What is the principle of estoppel in insurance?

The principle of estoppel in insurance refers to a legal doctrine that prevents insurers from denying coverage based on their past actions or representations, especially if those actions have led the insured to reasonably rely on those representations. This principle is rooted in fairness and equity, ensuring that insurers cannot later contradict their previous conduct if it would harm the policyholder who relied on that conduct.

For instance, if an insurer has consistently provided coverage for certain types of claims without objection, they might be barred from denying coverage for similar claims in the future. The idea is to avoid unfair practices and to uphold the expectations that have been established through the insurer's behavior. By acknowledging this principle, policyholders gain a level of protection that assures them that insurers will not arbitrarily change their position after they have relied on the insurer's previous behaviors or statements.

Other options do not accurately represent the principle of estoppel. Increasing premiums for high-risk clients, calculating risks for underwriting, and enforcing strict policies without exceptions do not relate to the fundamental legal concept that estoppel embodies in the context of insurance coverage and the relationships between insurers and insured parties.