Professor Jeffrey Stempel is among the best legal writers of matters pertaining to insurance. When reading his work, I often think "why can’t I explain my thoughts so clearly and eloquently?" Maybe that is why he is the insurance law professor, and I am in the middle of legal muck and controversies.
While following up on Saturday’s Post, "Fireworks are Loved by Americans–and Insurance Companies Seeking Not to Pay Fourth of July Fires," where I quoted Barry Zalma at length for the proposition that insurance companies often advertise one product but sell another, I came across a related article on the LexisNexis Insurance Law Center written by Stempel. His article, March Madness Makes It "Official: State Farm Embraces the Reasonable Expectations Doctrine and Rejects Linguistic Literalism, is a must read for those trying to prove that even the industry leader recognizes what it advertises is not what it sells. This is the point I was trying to make in my post, "Is the State Farm Policy Really Worth Anything?"
I felt the following paragraphs best sum up Stempel’s points:
"…State Farm’s television advertising has moved from warm-and-fuzzy image polishing to consistently more concrete promises that the company will provide insurance that meets the policyholder’s reasonable expectations and will give the policyholder treatment that goes beyond mere fairness or accommodation. Although the company’s marketing mavens probably never set foot in court or attended law school, they have in effect embraced the reasonable expectations concept as well as the standard of good faith and fair dealing that requires an insurer to give equal or better consideration of the policyholder’s interests rather than favoring the insurer’s interests. The company has now made these commitments to the world at large. It logically should have a hard time should it make contrary arguments in court.
…the State Farm ads go beyond the company in that they lay down a gauntlet for the entire insurance industry, one that suggests that insurers should not say one thing to market their products and then say inconsistent things when trying to avoid providing coverage or paying a claim. At the very least, lawyers, judges, and juries should not let them get away with it. Beyond this, it seems that insurers themselves recognize that they are not selling mere words on parchment. They are selling risk management products designed to accomplish a particular purpose. In light of this reality, one might expect to see at least a little restraint among insurers in their attempts to take a hyper-literal approach to policy text (particularly exclusions that are supposed to be strictly construed against insurers) when it serves their purpose. For example, perhaps State Farm may not want to push the envelope so much in arguing that the anti-concurrent causation clause in its policies allows it to escape a considerable amount of responsibility for hurricane-related damage to policyholder property."
I hope the jurists and their clerks faced with deciding insurance coverage cases read Stempel’s article and contemplate how the insurance industry is using the "letter of the contract" to defeat the promise they sell.
Another great lesson from one of our country’s finest teachers of insurance law. I suggest every attorney have two books of Stempel’s in their library: Litigation Road: The Story of Campbell v. State Farm (West 2008), and Stempel on Insurance Contracts, Third Edition (Aspen Publishers).