Courts may widen scope of reasonable expectations doctrine

Property and casualty insurers were warned to prepare for the possibility that Canadian courts may apply the doctrine of reasonable expectations in cases where the policy language is unambiguous.Michael Teitelbaum, a specialist in civil litigation at Hughes Amys LLP (a member firm of The ARC Group), delivered a speech to the Property and Casualty Underwriters’ Club during a luncheon in downtown Toronto. He explained that under the doctrine, where wording in a policy may be ambiguous, the courts would interpret the policy in the same way that a reasonable person who is not trained in the law would. Currently, the Canadian courts have only used this doctrine when policy wording was ambiguous, Teitelbaum said. But, he cautioned, “there are signs that they are willing to go to that next level.” The suggestion would be that the courts may be willing to use the doctrine even in cases where the insurers would not consider the policy wording to be ambiguous. Policyholders and insurers, particularly the insurers, “should be cognizant of what might be used to argue that coverage exists and should consider taking appropriate and prophylactic steps to ameliorate this possibility,” Teitelbaum warned. He proposed six suggestions for insurers to consider in the meantime: keep detailed notes and records of the dealings and negotiations prior to the issuance of the policy; consider the content, including the representations made, in the promotional or marketing literature on the policy jacket and company Web site; ensure that exclusionary language in policies and policy limitations and restrictions are brought to the insured’s attention and are prominently displayed and/or highlighted in the policy; include anti-concurrent language in the policies to ensure it is understood where coverage is not intended; ensure the intentions as to coverage in respect of anticipated claims are made clearly known by, for instance, giving examples of possible scenarios; and address anticipated concerns about the coverage that’s being provided either in the insurance applications or by means of other documents.