Opinion ID: 2443136
Heading Depth: 1
Heading Rank: 3

Heading: waiver and estoppel in insurance law

Text: The Browns testified, and the jury believed, that the defendant's agent had promised full coverage of plaintiff's cargo. The Court of Appeals reversed the trial court's judgment, however, on the grounds that waiver and estoppel cannot be used to extend the coverage of an insurance policy. Two well-settled but irreconcilable doctrines have collided to create uncertainty in this area of the law. On one hand, it has frequently been held that: As in the case of agencies in general an insurance company is bound by all acts, contracts, or representations of its agent, whether general or special, which are within the scope of his real or apparent authority. [Consequently], it has been said that there is no rule of law more firmly established than the rule that an insurance company, by reason of its agent's conduct, may be estopped to deny a waiver of provisions inserted in the policy for the benefit of the company. Couch on Insurance 2d § 71.9, fn. 8 (citation omitted). The corresponding rule in Tennessee is supported by an agency statute, Tenn. Code Ann. § 56-6-147 (1989), which provides that: Every insurance agent or limited insurance representative who solicits or negotiates an application for insurance of any kind shall, in any controversy arising from the application for insurance or any policy issued in connection therewith between the insured ... and the insurer, be regarded as the agent of the insurer and not the insured or his beneficiary. The purpose of the Tennessee statute ... is to prevent the insurance company from denying responsibility for representations and actions from the agent from whom applications are voluntarily accepted and to protect an applicant who relies on such representations or actions. The statute ... is thus liberally construed in the insured's favor. 15 Tenn. Jurisprudence, Insurance, § 9 at 180-81 (1984); quoting Industrial Life & Health Insurance Co. v. Trinkle, 30 Tenn. App. 243, 204 S.W.2d 827 (1947). Therefore, [a]n agent acting within the scope of his apparent authority, though exceeding his authority, binds his principal. Industrial Life & Health Insurance Co. v. Trinkle, 185 Tenn. 434, 206 S.W.2d 414, 415 (1947). On the other hand, [i]t has been repeatedly held that the doctrines of waiver and estoppel cannot be used to extend the coverage of an insurance policy or create a primary liability, but may only affect rights reserved therein. 16B Appleman § 9090 at 579 (1981). This rule is derived from the equitable maxim that estoppel is available to protect a right, but never to create one, see Henry County v. Standard Oil Co., 167 Tenn. 485, 71 S.W.2d 683 (1934), and was invoked in Tennessee by the Court of Appeals in Hardison v. Continental Casualty Co., 410 S.W.2d 729 (Tenn. App. 1966), and again in African Trading International v. Fireman's Fund Insurance Co., 583 S.W.2d 607 (Tenn. App. 1979). Neither opinion discusses the common-law doctrine of agency, the Tennessee Agency Statute, or the numerous cases construing that statute in favor of insureds who have relied upon representations of insurance agents. In order to reconcile these conflicting principles, we have reviewed the history of waiver and estoppel in our Tennessee insurance cases, those from other jurisdictions, and the arguments for and against permitting waiver and estoppel to broaden the coverage of an insurance policy.