Court Opinion

ID: 9553452
Source: CourtListenerOpinion
Date Created: 2023-08-07 19:29:56.488736+00
Date Added: 2024-06-11T15:31:07.857830
License: Public Domain

STEWART, Justice
(concurring in the result):
I concur in the conclusion that the household exclusion contained in plaintiff’s homeowner’s insurance policy is valid. However, I do not join the majority’s wholesale disavowal of the reasonable expectations doctrine. In my view, this Court should decide only whether the doctrine should be applied on the facts of this case. Anything beyond that is dicta and not binding in any *808other case.1
The facts of this case present nothing more than plaintiffs assertion that she had a subjective, uncommunicated, and otherwise unsupported expectation of coverage under the homeowner’s insurance policy. Whether the reasonable expectations doctrine should be applied in some future case on different facts cannot be legitimately determined in this case, and the majority’s attempt to foreclose reliance on that doctrine is simply inappropriate.
To reach the issue of the general validity of the reasonable expectations doctrine, the majority “assumes” that plaintiff “raised factual issues as to whether she in fact expected the household exclusion to be contained in the Prudential policy and whether that expectation was reasonable.” Plaintiff did raise an issue of fact as to her subjective expectation of coverage; however, she established no objective basis to show that her expectation was reasonable. Nevertheless, the majority “assumes” that it was reasonable.
Under the reasonable expectations doctrine, the reasonableness of plaintiff’s expectations must be established by objective criteria. See generally Restatement (Second) of Contracts § 211 (1979); Robert E. Keeton, Insurance Law Rights at Variance with Policy Provisions, 83 Harv. L.Rev. 961, 967 (1970). It is generally recognized that a mere subjective expectation of coverage is not enough because “most insureds develop a ‘reasonable expectation’ that every loss will be covered by their policy.” Darner Motor Sales, Inc. v. Universal Underwriters, 140 Ariz. 383, 682 P.2d 388, 395 (1984). The expectation must be established “by something more than the fervent hope usually engendered by loss.” Id. Yet, a fervent hope is all that there is in this case. Plaintiff essentially asks this Court to rewrite her policy to allow for increased coverage simply because she subjectively expected coverage.
I.
The purpose and nature of homeowner’s insurance, coupled with Mr. Allen’s deposition testimony regarding his intent and the circumstances surrounding the purchase of his homeowner’s policy, clearly show that plaintiff had no reasonable basis for her expectation of coverage. As a general rule, the purpose of homeowner’s insurance is to protect the owner from property loss due to a disaster, such as fire, and from liability if someone is injured on the premises. Homeowner’s insurance does not ordinarily provide bodily injury coverage for members of the insured’s household. That coverage is typically obtained under a medical and health insurance policy. The insurance company certainly considers the household exclusion when calculating its risk under a homeowner’s policy. The result is a relatively low premium when compared with premiums for higher risk coverage, such as medical and health insurance. If an insurer provided bodily injury coverage in a homeowner’s policy for those living on the insured premises, the likelihood of covered injuries would substantially increase and the insurer would assess a higher premium based on that increased risk. See, e.g., Farm Bureau Mut. Ins. Co. v. Sandbulte, 302 N.W.2d 104, 113 (Iowa 1981).
The specific facts of this case demonstrate that plaintiff's expectation lacked a reasonable basis. It is undisputed that *809Mrs. Allen never spoke with the Prudential agent. She left the purchase of the insurance entirely up to her husband. In his deposition, Mr. Allen testified regarding the type of coverage he sought in applying for homeowner’s insurance:
Well, I just wanted to make sure that my — that my home was covered, you know, and the standard policy with all of the fire and the theft and the — all those kinds of things that can happen to a house, and then I had — I had to ask them to make sure that I was covered for my tools and equipment and — because that’s how I was earning my income, and I wanted liability coverage so that I wouldn’t get sued and those kinds of things, you know, if we had an accident. And so, anyway, that was basically what we had discussed, and the amounts that — he had me kind of make a list for him of our household items so we would know how much money to cover for that.
Nothing in this statement even remotely suggests that the Allens sought to procure coverage for themselves and their children. Indeed, the statement indicates only that the Allens sought a typical homeowner’s policy which would provide coverage for property damage, theft, and liability in the event they were sued.
