Regardless of what unfounded promises and misrepresentations are made by insurance companies and their agents about the scope or type of coverage purchased, an insured may well be able to use the principles of waiver or estoppel to hold an insurance company to its promises. This may be the case even if the loss in question is technically not covered by the insurance policy or even if it is expressly excluded.
In the watershed opinion of Bill Brown Construction v. Glen Falls Insurance Co., the Supreme Court of Tennessee held that an insured may use waiver or estoppel to void any provision in an insurance policy that would otherwise prevent the insured from being covered. In the Glen Falls case, the insured was a business (“Business”) which specialized in transporting cargos which were too big to be transported on conventional trailers. The Business requested a “full coverage policy” from the Insurance Company. In the process of obtaining the “full coverage policy” which it requested, the owner of the business showed pictures to the Insurance Company’s agent of the type of equipment which it hauled. The pictures showed equipment which substantially exceeded the height of the tractor-trailers on which it was located.
The owner of the Business testified that the Insurance Company’s agent told him that his company “had full coverage.” The Business was transporting an asphalt dryer on a tractor-trailer when the asphalt dryer hit an overpass near Nashville. The asphalt dryer was knocked off of the trailer and badly damaged. The tractor-trailer on which it was being hauled did not make contact with the overpass and was not damaged.
The insurance policy which the Business had purchased did not provide coverage unless the tractor-trailer, not just the cargo, collided with the overpass. The Insurance Company denied coverage for that reason. The Business filed a breach of contract lawsuit.
The trial court ruled that the policy itself did not provide coverage, but allowed the jury to determine whether or not the Insurance Company had waived its right to deny coverage or was estopped to deny coverage based on the representations made by the agent. The jury found for the Business on the grounds that the Insurance Company was estopped to deny coverage even though, under the plain language of the insurance policy, it was not liable for a loss unless the tractor-trailer, not just the asphalt dryer, collided with the overpass.
The Glen Falls case went to the Supreme Court of Tennessee and it affirmed that waiver and estoppel may be used to defeat or to void any clause in an insurance policy whether the clause is classified as an insuring, exclusionary or forfeiture clause. Moreover, it held that waiver and estoppel may be used even if they have the effect of broadening the coverage of the policy.
For lawyers who handle cases against insurance companies, the Glen Falls case can be a powerful tool. It can be used in cases involving all types of insurance policies including homeowner’s insurance policies, commercial general liability policies, life insurance policies, cargo policies, errors and omissions policies, etc. Keep in mind that, even though an insured may use waiver and estoppel, the insured bears the burden of proof to prove not only the misrepresentation, but also, that the insured reasonably relied on the misrepresentation.