Crown Life Ins. Co. v. McBride
1987 Fla. LEXIS 2463, 12 Fla. L. Weekly 549, 517 So. 2d 660 (1987)
Rule of Law:
The doctrine of promissory estoppel may be utilized to create or extend insurance coverage where refusing to enforce a promise would virtually sanction fraud or result in other injustice, provided the promisee proves detrimental reliance by clear and convincing evidence.
Facts:
- In November 1977, McBride, father of Steven Patrick McBride, inquired of Crown Life Insurance Company whether group health insurance coverage through his new employment would cover Steven.
- Steven was 20 years old, suffering from a genetic premature aging disease, in a special high school class for slow learners, and financially dependent upon his father.
- During discussions with a Crown Life group service supervisor and an insurance broker, McBride was allegedly led to believe that Steven would be covered by the new policy.
- In reliance upon these representations, McBride allowed the conversion option on Steven's prior insurance coverage to lapse and purchased the group coverage with Crown Life Insurance Company.
- Steven incurred medical expenses while allegedly covered under the Crown Life policy.
- Crown Life denied Steven's claim for benefits, asserting that he was 23 years old when the medical expenses were incurred and had been disabled from the inception of McBride's group coverage.
Procedural Posture:
- Steven Patrick McBride brought suit against Crown Life Insurance Company in trial court for recovery of benefits under the written policy.
- Crown Life denied that Steven McBride was a dependent under the policy.
- The trial court allowed Steven McBride to amend his complaint to include claims for recovery based on equitable estoppel and oral contract.
- The trial court denied Crown Life's motion for a continuance for discovery regarding the new claims.
- At the close of evidence, the trial court directed a partial verdict, finding that Steven McBride was not entitled to recover under the written policy.
- The case proceeded to the jury on the theories of estoppel and oral contract, resulting in a jury verdict and final judgment in Steven McBride's favor.
- The District Court of Appeal (4th DCA) affirmed the trial court's judgment for Steven McBride.
- The 4th DCA certified a question of great public importance to the Supreme Court of Florida, the petitioner.
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Issue:
Does the theory of equitable estoppel, specifically promissory estoppel, permit an insured to create or extend insurance coverage where an insurer's representations induced detrimental reliance?
Opinions:
Majority - Shaw, J.
Yes, the theory of equitable estoppel, specifically promissory estoppel, may be utilized to prevent an insurance company from denying coverage, but only to a limited extent. The Court finds that promissory estoppel can create insurance coverage where refusing to enforce a promise would virtually sanction the perpetration of fraud or result in other injustice. This represents an exception to the general rule that equitable estoppel serves defensively to prevent forfeiture of existing coverage rather than affirmatively to create or extend coverage. The doctrine applies where a promisor reasonably should have expected that their affirmative representations would induce the promisee into substantial action or forbearance, and the promisee demonstrates that such reliance was to their detriment. Although this is a minority view, the Court sees no reason why this equitable doctrine should not apply to insurance contracts, citing numerous jurisdictions that have adopted this position. However, in this specific case, the respondent, Steven Patrick McBride, failed to meet his burden of proving detrimental reliance because he offered no sufficient evidence regarding the nature or extent of his prior coverage, nor did he prove that allowing it to lapse was to his detriment or would sanction fraud. Furthermore, the jury's finding of an oral contract was not supported by competent, substantial evidence, as the unproven detrimental reliance would have supplied the missing consideration for such a contract, and the trial court erred in denying Crown Life's motion for continuance regarding this late-asserted claim. Therefore, the decision of the district court is quashed and remanded for proceedings consistent with this opinion.
Concurring specially - Grimes, J.
Justice Grimes concurs specially, acknowledging the strong arguments on both sides regarding the application of promissory estoppel to create coverage. While it is unjust to deny recovery to an insured who detrimentally relied on an insurer's assurance, allowing such claims also creates the possibility of fraudulent claims. He suggests that requiring proof by 'clear and convincing evidence' for promissory estoppel is a sufficient justification to prevent fraud. He is confident that the adversary system of justice can develop the true facts and lead to a just result.
Concurring - Willis, Ben C., Associate Justice (Ret.)
Justice Willis concurs with the conclusions and dispositions set forth in Justice Shaw's opinion. He recognizes the potential dangers of relaxing the established rule from Six L's Packing Co. that estoppel does not apply to matters of coverage but is convinced of the soundness of applying promissory estoppel to insurance coverage cases. This doctrine applies when a promisor makes a promise that reasonably induces substantial detrimental action or forbearance by the promisee, and refusing to enforce it would sanction fraud or injustice. He emphasizes that the facts necessary for equitable estoppel must be shown with 'certainty' and 'clearly and satisfactorily proved,' which is a 'significantly higher degree of proof than by the greater weight of the evidence.' He stresses the trial court's burden to ensure competent, substantial evidence constituting clear and convincing proof before submitting the issue to a jury, to prevent intolerable confusion and spurious claims.
Concurring in part and dissenting in part - Ehrlich, J.
Justice Ehrlich concurs in the result of the Court's judgment (to quash the district court's decision) but dissents from the majority's conclusion that equitable estoppel may be utilized to create insurance coverage. He argues that this Court definitively answered that question in the negative in Six L's Packing Co., Inc. v. Florida Farm Bureau Mutual Insurance Co., which held that waiver and estoppel are 'not applicable to matters of coverage as distinguished from grounds for forfeiture.' He believes this established legal principle is still good law and that the majority's attempt to 'whittle away' at it through the doctrine of promissory estoppel is 'totally unconvincing'.
Analysis:
This case significantly altered Florida insurance law by establishing that promissory estoppel can be used to create or extend insurance coverage, departing from the prior general rule limiting estoppel to preventing forfeiture. While this ruling provides a potential avenue for insureds who rely on insurer representations, the accompanying requirement of 'clear and convincing evidence' for detrimental reliance sets a very high bar for claimants. This decision places a greater responsibility on insurance companies and their agents to be precise in their representations, as their promises can now create coverage not explicitly stated in the written policy, provided the strict evidentiary standards are met. Future cases will likely grapple with the specific application of the 'fraud or injustice' standard and the 'clear and convincing evidence' burden of proof in various factual scenarios.