Plaintiff argues that the agent should have known of her expectation of coverage when Mr. Allen contacted him to increase liability coverage after the Allens purchased a trampoline. Plaintiff states that Mr. Allen told the agent “to make sure that anyone who got hurt on the trampoline would be covered” and that “he was really concerned about the trampoline and that he wanted to make sure he had full coverage under the policy to cover such an eventuality.” Even though Mr. Allen testified in deposition that it was his intention to get coverage for himself and his family in the event they were hurt on the trampoline, he also testified that he did not express that intent to the agent because he “just assumed that that was for anybody that got hurt on [his] property.” Mr. Allen points to no specific words or conduct on the part of himself or the agent that would lead to the inference that the agent knew or should have known of the Allens’ expectation. On the contrary, Mr. Allen’s deposition testimony regarding the events leading up to the changes in coverage clearly indicate that he was concerned with being sued by third parties, not with coverage for his family:
I was really concerned because we had heard horror stories of people getting sued because of their trampolines and so I called Russ and asked him if we could — if we could increase my coverage to make sure that if anyone got hurt on the trampoline, they would be covered, and he recommended that we — that we build a fence around the yard, which I did.... And we increased my insurance so that if anybody got hurt on my property, we were covered....
The agent’s recommendation to build the fence and the Allen’s compliance also indicate a concern only for liability for nonfam-ily members injured on the trampoline. In addition, the record indicates that plaintiff had health and medical insurance at the time of the accident and that she filed a claim against that insurance.
In short, plaintiff failed to raise a material issue of fact with respect to the reasonableness of her expectation of coverage that would establish a foundation for application of the reasonable expectations doctrine, however broadly that doctrine might be construed. Thus, in my view, the discussion in the majority and dissenting opinions regarding the general validity of the reasonable expectations doctrine is irrelevant.2
*810Addressing the Court’s dicta, I note that the majority does not define the doctrine.3 Although the majority recognizes that the doctrine has a number of different formulations, it describes the doctrine in only the most general terms, leaving the reader with the impression that the reasonable expectations doctrine would allow courts to engage in wholesale rewriting of insurance policies simply because an insured expected coverage. This, presumably, is the basis for the majority’s concern that the doctrine would unduly interfere with the parties’ freedom to contract. The majority’s position essentially states that the reasonable expectations doctrine is an aberration from traditional principles of contract law. It may be something of an extension, but it is not an aberration.
In reality, the reasonable expectations doctrine falls within long-accepted and well-settled principles of contract law, as evidenced by its adoption in Restatement (Second) of Contracts § 211 (1979).4 The Restatement’s formulation of the doctrine is simply a rule of construction that allows a fact finder to look at the totality of the circumstances in determining the intent of the parties, rather than being strictly confined to the four comers of a standardized agreement. See, e.g., Darner Motor Sales, Inc. v. Universal Underwriters Ins. Co., 140 Ariz. 383, 682 P.2d 388, 397 (1984). In other words, the doctrine modifies the par-ol evidence rule and allows parties to present proof that their true intent was not accurately reflected in the written contract. This is particularly necessary and appropriate in the case of standardized adhesion contracts. See Restatement (Second) of Contracts § 211, cmt. a.
The Restatement’s view of the reasonable expectations doctrine acknowledges the reality that in a standardized or form contract one necessarily relies on the party supplying the contract and that party’s good faith that the agreement will reflect the true intent of the transaction. When standardized preprinted forms contain terms not contemplated by the parties, those terms should not be given effect. As a rule of construction, the doctrine does not interfere with freedom of contract, but merely ensures that the parties’ intent be effectuated.5
*811Furthermore, the reasonable expectations doctrine may be essential to reaching a fair result in certain cases. It is not appropriate for this Court on this record to foreclose the application of some version of the doctrine in a later case on other facts. For example, in Tonkovic v. State Farm Mutual Automobile Insurance Co., 513 Pa. 445, 521 A.2d 920 (1987), the insured, in completing an application for disability insurance, specifically requested a classification that would provide coverage whether or not he was eligible for workers’ compensation benefits. The insurer, after receiving the insured’s premium, changed the insured’s classification to exclude coverage when workers’ compensation was available. Although the insured received a copy of the policy, he did not read it. After the insured was injured on the job, the insurer denied benefits because of the availability of workers’ compensation. The Pennsylvania Supreme Court held that the insured was entitled to coverage because
when the insurer elects to issue a policy differing- from what the insured requested and paid for, there is clearly a duty to advise the insured of the changes so made. The burden is not on the insured to read the policy to discover such changes, or not read it at his peril.
Tonkovic, 521 A.2d at 925. The court emphasized that the reasonable expectations of the insured were the focal point of the insurance transaction and that such expectations are “in large measure created by the insurance industry itself.” Id. at 926.
