 Harvard Law Review article, “Insurance Law Rights at Variance with Policy Provisions,” Part One, 83 Harv. L. Rev. 961).

The doctrine, now more than twenty years old, has been considered in at least twenty-five jurisdictions and adopted in at least ten (Alabama, Alaska, Arizona, California, Iowa, Montana, Nebraska, Nevada, New Hampshire, and New Jersey). The development of the doctrine has followed other developments in the law of contracts, spurred by the consumer movement and the recognition of the difference between contracts negotiated face-to-face, and those produced solely by one party on a mass scale.

Two things are clear from the original outline of the doctrine: (1) the insured's expectations of coverage must be objectively reasonable, and (2) the insured may be able to recover under a policy containing language that unambiguously excludes coverage.

As the courts that have adopted it see it, development of the doctrine was necessary to protect individuals with little knowledge of insurance who buy standard, nonmanuscripted policies. For example, there has been some application of the doctrine to advertising brochures (as discussed later) where the brochures have seemed to indicate broad coverage that the policy exclusions substantially narrowed. Particularly with personal insurance coverages, certain courts have been sympathetic to insureds who have relied solely on brochures for an understanding of their coverage.

This is not to say that all courts have adopted the doctrine (nine jurisdictions have specifically declined to adopt it), or agree on the facts that must be shown for the doctrine to apply. There has also been an inaccurate use of what is now a term of art. Many courts that have used the term “reasonable expectations” in their decisions have gone no further than to determine that an ambiguity exists in the policy language so that the insured gets the benefit of the doubt. This mislabeling of the doctrine of contra proferentem (under which ambiguities are interpreted in the light most favorable to the insured) as the doctrine of reasonable expectations adds to the difficulty of establishing guidelines for use of the latter doctrine.