From the desk of Jeffrey D. Eberhard: : So I’ll give you the lawyerly answer – it depends. This recent, important case clarifies some older case law (which the court called “misguided”) about when an agent’s statements can bind the insurance company to provide coverage. Read on to find the circumstances under which an agent’s statements will bind the insurer.
Claims Pointer: The legal principle at issue here is called “estoppel.” Estoppel means the insured’s ability to prevent the insurer from denying coverage because of statements made by the agent, particularly when the insured took actions to its disadvantage in reliance on those statements. The Court of Appeals held that estoppel cannot be used to contradict an express exclusion in the policy. However, estoppel may apply if 1) the agent actually reads the policy, and 2) is providing its interpretation to the insured of an ambiguous policy provision.
Deardorff v. Farnsworth, 268 Or App 844 (February 4, 2015)
Deardorff asked his insurance agent, Farnsworth, to obtain insurance for his horse stable business. The agent submitted an application to Oregon Mutual Insurance Company which provided the agent with a quote. The quote did not initially include coverage for property in the care, custody or control (CCC) of Deardorff. Farnsworth communicated with Oregon Mutual about Deardorff’s desire for CCC coverage and ultimately Farnsworth told Deardorff that he had CCC coverage. It turned out that the Oregon Mutual policy excluded liability coverage for CCC. Liability coverage exists to defend (hire lawyers) and indemnify (pay damages on behalf of) the insured when the insured is sued by a third party for property damages. Specifically, the Oregon Mutual policy excluded liability coverage for “‘Property damage’ to * * * [p]ersonal property in the care, custody or control of the ‘insured.’” (Note, that while the Oregon Mutual policy did include CCC property insurance coverage, the...