The question of the month deals with an issue that has been given much attention in legal circles when it comes to coverage disputes between insureds and insurers. The doctrine of reasonable expectations holds that the objectively reasonable expectations of applicants and intended beneficiaries regarding the terms of insurance contracts will be honored even though painstaking study of the policy provisions would have negated those expectations.

This doctrine raises many questions for insureds and insurers alike. Such as, does it mean the insured will automatically have every loss covered just because he expects it to be covered? And, are there any restrictions placed on the scope and extent of this doctrine? And, which jurisdictions have accepted this doctrine and which have declined to adopt it?

For the answers to these questions and a review of court rulings on the subject, link onto the designated article in the FC&S Bulletins.

The court cases in the Dec Page concern the following issues: the choice of law and UIM coverage; permissive drivers; and unknown drivers and UM coverage. The choice of law case is from Wisconsin and involves an auto accident that happened in Wisconsin and caused by a Minnesota driver. The question was whether Minnesota law or Wisconsin law would apply, with Wisconsin law favoring recovery by the claimant and Minnesota law not doing so. In the second case, the Kentucky Supreme Court dealt with a case concerning the standards for judging whether a driver is considered a permissive driver in the state. The court noted that there are three lines of thought on the subject, and ruled that the initial permission standard is the one that Kentucky now follows. The final case concerns a driver who was seriously injured after striking a large rock in the road, brought an action against an unknown driver and operator of a dump truck, and then asserted a claim against his own insurer for uninsured motorist benefits. An appeals court in Tennessee had to decide whether the insured fulfilled his requirements for proof of a covered loss under the unique circumstances of the accident.

The Dec Page also reports on recent laws and regulations enacted by several states that impact the insurance industry.

Questions and Answers

An insured rents a vehicle in his own name while on a business trip in England and then is involved in a loss in which he is liable, would there be PD coverage available under the BAP? See PD Coverage under BAP For Insured on Out of Country Business Trip?. An insured's employee has Hepatitis A and The County Health Board has ordered everyone (customers too) to be tested. Is there bodily injury and thus med pay coverage for the cost to test the customers? See Med Pay Coverage for Cost to Test Customers For Possible Exposure to Hepatitis A?. If an insured's employee steals a credit card belonging to a customer and then charges items on the credit card, from the standpoint of the named insured, is there an occurrence and is there property damage? See Occurrence or PD When Customer Credit Card is Stolen by Employee?. A windstorm topples a concrete light pole which, as it falls, uproots the underground pipes of a sprinkler pipes, damaging the sprinkler systems. Is the damage to the sprinkler system covered, as it is a permanently installed fixture, or not covered because it is specifically property not covered? See Outdoor Sprinkler System as Fixture or Property not Covered.

Who has an insurable interest in an engagement ring? See Engagement Ring Coverage Issue.

The Care, Custody or Control Exclusion

This article contains an updated summary of selected court cases that have considered applications of the care, custody, or control exclusion contained in general liability forms. See Care, Custody, or Control Exclusion.

Flood Coverage Endorsement

The Insurance Services Office has an endorsement, CP 10 65, that can be attached to a property coverage form to provide a certain amount of flood coverage for the insured. The article in the Specialty Lines Fla- pages presents a description of the coverage that CP 10 65 gives the insured. See Flood Coverage Endorsement.