Updated on October 4, 2023
Estoppel is a legal doctrine that prevents a person or entity from asserting a fact or claim that contradicts a previous position, statement, or representation that they have made to another party. In insurance, estoppel can have significant implications, especially when it comes to the rights and obligations of policyholders and insurance companies.
How does Estoppel work in Insurance?
Estoppel often occurs when a policyholder or insurer makes statements conflicting with the insurance contract’s terms or conditions. To invoke estoppel, it must be demonstrated that the other party reasonably depended on the initial statement or representation to their disadvantage, meaning that if one party’s promise or assurance influenced the actions or decisions of the other party, estoppel might be relevant.
Understanding Estoppel in detail
Estoppel is a legal defense used in insurance disputes to prevent one party from enforcing terms or making claims that are inconsistent with previous statements or actions. For instance, if an insurance company verbally assures coverage for a specific type of damage not mentioned in the policy, estoppel might be invoked to uphold that assurance. Conversely, if a policyholder provides false information on their application but the insurer initially accepts it, estoppel could be raised to prevent the insurer from voiding the policy later. Estoppel is recognized, and its application depends on case-specific circumstances. It serves as a protective measure for policyholders, promoting fairness and transparency in insurance transactions. Clear and accurate communication is essential to avoid estoppel-related issues.