Waiver & Estoppel in Insurance

A Video Explaining the Doctrines of Waiver & Estoppel with Regard to Insurers

Although the concepts of “waiver” and “estoppel” are usually lumped together, they are totally different concepts that, when applied. They may result in similar conclusions by a trier of fact but they are different.

Waiver is a “voluntary relinquishment or abandonment—express or implied—of a legal right or advantage.”201 The person who is found to have waived a right must do it knowingly, with knowledge of the existing right and the intention of forgoing the right.

Estoppel, on the other hand, requires that a court create a bar that “prevents one from asserting a claim or right that contradicts what one has said or done before or what has been legally established as true.”

To establish estoppel, the insured or insurer must produce evidence that:

there must be a false representation;
it must be made with knowledge of the facts;
the other party must have been ignorant of the truth;
it must have been made with the intention that it should be acted upon by the other party; and
the other party must have been induced to act upon it.

Insurers often, by the wording of the policy, voluntarily waive a right usually available to insurers, the right to use the equitable right of subrogation where, after a loss is paid the insurer may step into the shoes of the insured and seek damages from the person responsible for the loss. The insurance contract will often allow the insured, before a loss, to waive the right of its insurer to subrogate against a certain class of person such as landlords, general contractors, property owners or lessee.

The insurer should give notice to the insured of its intent to declare the policy void, or forfeited, as a result of the insured’s misrepresentation, concealment, and/or fraud as soon as possible. The notice should be sufficiently clear to allow the insured to know clearly that no coverage exists and the reasons the insurer has taken the position that the contract is void.

Since this is a drastic remedy, it should not be undertaken without the advice of competent coverage counsel, even in jurisdictions that find a policy instantly void upon the fraud of the insured. The adjuster should also request that coverage counsel assist in drafting the letter to the insured providing notice of the decision of the insurer to void coverage. The cost to the insurer is well worth avoiding any claim of a waiver or estoppel defense.

© 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/  The last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud-letter-2/  podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4