None of the existing equitable doctrines mentioned by the majority would be directly applicable in the Tonkovic case. Estop-pel is at best problematic because the agent did not induce reliance by his representations. Likewise, waiver, defined as the voluntary and intentional relinquishment of a known right, would not apply. Nor was the exclusion in Tonkovic unconscionable. A breach of an implied duty of good faith and fair dealing generally arises in other contexts; and primarily deals with the insurer’s refusal to settle a claim mandated by the policy. Finally, the exclusion in Tonkovic was unambiguous.
It is possible that we will one day have to decide a case such as Tonkovic that does not fit within traditional equitable doctrines. The availability of these doctrines is simply not a valid basis in my view for a wholesale rejection of the reasonable expectations doctrine.
II.
The majority argues in broad dicta that the adoption of the reasonable expectations doctrine as formulated in Wagner v. Farmer’s Insurance Exchange, 786 P.2d 763 (Utah Ct.App.1990), and thus the Restatement, would modify legislatively expressed public policy regarding regulation of the insurance industry. The majority also assumes that legislative and executive regulation of the insurance industry limits judicial authority to engage in the modification of principles common to insurance contracts. With both of these statements, I emphatically, but respectfully, disagree.
In support of its argument, the majority cites Utah Code Ann. § 31A-21-201(2)(a) (1991), which provides that the insurance commissioner may “disapprove” a form if it is inequitable, and concludes that “the validity of preprinted insurance contracts is premised on regulatory approval....” With deference, I submit that it is extremely farfetched for the majority to argue that pro forma administrative approval of thousands upon thousands of pages of forms somehow deprives the courts of the power to use the common law process of developing principles of fairness, justice, and equity.
The insurance commissioner neither writes nor, more importantly, approves the forms. The fact that the commissioner has the power to disapprove a form in certain circumstances does not indicate “regulatory approval” of forms not disapproved. The majority’s implication that the commissioner’s review will guarantee fairness in the terms of a contract is misguided and wrong. Furthermore, much injustice and unfairness in insurance transactions may occur, irrespective of the written language of the contracts.
*812Finally, I submit that the majority misinterprets our previous decisions. The majority specifically refers to three of our cases, stating, “Taken as a whole, these cases show our unwillingness to alter fundamentally the terms of insurance policies in the absence of legislative direction.” Our cases simply do not say that. In many situations, the real issue in insurance contracts is determining what the terms of the policy are. The majority assumes that the reasonable expectations doctrine would fundamentally alter the terms of insurance policies. As noted above, however, the Restatement version of the doctrine merely allows courts to determine contract terms more realistically than they could by relying only on a written document, whose drafters may have intentionally obscured the policy’s language in a thicket of verbiage and on whose meaning even appellate judges may disagree.
The cases cited do not support the majority's assertion that this Court is “uneasy with the notion of a reasonable expectations doctrine.” General Motors Acceptance Corp. v. Martinez, 668 P.2d 498 (Utah 1983), involved a provision in a credit life and disability insurance agreement excluding coverage. We invalidated the provision because the insured had never received a copy of the policy as was required by statute. The next case, Farmers Insurance Exchange v. Call, 712 P.2d 231 (Utah 1985), invalidated a household exclusion in an automobile liability insurance policy to the extent that it conflicted with the minimum coverage requirements of the Utah Automobile No-Fault Insurance Act. The insurer in Call, like the insurer in Martinez, failed to deliver written notice of the policy or exclusion to the insured. We stated, “Without disclosure, the household exclusion clause fails to ‘honor the reasonable expectations’ of the purchaser, rendering the exclusion clause invalid as to the entire policy limits.” Id. at 237. In the third case, State Farm Mutual Automobile Insurance Co. v. Mastbaum, 748 P.2d 1042 (Utah 1987), we held that a household exclusion in an automobile liability insurance agreement was valid to the extent coverage remained above the minimum required by statute. We expressly declined in that case to address the implications of the reasonable expectations doctrine because it was not adequately presented on appeal. Id. at 1044 (Zimmerman, J., concurring).
. Although the majority insists that we should always defer to legislative policy in construing insurance provisions, it never defines the legislative policy to which we should defer. The majority appears to be most concerned with freedom of contract. However, Utah Code Ann. § 31A-1-102 (1991) lists eleven other policies underlying the Insurance Code, including “to ensure that policyholders, claimants, and insurers are treated fairly and equitably.” § 31A-1-102(2).
For the foregoing reasons, I concur in the validity of the household exclusion in this case, but I reject the Court’s far-flung and ill-advised dicta regarding the reasonable expectations doctrine. The doctrine remains to be applied on a case-by-case basis.

