Research On The Doctrine Of Reasonable Expectations In Insurance Law

Insurance law doctrine of reasonable expectations has been debating over for its effect undermining a principle of “the contract must be abided” since it emerged. Nevertheless, the doctrine of reasonable expectations has been developed rapidly in judicial practices in the United States, which has attract attention from other jurisdictions, having shown some impact on the theoretical researches and judicial precedents in connection with insurance laws therein since it helps to protect the interests of the insured in activities where insurance is involved. Recently, researches on the doctrine of reasonable expectations in insurance law have broken the ice. However, many of such researches were trapped in the way defining the doctrine as a rule applicable for insurance contract interpretation, which has confined the contribution of this doctrine to studies on insurance laws generally. Further, most of these researches were short in length with no intend to pursue the topic in an extensive way. The lack of theoretical researches has led to a chaotic situation in judicial practices owing to the absence of universal standards in terms of the application of this doctrine. On the other hand, even though the concept of this doctrine seems to have been accepted by the insurance regulatory authorities, it is not clear and concrete enough to be used as a protective mechanism so as to defend the legitimate interests of insurance consumers. This paper has taken the doctrine of reasonable expectations as the object of study and tried to dissect the logical relations bolstering the generation and development of this doctrine, figure out the genesis and background of its emergence, restore the jurisprudential basis of this doctrine of Reasonable Expectations that has been purported to be rebellious and redefine its role in connection with insurance law, and has reviewed the application of this doctrine in practical cases in China using historical analysis, empirical analysis, comparative analysis and such other research tools available in the sociology of law and the economics of law. All the above efforts have facilitated a rehearsal of the improvement of basic theories in relation to the insurance legislations in China, the exploration of the necessity and possibility of such doctrine in guiding judicial practices and boosting the development of insurance market, and the selection of approaches in terms of localized optimization.In addition to the introduction and conclusion sections, the paper is comprised of five chapters:Chapter One aimed to dissect the logical relations bolstering the generation and development of this doctrine. Looking into the genesis of this doctrine of Reasonable Expectations, it is possible to say Professor Keaton did not go one step further to give a comprehensive interpretation of the this “Doctrine of Reasonable Expectations” after he had developed the concept of it and held that this doctrine might be applied without complying to rights and obligations determined by the insurance contract. The doctrine of Reasonable Expectations was developed and improved by the U.S. courts. Arising out of the needs embodied in judicial practices, the doctrine of Reasonable Expectations recognized by the U.S. courts in their judicial activities appeared to be more mild and acceptable: the U.S. courts, in determining the reasonable expectations of the insured in insurance disputes, have repeatedly referred to the basic concepts such as rule of ambiguity, rule of unconscionable contractual and public regulatory terms and equitable remedies of waiver, estoppel, option and correction of contract which are conventional in contract area, as well as theories viewing the standard policies as contracts of adhesion and application of the rule of additional explanations, on the ground of such notion that “no unconscionable advantage shall be available to the insurer under an insurance contract”; moreover, the courts have acknowledged that in view of fairness and justice, the court shall be allowed to recognize and respect reasonable expectations of the insured in insurance disputes despite of unambiguous policy language. Apart from its wide spread in the United States on the strength of adaptability, it has also brought an effect on theoretical researches and judicial precedents in connection with insurance laws in other jurisdictions. Undoubtedly, the discovery of the doctrine of Reasonable Expectations is of great significance in the development of modern insurance laws.Chapter Two focused on value propositions and rationale of the doctrine of Reasonable Expectations in the philosophy of law, and the conventional insurance law theories upholding this doctrine so as to find a jurisprudential basis for it to establish a niche in the insurance law arena. The doctrine of Reasonable Expectations has a bearing on the interpretation of fairness, the pursuit of substantive justice, the consideration of public interests and the value of protecting for the weak. It has taken pragmatism, sociology of law, substantive justice and other contractual notions and has incorporated the core concept of the reasonable expectations adopted in the contract law. It gets along well with both schools of the interpretive theorists and is supported by the theory that liberty of contract and legal control work in a zero-sum way. It has successfully included equitable remedy principles as an important integral part and has in turn reaffirmed its roots in the traditional general theories of the contract law.Chapter Three analyzed features of the doctrine of Reasonable Expectations and redefined the role of this doctrine in the insurance law based on the concrete scenarios of its application. According to the experience of the application of this doctrine of Reasonable Expectations in judicial practices of insurance cases in the U.S., the approaches of application are obviously diversified: following the idea that no unconscionable advantage shall be available to the insurer under an insurance contract, the courts tended to offer to the insured coverage in consistence with their reasonable expectations, even which were excluded by the contractual language of the policy, provided however, such objectives should be first fulfilled by virtue of remedies available in conventional contractual and equitable theories and should be recognized and respected by the courts using judicial discretion in rare cases where fairness and justice are required. The doctrine of Reasonable Expectations has a function to adjust the conflicting interests of the parties to the standard insurance contracts and navigate the direction how such contracts should be construed. It is also able to control the provisions of insurance contracts and present a solution for the problem of contracting information. In defining its role in the insurance law, it is necessary to correct the perspective taking the doctrine of Reasonable Expectations simply as an explanatory rule but shall reaffirm its role as a fundamental principle of laws associated with the insurance contracts.Chapter Four investigated how the doctrine of Reasonable Expectations has been practiced in China and evaluated the current researches, judicial practices and perceptions of the industry thereof. This doctrine of Reasonable Expectations is yet to be incorporated inthe insurance legislations in China. Nevertheless, admittedly, such a unique and attractive doctrine has not only got noticed by the academic circle of insurance but also gained the popularity among the judges in their judicial activities solving insurance disputes and therefore become a tool useful in reasoning. Indeed, the insurance regulatory authorities have been aware of the significance to protect reasonable expectations of the insured in insurance transactions and have made a request for the mechanism to recognize reasonable expectations of the insured in the development of the insurance industry in China.Chapter Five stressed on the localized optimization of this doctrine of Reasonable Expectations. The system of basic doctrines constitutes an important integral part of the fundamental theoretical system of the insurance law, which shall embody the values thereof. However, due to the absence of the heart of such basic doctrines in China, the fundamental theoretical system of the insurance law is yet to be completed by new notions. This developing doctrine of Reasonable Expectations will help to cover the shortage and make up the deficiency in the law of insurance. Further, regulations of the judicial activism in trials of insurance disputes and requirements of boosting the development of the insurance market in China have laid grounds for the necessity of and the emergence of the occupational group of judges as well as the belief of substantive justice manifested in the traditional ethics in China have offered possibility of the localized optimization of this doctrine. The foundations are there for the localization of the doctrine of Reasonable Expectations. Given the practical conditions of legislations and judiciary, it would be rather preferable to choose theinterpretivism as an approach to introduce this doctrine of Reasonable Expectations and the legislative way would be the second best.