circumstances, Keeton argued, it is appropriate for courts to interpret or
“regulate” insurance contract language “as laymen would understand it and
not according to the interpretation of sophisticated underwriters.”57
Although considered revolutionary in some respects, the doctrine could
also be considered a fair adaptation of conventional rules of contract
interpretation to insurance disputes.58 As Professor Jerry notes, the
essence of a contract is a meeting of the minds, so that “the reasonable
expectations of the parties are fundamental to the formation of a contractual
obligation.”59 Where coverage disputes concerning standard form
language in consumer policies arise, it makes some sense to consider the
consumer’s reasonable expectations of coverage.
The reasonable expectations doctrine gained notice during the
1970s.60 It became generally accepted, if sparsely and inconsistently
applied in practice, in the 1980s.61 Since then, the doctrine has suffered
retrenchment, with some courts limiting its application to cases in which
policy language was ambiguous and other courts rejecting it entirely.62
Scholars and courts have subjected the doctrine to criticism,63
key examples of contracts of adhesion).
57. Keeton, Part One, supra note 44, at 967; accord Kessler, supra note 56, at 637 (“In
dealing with standardized contracts courts have to determine what the weaker contracting
party could legitimately expect by way of services according to the enterpriser’s ‘calling,’
and to what extent the stronger party disappointed reasonable expectations based on the
typical life situation.”). There exists understandable hesitation to apply the reasonable
expectations doctrine to policies that have been carefully negotiated by so-called
“sophisticated policyholders” who, unlike ordinary consumers, may have sufficient
knowledge or bargaining power to negotiate a carefully tailored policy rather than accept a
standard form policy. See Eagle Leasing Corp. v. Hartford Fire Ins. Co., 540 F.2d 1257,
1261 (5th Cir. 1976) (suggesting that the principle of construing ambiguous policy
provisions against the drafter might not apply where the policy was negotiated by a
“sophisticated” commercial company and the insurer who drafted the resulting policy). See
generally Jeffrey W. Stempel, Stempel on Insurance Contracts § 4.11 (2009) (describing the
sophisticated policyholder concept and its application ); Jeffrey W. Stempel, Reassessing the
“Sophisticated” Policyholder Defense in Insurance Coverage Litigation, 42 Drake L. Rev.
807 (1993) (noting that courts have begun to recognize that some parties are more
sophisticated than others).
58. See Jerry & Richmond, supra note 7, at 142–45; see also Roger C. Henderson, The
Formulation of the Doctrine of Reasonable Expectations and the Influence of Forces Outside
Insurance Law, 5 Conn. Ins. L.J. 69, 74 (1998) (noting that the doctrine was influenced by
the § 211 of the Restatement (Second) of Contracts, which addressed situations in which
standard form contract terms can be ignored).
59. Jerry, supra note 45, at 29.
60. See Abraham, Judge-Made Law, supra note 45, at 1153; see also Stempel, Unmet
Expectations, supra note 45, at 184; Jerry, supra note 45, at 22.
61. See Maniloff & Stempel, supra note 46 (forthcoming) (listing state by state rules).
62. Id. See generally Abraham, Distributing Risk, supra note 7 (explaining how public
policy relates to interpretation of insurance contracts).
63. See, e.g., Fischer, Reasonable Expectations, supra note 49, at 172 (arguing that the