Promissory Estoppel

The carrier must honor their promises if you relied on them

Promissory Estoppel is another concept that comes from contract law. Promissory Estoppel occurs when a promise is made (promise of coverage) and the insured relies on that promise to her detriment, but then the promise is broken (the carrier discovers that there was a mistake and there should be coverge). In this case, the carrier will be estopped or barred from denying coverage.

For example, you call the insurance carrier that you believe is responsible for the loss (the other party). You tell them that you need a rental car. They tell you that they believe their client is at fault so that you can go ahead, rent a vehicle, and then turn in the receipts for reimbursement.

You rent the vehicle and drive it for 3 days when they call you back and tell you that there is no coverage for the loss for non-payment of premium.

In this case, you relied to your detriment in the promise to pay for the rental car, but the promise stopped the forth day (they told you that there was a mistake). Therefore, the carrier will only be responsible to pay for four days of rental.

Most of the time the problem is to get carrier to tell you that they made a mistake or to recognize that they made the promise in the first place. To protect your interest you should always agreements and understandings with the in writing.

Remember that to apply this doctrine you must rely to your detriment on their state. You must do something to show that you relied on what they told you. If you do not show this, then this legal concept will not apply.

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