Main Content

Principles of Insurance Law and Regulation

Atwater Creamery Co. v. Western National Mutual Insurance Co.

1. This is the classic "strong form" reasonable expectations case in which the court disregards the actual words in the policy in order to effectuate not the intent of the parties, but rather the "reasonable expectations of the insured." You should be aware that this case, although heralded at the time, has not stood the test of time well.  Texas does NOT recognize strong form reasonable expectations. Even the Restatement of the Law of Liability Insurance rejects it.

2. One might blame Professor Robert Keeton for the doctrine. But really, Prof. Keeton was being descriptive, asserting that some cases that purported to be based on ambiguity could be better understood if the court was applying a reasonable expectations doctrine. Some courts, however, took Prof. Keeton to be making a normative claim: reasonable expectations doctrine was a good idea.

3. Do not confuse strong form reasonable expectations with weak form reasonable expectations. In the latter, the reasonable expectations of the insured can be used to interpret an ambiguous contract. Few states dispute that claim. But that is a far cry from saying the lanugage of the policy doesn't matter.

4. Is there any real difference between unconscionability and reasonable expectations? Would you say the insurance policy at issue in this case, with its requirement of visible marks, was "unconscionable."