1.20 Estoppel

• Jurisdiction: Arizona

Historically, Arizona courts readily seize upon the opportunity to bring about a waiver/estoppel against insurance companies by placing a liberal construction on the insurance company's acts.^[261] This historical approach must be balanced against the more recent authorities, which find that the doctrine of estoppel will not normally supply coverage where none exists. For example, the court in Sellers v. Allstate Insurance Co.^[262] found that the doctrine of estoppel was not generally available to bring risks that were not covered by the terms of the policy within the coverage of the policy. The court further reasoned that even if the doctrine of estoppel were available to bring risks within the coverage of the policy, the insurer was not estopped from denying coverage absent reliance by the insured. A minimum reliance to the prejudice of the insured must be shown.^[263]

The elements of estoppel were set forth by the court in State Farm Mutual Automobile Insurance Co. v. Robison:^[264] ". . . conduct by which one induces another to believe and have confidence in certain material facts, which inducement results in acts in reliance thereon, justifiably taken, which causes injury to the person thus relying."

Conduct or communication by the insurance company is essential. For example, in Chapman v. Ranger Insurance Co.,^[265] the court found that an estoppel did not take place where the insurance company did not communicate directly with the insured that any policy defenses were waived or that liability under the policy was accepted.

Estoppel arises by operation of law, and rests upon the insurer's (or its duly authorized agent's) acts, statements, or conduct that leads or induces the insured, in justifiable reliance, to act or forbear to act to his prejudice.^[266] In contrast to waiver, the insured can establish its claim without showing that the insurer acted intentionally and voluntarily, with full knowledge of the facts.^[267]

Estoppel precludes the insurer from asserting its policy defenses where it would be inequitable to permit the defense.^[268] The insured asserting an estoppel claim has the burden of proof in establishing the elements of estoppel^[269] and demonstrating that the written policy varied materially from the oral representations made by the insurer or its agent.^[270]

Estoppel often arises where the insurer has failed to act upon an application duly made, and where the period of delay may be so unreasonable as to estop the insurer from denying liability.^[271] The insurer's retention of the policy's premium may be the most important factor giving rise to the estoppel claim. One commentator has observed:

A retention of the application...