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1958 Ins. L.J. 172 (1958)
Waiver and Estoppel in Insurance Policy Litigation

handle is hein.journals/inslj20 and id is 174 raw text is: Waiver and Estoppel in Insurance Policy The author is professor of (aw, Uni- versity of Pennsylvania. This article is reprinted from the University of Penn- sylvania Law Review for May, 1957. 66rHE TENDENCY on the part of the Tcourts to treat insurance contracts as standing in a class by themselves and to protect against forfeitures invoked in de- fense of honest claims has led to much subtlety. As Profesior Woodruff says ... 'What do they know of the law of the insur- ance contract who only the law of contract know?' ' Indexes to the great nineteenth century insurance texts do not list waiver and estoppel But times have changed. The 1951 third edition of Vance on Insurance enfolds an excellent and important 76-page Waiver & Estoppel chapter-about a fourteenth of the book's bulk. What has fostered this growth in the last hundred years? My thesis is that waiver and estoppel are two of several guises that cloak the courts' part in changing insurance from a service safely bought only by sophisticated businessmen to a commodity bought with confidence by untrained consumers. Judges, at the urging of policyholders' advocates, have used waiver and estoppel to convert insurance from a custom-made document designed in part by knowing buyers to a brand-name staple sold over the counter by mine-run salesmen to the trusting public. Seventeenth and eighteenth century marine insurance contracts were handwritten; hull and cargo owners and their brokers knew insurance as thoroughly as the underwriters. When a marine policy buyer entertained a proposal of a warranty, he bargained for important premium concessions and knew the courts would construe tile warranty strictly against him. American draftsmnen- lawyers, sometimes in the hire of fly-by- 'Satz v. Massachusetts Bonding d insurance Company, 243 N. Y. 385. 393. 153 N. E. 844. 848 (1928). 2See, for example. Angell. Fire and Life Insurance (1854): Annesley. Marine Insurance (1808); Arnould, Marine Insurance (1848). Sm, tor example, De Helhn v, Hartley, I T. R. 343, 99 Eg, Rep. 1130 (K, B, 1786). In night companies, proliferated fine print in the nineteenth century fire and lile insurance policies. Companies, spurred by competition, debased their product (as the Germans did their linen). Restrictions on coverage, not noticed or not understood by policyholders at the time of issue, became painfully clear after uncovered losses which policyholders would have paid to cover. The insurance market might have soured had not the law stepped in and afforded consumer protection greater than companies intended to sell. Of course this process of favoring con- sumers can be carried too far. Insurance companies need and are entitled to reason- able limits on their responsibilities; the public is prejudiced when company liabilities are by generous caprice stretched over risks that cannot be profitably underwritten at a just premium. By and large, however, the courts have not been overgenerous to the public. Judges have limited their use of the doctrines of waiver and estoppel because of their awareness of important underwriting realities. Underwriting cannot be discussed intelli- gently when cases involving unrelated prob- lems are lumped together because of abstract legal similarities. I shall avoid this difficulty by classifying cases according to kinds of insurance, rather than technical types oi legal problems. Fire Insurance Sole-ownersh;p clauses.-Before 1943 most fire insurance policies stipulated that unless the policy expressly provided otherwise, it was void if the policyholder owned less than an unniortgaged, undivided fee. Oi course much insured property is mortgaged. and often a co-owner insures only his in- terest in property. Ownership warranties became harnless by the terms of the policy which the court strained at a technicality to find breach of marine insurance warranty-a breach which could not possibly have increased the hazards of the insured voyage. 4 See Jherlng. Law as a Means to an End (Modern Legal Philosophy Series. Vol. 5, Hu- sick Translation, 1913), p. M54 I L J - March, 1958

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