The Definition of Estoppel in Insurance

By Corr S. Pondent
Young married couple meeting with an insurance agent

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The law of estoppel is sometimes used in matters relating to insurance. Estoppel is a legal concept that holds an entity to some standards of established behavior.

Definition

Estoppel prevents an insurance company from adopting a position that is not consistent with a position it took previously if it would result in injury to the insured. This gives policyholders some assurance that their interests will not be harmed when dealing with their insurer.

Example

If you send in a late payment for your insurance premium, the insurance company cannot cancel your insurance if it has established a pattern of accepting late payments from other insured persons. This is because you were under the impression that a late payment would not lead to a policy cancellation, based on the insurance company’s behavior of accepting late payments from others without consequence.

Waiver

When an insurance company chooses to accept an insured's late payment and continue her policy, it has "waived" its right to cancel her policy for nonpayment in this instance. Waivers are typically express (spoken or made in writing) or implied (by conduct). Essentially it means a person or business gave up a right it was entitled to. In the late payment example, the insurance company gave up its right to cancel the insured's policy for nonpayment the moment it accepted and cashed her late payment and continued her policy.

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