The doctrine of reasonable expectations applicable to insurance policies recognizes that (a) the insured is entitled to all the coverage he may reasonably expect to be provided under the policy, and (b) only an unequivocally conspicuous, plain and clear manifestation of the insurance company's intent to excluded coverage will defeat that expectation. The Kentucky Supreme Court recently applied the reasonable expectations doctrine and held that a permissive used step-down provision in an auto policy was unenforceable. The Court's unanimous opinion in Bidwell v. Shelter Mutual Insurance Company, No 2010-SC-560 (June 21 2012) was written by Justice Will T. Scott.
Danielle Bidwell was injured while riding in a car driven by Joshua Tarlton that was owned and insured by Frank and Missy Gaines. The Gaines' car was insured by Shelter Mutual Insurance Company; Tarlton had no auto insurance coverage. Bidwell's injuries were severe and she made a claim for $250,000, which was the amount of coverage stated on the Declarations page of the vehicle's insurance policy. Shelter said its liability was limited only to $25,000 due to a permissive step-down provision in the policy.
The Kentucky Supreme Court applying the doctrine of reasonable expectations and applying its precedent in Simon v. Continental Ins. Co., 724 S.W.2d 210 (Ky. 1986) ruled that the permissive user step-down provision was unenforceable. First, the Court noted that "the Declarations page is silent with respect to any limitation included later in the policy, even though the step-down provision radically limits the amount of coverage that is listed on that page," and the "Declarations page indicates, in unqualified terms, that the limit of Shelter's liability for bodily injury is $250,000 per person, and $500,000 per accident." Second, the step-down provision was mentioned in limited and confusing terms, referring to a "financial responsibility law applicable to the accident" rather than stating clearly the coverage limit. Third, the policy did not include any clear references to where coverage limitations could be found, and Shelter informed the insured that they should check the Declarations page to make sure their coverages are correct.
Comments