In many states, the insured has a general duty to read the insurance policy. See Practical Tools for Handling Insurance Cases, § 2:28, pp. 43, fn.1 (Thomson Reuters, 2012 Supplement) (citing cases).
Other courts have affirmatively rejected a duty to read. The two competing views has created a split of authority on whether the duty to read even exists. Practical Tools for Handling Insurance Cases, § 2:28, fn.3 (2012 Suppl.).
In West Virginia, a party to a contract has a duty to read the contract; Soliva v. Shand, Morahan & Co., Inc., 176 W.Va. 430, 345 S.E.2d 33 (1986). However, the West Virginia Supreme Court recently held that application of the reasonable expectation doctrine can create a question of fact as to whether the clear and plain language of the insurance policy can be overwritten because of the insured’s contrary reasonable expectations even though it was clearly established that the insured had received the insurance policy but failed to read it.
In New Hampshire Ins. Co. v. RRK, Inc., 230 W.Va. 52, 736 S.E.2d 52 (2012), the West Virginia Supreme Court found an issue of material fact existed, precluding summary judgment, as to whether the insured had an objectively reasonable expectation of coverage when the insured relied solely upon a 17-page fax that it received prior to purchasing the insurance policy.
The facts before the Court demonstrated that the insured, RRK, sought insurance coverage for a floating barge and two strings of docks situations on the banks of the Ohio River in Huntington, West Virginia.
RRK used a local insurance agent to procure the insurance. During the purchase negotiations, RRK requested that the agent provide it with a copy of the coverage forms for the proposed policy. In response, the agent sent via facsimile a 17-page document stating “per our phone conversation of this morning, attached you will find the coverage forms you requested.”
Based on the evidence, it was the understanding of RRK and the agent that any policy issued would cover the barge and its contents, as well as the two docks. Subsequent to receiving and reviewing the 17-page fax, RRK completed the application to purchase the policy and the policy was placed with New Hampshire Insurance Company. It was undisputed that RRK had received a copy of the insurance policy from the agent by mail. No one at RRK read the insurance policy.
The content of the mailed New Hampshire policy differed from the 17-page fax that had previously been received during the purchase negotiations. The actual policy that was issued conspicuously included in boldface and capital letters an exclusion for property damage caused by “wear, tear, and/or gradual deterioration.” The 17-page fax did not include that exclusion. The 17-page fax also did not list the property to be covered by the policy: the two docks, the barge, and its contents. The actual policy listed property coverage for the two docks but did not list the barge and its contents.
Several months later, the agent realized that New Hampshire had failed to list the barge as covered property under the policy. The agent informed New Hampshire of the omission and requested that the barge and its contents be added to the policy. Thereafter, the barge sank destroying the barge and its contents. When the claim was presented to New Hampshire, it was denied. New Hampshire denied coverage for the claim relying upon the wear-and-tear exclusion in the policy.
The issue before the Court was whether the wear-and-tear exclusion contained in the mailed copies of the policy, but which was not part of the 17-page fax, was valid. RRK asserted that it relied on the 17-page fax which did not contain the wear-and-tear exclusion and therefore the wear-and-tear exclusion in the policy that was issued was not a valid part of the insurance policy. New Hampshire Ins., 230 W.Va. at 57, 736 S.E.2d at 57.
During the proceedings, the parties agreed that the exclusion in the issued policy was conspicuous. Notwithstanding the conspicuousness of the exclusion, because the wear-and-tear exclusion was not placed in the 17-page fax it was, therefore, not placed in such a way as to bring the exclusion to RRK’s attention.
The fax, which omitted the exclusion, suggested the non-existence of any such exclusion in the policy when it would be issued. Because of this, RRK argued that it was reasonable for RRK to rely solely on the 17-page fax which was sent in response to the request for coverage forms and that to enforce the exclusion would be inequitable. The West Virginia Supreme Court reversed the Circuit Court’s Order which had found that the wear-and-tear exclusion was invalid and remanded the case for proceedings in terms of reasonable expectations.
Chief Justic Ketchum, joined by Justice McHugh, dissented. The focus of the dissent was that the record was uncontroverted that RRK did not read the insurance policy, relying instead on the representations in a faxed coverage form that pre-dated the issuance of the policy. The wear-and-tear exclusion was conspicuous, plain and unambiguous in the insurance policy. Because the insured received two policies containing the conspicuous, plain and unambiguous exclusion, the dissent felt that the majority opinion had stretched the law of reasonable expectations “into areas where it was not designed to go and undermines the long-established principle that “[a] party to a contract has a duty to read the instrument.”
It appears that the West Virginia Supreme Court has adopted the whole transaction version of the reasonable expectation doctrine. See Practical Tools for Handling Insurance Cases, § 1:17.C., p. 1:46.
Under the whole transaction version of the reasonable expectation doctrine, the expectations of the insured are created not only “by policy language and structure” but also by those expectations created by the insurer’s marketing patterns and general practices which take precedence over the policy’s unambiguous language. The whole transaction version of the reasonable expectation doctrine can operate to excuse the insured’s duty to read the policy when the insured relies upon some other insurer-based writing which leads the insured to have a specific and focused expectation of coverage notwithstanding what the issued policy actually states.
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