. Justice Zimmerman’s ambiguous retrenchment in footnote 18 hardly settles the difficulties that arise from the broad scope of his opinion. It is, of course, fundamental that the applicability of legal rules should be applied on a case-by-case basis. Footnote 18, however, states that "the best source as to what this opinion stands for is the opinion itself." Whatever the majority opinion stands for, the scope of its holding and the scope of its dicta are decidedly not determined within its four corners. Indeed, Justice Zimmerman compounds the departure from legitimate judicial process by insisting that given available equitable remedies, there is no proven need to adopt the reasonable expectations doctrine in Utah at this time. As will be shown in the text, this case stands only for the proposition that on these facts — not what the majority incorrectly assumes to be the facts — no version of the reasonable expectations doctrine is applicable.

. Justice Zimmerman argues in footnote 7 that I do not take "the facts in a light most favorable to the nonmoving party, as we are bound to do [citations omitted]. Rather, Justice Stewart weighs the evidence and makes a finding of fact that Allen’s expectations could not be reasonable.” Justice Zimmerman is flatly incorrect. There is no fact asserted in this case, even taking those facts in the light most favorable to plaintiff, that supports an inference that her expectations were objectively reasonable, and Justice Zimmerman cites none. Thus, Justice Zimmerman erroneously proceeds on an inappropriate assumption in an effort to reject the reasonable expectations doctrine, without even attempting to define it. His failure to acknowl*810edge that both Section 211 of the Restatement and Professor Keeton, see my discussion infra, require more than a subjective expectation to establish the reasonable expectations doctrine explains why this simple case has evolved into an unnecessarily protracted one.

. The dissent argues policy considerations in support of the reasonable expectations doctrine. But it, like the majority, fails to define the doctrine.

. That section, which applies to standardized or form agreements, reads:
(1) Except as stated in Subsection (3), where a party to an agreement signs or otherwise manifests assent to a writing and has reason to believe that like writings are regularly used to embody terms of agreements of the same type, he adopts the writing as an integrated agreement with respect to the terms included in the writing.
(2) Such a writing is interpreted wherever reasonable as treating alike all those similarly situated, without regard to their knowledge or understanding of the standard terms of the writing.
(3) Where the other party has reason to believe that the party manifesting such assent would not do so if he knew that the writing contained a particular term, the term is not part of the agreement.
Comment (b) points out that parties regularly using standardized agreements ordinarily do not expect customers to "understand or even to read the standard terms.” Customers "trust to the good faith of the party using the form and to the tacit representation that like terms are being accepted regularly by others similarly situated.”

.In response to this opinion, Justice Zimmerman states that the Restatement version bears little resemblance to the “ill-defined and sweeping doctrine argued for by Allen.” This version, however, formed the basis of the Utah Court of Appeals’ opinion in Wagner v. Farmers Insurance Exchange, 786 P.2d 763 (Utah Ct.App. 1990). As noted by the majority, Allen argued that the trial court erred in not applying the variant of the reasonable expectations doctrine discussed in Wagner. Thus, the Restatement version was advanced by plaintiff.
Nevertheless, Justice Zimmerman’s assertion that this version is different from that argued by Allen and by Justice Durham only supports my contention that the majority goes too far in its general rejection of the doctrine. Given the many different versions, it is impossible, on these facts, to determine the appropriate application of the doctrine on other facts.