Pa. Superior Court Limits Use of Reasonable Expectations Doctrine in Commercial Insurance Dispute

The Pennsylvania Superior Court rejected the appellants’ assertion that the doctrine of reasonable expectations applied, finding that a commercial entity cannot prevail under this doctrine, nor can a non-commercial entity, where there is no indication of deception by an insurance agent. 

When a lawsuit arising from an auto accident was filed against the commercial insured, the commercial general liability carrier, Erie, denied coverage as the policy in place did not have auto coverage and—pre-accident—the insured rejected the insurance agent’s quote for commercial auto insurance with Erie based on price. 

This decision suggests that where, as here, the policy terms are “readily apparent,” the insured is a commercial entity and/or there is no evidence of deception—particularly where the insurance product sought was offered and rejected—the court will reject to apply the reasonable expectations doctrine. 

Nonetheless, insurance agents should remain cognizant of their insurance customer audience and provide clear communication and access to policy information in order to mitigate against potential claims of deception under the doctrine of reasonable expectations. 

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