Also known as: reasonable expectations doctrine · reasonable expectations
Written by attorneys · grounded in primary & secondary sources — see below
3 senses
An interpretive rule that resolves an ambiguity in an insurance policy in favor of coverage that aligns with the insured's reasonable expectations. The rule applies when policy language is unclear and the insured would not have purchased the policy had the limiting term been disclosed.
A fiduciary duty requiring an agent who has accepted appointment under a power of attorney to act in accordance with the principal's reasonable expectations to the extent those expectations are actually known to the agent. When the expectations are not known, the agent must instead act in the principal's best interest.
A factor in regulatory takings analysis that examines whether a land-use regulation interferes with an owner's reasonable investment-backed expectations formed before the restriction.
Each sense below has its own examples, sources, and questions.
An interpretive rule that resolves an ambiguity in an insurance policy in favor of coverage that aligns with the insured's reasonable expectations. The rule applies when policy language is unclear and the insured would not have purchased the policy had the limiting term been disclosed.
Raven Logistics purchased a liability policy that contained conflicting clauses about coverage for leased equipment. When a loss occurred, the insurer denied the claim under the narrower reading. The court applied the reasonable expectation doctrine to interpret the ambiguity in favor of the coverage Raven Logistics reasonably anticipated when it bought the policy.
Most jurisdictions apply the doctrine only when the policy provision at issue is ambiguous. A minority of states permit courts to honor the insured's reasonable expectations even when the language is clear, provided the insurer had reason to know the term would be unacceptable.
A fiduciary duty requiring an agent who has accepted appointment under a power of attorney to act in accordance with the principal's reasonable expectations to the extent those expectations are actually known to the agent. When the expectations are not known, the agent must instead act in the principal's best interest.
Martin repeatedly told his advisor Lena that he wanted only conservative investments. After Martin signed a durable power of attorney naming Lena as agent, Lena shifted assets into higher-risk bonds to increase yield. Because Lena knew Martin's stated preference, her duty required her to follow that expectation rather than substitute her own judgment about returns.
The doctrine requires the agent to follow the principal's reasonable expectations when those expectations are actually known to the agent. Only when the expectations are unknown does the duty shift to acting in the principal's best interest. The distinction ensures the principal's expressed objectives control the agent's conduct.
The doctrine supplies the substantive content of the agent's duty while good faith supplies the required manner of performance. An agent must act honestly and loyally when carrying out known expectations or, if unknown, when pursuing the principal's best interest.
A factor in regulatory takings analysis that examines whether a land-use regulation interferes with an owner's reasonable investment-backed expectations formed before the restriction.
A city imposed a two-year moratorium on all development in a coastal zone while it revised its comprehensive plan. Owner Rhea Reynolds had already purchased materials and permits for a hotel project. A court evaluating whether the moratorium effected a taking must weigh the short duration, the city's planning purpose, and Reynolds's reasonable expectations formed before the restriction.
After purchasing beachfront lots for residential development, Roberto Reyes learned that new state regulations barred all construction. Because the rules left the parcels without any economically viable use, a court must consider whether Reyes's reasonable investment-backed expectations were defeated when deciding if compensation is required.
Penn Central Transportation Company acquired Grand Central Terminal expecting to build a large office tower above it. After the city designated the terminal a landmark and blocked the tower, the company claimed a taking. The analysis turned on whether the regulation interfered with distinct investment-backed expectations that were reasonable when the property was purchased.
Courts examine the owner's reasonable investment-backed expectations as one factor when deciding whether a temporary restriction or land-use regulation effects a taking. The duration of the restriction, the government's planning purpose, and the effect on value are weighed together with those expectations.
…challenged government action caused economic harm, it did not interfere with interests that were sufficiently bound up with the reasonable expectations of the claimant to constitute “property” for Fifth Amendment purposes. See, e. g. , United States v. Willow River Power Co. , 324 U. S. 499 (1945) (interest in high-water level of river…
…expectations. There is an inherent tendency towards circularity in this synthesis, of course; for if the owner's reasonable expectations
…a different court, of no greater stature, and located in Erie, Pennsylvania, rather than Palm Springs. I base my assessment of reasonable expectations