## Facts

- Max True Plastering Company purchased an employee-dishonesty fidelity bond issued by United States Fidelity and Guaranty Company (USF&G) through an insurance agent.
- In 1991, True discovered certain employees had formed a separate corporation and were diverting True’s business to it.
- True sued the employees and the new corporation, then later submitted a claim to the agent seeking coverage for losses allegedly caused by employee dishonesty.
- USF&G denied coverage, citing noncompliance with notice/proof-of-loss requirements and asserting the claimed losses were excluded or otherwise not covered.
- True sued USF&G in federal court, claiming coverage under the bond and under True’s reasonable expectations of coverage; USF&G brought a third-party claim against the agent.
- The federal court certified to the Oklahoma Supreme Court questions on whether Oklahoma recognizes the reasonable expectations doctrine and, if so, its scope.

## Issues

1. Whether Oklahoma recognizes the reasonable expectations doctrine in construing insurance contracts.
2. If recognized, whether and when the doctrine applies beyond ambiguities, including to exclusions presented in obscure, technical, or hidden form.

## Decision

- The Oklahoma Supreme Court answered that Oklahoma recognizes the reasonable expectations doctrine.
- The court held the doctrine may be applied when:
  - policy language is ambiguous; or
  - exclusions are masked by technical or obscure language or hidden within the policy.
- The court limited the doctrine to interpretation problems of this type and did not authorize disregarding clear, conspicuous policy terms.
- The certified answers were returned to the federal court for application to the parties’ dispute.

## Legal Principles

- Insurance contracts are commonly treated as adhesion contracts; interpretive rules therefore construe coverage provisions liberally in favor of the insured and exclusions strictly against the insurer.
- The reasonable expectations doctrine honors the objectively reasonable expectations of insureds regarding coverage when policy language is ambiguous.
- The doctrine may also apply to exclusions that are not fairly disclosed because they are buried in the policy or drafted in technical or obscure language that would likely prevent a reasonable insured from understanding their effect.
- Clear and conspicuous limitations and exclusions are generally enforced; the doctrine is not a general license to rewrite unambiguous policy terms.

## Conclusion

Oklahoma law permits courts to apply the reasonable expectations doctrine to ambiguous insurance provisions and to exclusions that are effectively concealed or unintelligible to a reasonable insured, while still enforcing clear and conspicuous coverage limitations.


Max True Plastering Co. v. U.S. Fid. & Guar. Co., 912 P.2d 861 (Okla. 1996)