Reasonable Expectations of Policyholder

A leading scholarly commentator on insurance law has explained the "reasonable expectations" principle as follows:

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. R. Keeton, "Insurance Law Rights at Variance with Policy Provisions," 83 Harv.L.Rev. 961, 967 (1970).

Georgia courts have followed this standard in construing insurance contracts to protect the reasonable expectations of the insured. See, e.g., Georgia Farm Bureau Mut. Ins. Co. v. Meyers, 249 Ga.App. 322, 548 S.E.2d 67 (2001); Ga. Farm Bureau &c. Ins. Co. v. Huncke, 240 Ga.App. 580-581, 524 S.E.2d 302 (1999); Anderson v. Southern Guaranty Ins. Co. &c., 235 Ga.App. 306, 309, 508 S.E.2d 726 (1998).

Ambiguity in an insurance contract is duplicity, indistinctiveness, uncertainty of meaning of expression, and words or phrases which cause uncertainty of meaning and may be fairly construed in more than one way. Allstate Ins. Co. v. Grayes, 216 Ga. App. 419, 422(3), 454 S.E.2d 616 (1995).

Where a term of a policy of insurance is susceptible to two or more constructions, even when such multiple constructions are all logical and reasonable, such term is ambiguous and will be strictly construed against the insurer as the drafter and in favor of the insured. O.C.G.A. § 13-2-2(5); Ga. Farm &c. Ins. Co. v. Huncke, supra at 580, 524 S.E.2d 302; Peachtree Cas. Ins. Co. v. Kim, 236 Ga.App. 689, 690, 512 S.E.2d 46 (1999); Cole v. Life Ins. Co. &c., 236 Ga.App. 229, 511 S.E.2d 596 (1999). Where the phrasing of the policy is so confusing that an average policyholder cannot make out the boundaries of coverage, the policy is genuinely ambiguous. Ga. Baptist Children's Homes &c. v. Essex Ins. Co., 207 Ga.App. 346, 347(1), 427 S.E.2d 798 (1993).

Exceptions and exclusions to coverage must be narrowly and strictly construed against the insurer and liberally construed in favor of the insured to afford coverage. Nationwide Mut. Fire Ins. Co. v. Erwin, 240 Ga.App. 816, 817, 525 S.E.2d 393 (1999). "[T]he absence of an express provision must be strictly construed against [the insurance company] and in accordance with the reasonable expectations of [the lay insured]." Jefferson-Pilot Life Ins. Co. v. Fraker, 234 Ga.App. 430, 507 S.E.2d 188 (1998); Duncan v. Integon General Ins. Corp., 267 Ga. 646, 482 S.E.2d 325 (1997).

One of the most eloquent court opinions on reasonable expectations of policyholders, Lehrhoff v. Aetna Cas. and Sur. Co., 638 A.2d 889 (N.J.Super.A.D.,1994). In discussing the reasonable expectations of an insured in an automobile policy, the court found a particular provision was:

So well-hidden that only a determined, persistent and experienced reader knowing precisely what information he is seeking would be able even to find the applicable sections of the policy. . . . [An] ... insurance policy is a bulky document, arcane and abstruse in the extreme to the uninitiated, unversed and, therefore, typical policyholder. . . . We deem it unlikely that . . . the average . . . policyholder would then undertake to attempt to analyze the entire policy in order to penetrate its layers of cross-referenced, qualified, and requalified meanings. Nor do we deem it likely that the average policyholder could successfully chart his own way through the shoals and reefs of exclusions, exceptions to exclusions, conditions and limitations, and all the rest of the qualifying fine print, whether or not in so-called plain language.

The court in Lehrhoff went on to discuss the reasonable expectations rule as having been "developed over the years to protect insureds from . . . the insurance industry's ‘unholy mantra’ of ‘we collect premiums; we do not pay claims.’" To that end,

[W]hen members of the public purchase policies of insurance they are entitled to the broad measure of protection necessary to fulfill their reasonable expectations. They should not be subjected to technical encumbrances or to hidden pitfalls and their policies should be construed liberally to the end that coverage is afforded "to the full extent that any fair interpretation will allow." [Citations omitted]. An important corollary of the reasonable-expectation doctrine, at least in respect of the consumer market, is that reasonable expectations will, in appropriate circumstances, prevail over policy language to the contrary. 638 A.2d 892-3

See also, Universal Underwriters Ins. Co., Recreational Products Ins. Div. v. New Jersey Mfrs. Ins. Co., 690 A.2d 1104, 1110-11 (N.J.Super.A.D. 1997), holding that, "it is the declaration page, the one page of the policy tailored to the particular insured and not merely boilerplate, which must be deemed to define coverage and the insured's expectation of coverage." While not a Georgia case, it is consistent with the reasonable expectation rule under existing Georgia law discussed above.