Property and Casualty Insurance Practice Exam

What states that a policy should include coverages that an average person would reasonably expect it to include?

1. Doctrine of Explicit Coverage

2. Doctrine of Indemnity

3. Doctrine of Reasonable Expectations

4. Doctrine of Good Faith

The correct answer is: Doctrine of Reasonable Expectations

The correct answer is based on the Doctrine of Reasonable Expectations, which emphasizes that an insurance policy should encompass the coverages that a typical policyholder would likely anticipate based on the policy's representations. This doctrine protects the interests of the insured by ensuring that they receive the benefits they reasonably expect from their policy, acknowledging that insurance contracts can be complex and that consumers may not fully understand all the details. Under this doctrine, if a policyholder can demonstrate that they had a reasonable expectation regarding coverage, courts may rule in favor of the insured, even if the policy language does not explicitly support that coverage. This principle promotes fairness and transparency in insurance agreements, fostering trust between insurers and their clients. In contrast, the other options do not align as closely with this concept. The Doctrine of Explicit Coverage deals with clear terms outlined in a contract rather than average expectations. The Doctrine of Indemnity focuses on restoring the insured to their pre-loss position, ensuring no profit is made from a claim. The Doctrine of Good Faith refers to the obligation of both parties in an insurance contract to act honestly and not deceive one another. Each of these doctrines serves a different purpose within the broader context of insurance principles, but only the Doctrine of Reasonable Expectations directly addresses the expectation of