How does estoppel work in relation to insurance claims?

Estoppel is a legal principle that plays a significant role in insurance claims by preventing a party from asserting something contrary to what is implied by a previous action or statement. In the context of insurance, estoppel arises when an insurer, through its conduct or representations, leads the policyholder to rely on certain expectations regarding their coverage or policy terms.

If the insurer acts in a way that contradicts the understanding that the insured developed from those actions—such as denying a claim after initially indicating that it would be covered—the principle of estoppel may prevent the insurer from denying the claim. This reliance must be reasonable, meaning that the insured behaved or acted in a particular way based on what they believed to be true due to the insurer's earlier conduct.

This concept essentially protects policyholders from unfair treatment that stemmed from reliance on the insurer's representations or promises. It enforces fair play and consistency in the dealings between the insurer and the insured, thereby ensuring that the insured can trust the information and behavior of the insurer when making decisions about their coverage and claims.