Estoppel means preclusion. When is an insurance company estopped from enforcing its policy terms?
In every jurisdiction I’ve looked at, ambiguous policy terms are interpreted in favor of the policyholder. See Lesson 13; see also; Bianchi v Automobile Club of Michigan, 437 Mich 65, 70 (1991); Klapp v United Ins Group Agency, Inc., 468 Mich 459, 467 (2003) (if two provisions of the same contract irreconcilably conflict with each other, the language of the contract is ambiguous). In such a case, it won’t matter what the insurance company intended, or hoped, the term would mean, and the insurance company’s intent will not be enforced.
But what about when the policy terms are clear?
In Michigan estoppel can only override the policy terms in very limited circumstances. Lee v. Evergreen Regency Coop. & Mgmt. Sys., Inc., 151 Mich. App. 281, 286 (1986). “For example, in situations in which the insurance company has misrepresented the terms of the policy to the insured or defended the insured without reserving the right to deny coverage, courts have extended coverage beyond the terms of the policy when the inequity to the insurer as a result of the broadened coverage is outweighed by the inequity suffered by the insured.” Kirschner v. Process Design Assocs., 459 Mich. 587, 594-95, 592 N.W.2d 707, 710 (1999).
Other jurisdictions have far broader estoppel rules. To be continued…