Estoppel, Waiver, and Promissory Estoppel in Insurance Claims

Insurance companies sometimes deny claims on grounds that, while technically valid under the policy language, contradict everything the insurer said and did during the claims process. An adjuster spends three months investigating a claim, requests documentation, hires experts, and never once mentions a coverage issue — then the carrier issues a denial based on a policy condition that existed from day one. An insurer learns that a policyholder made a misrepresentation on the application but continues accepting premiums for years — then tries to rescind the policy after a large claim is filed. A claims representative tells the policyholder that a particular type of damage is covered, the policyholder acts in reliance on that representation, and the carrier later reverses its position.

In each of these scenarios, the doctrines of estoppel and waiver may prevent the insurer from enforcing the denial. These are equitable doctrines rooted in a simple principle: an insurance company should not be permitted to benefit from its own inconsistent conduct at the expense of a policyholder who relied on that conduct in good faith.

Estoppel: When the Insurer’s Conduct Creates Coverage

Estoppel in the insurance context operates when an insurer’s representations or conduct lead the policyholder to reasonably believe that coverage exists or that a particular defense will not be raised, and the policyholder relies on that belief to their detriment. The effect of estoppel is to prevent the insurer from asserting a position that contradicts its prior conduct — even if that position would otherwise be valid under the policy.

The elements of estoppel in insurance disputes generally require:

• The insurer made a representation or engaged in conduct that communicated a particular position regarding coverage or a coverage defense.
• The policyholder was unaware of the true facts (or unaware that the insurer intended to take a different position).
• The policyholder reasonably relied on the insurer’s representation or conduct.
• The policyholder suffered detriment as a result of that reliance — meaning the policyholder changed their position in a way that would cause harm if the insurer were allowed to reverse course.

Estoppel Under California Law

California courts recognize equitable estoppel in insurance disputes, but the doctrine has important limitations. The central requirement is detrimental reliance: the policyholder must demonstrate that they changed their position based on the insurer’s representation and that they would be harmed if the insurer were permitted to take a contrary position. A policyholder who received an oral assurance of coverage and then incurred expenses in reliance on that assurance has a stronger estoppel argument than one who simply received a vague statement and took no action based on it.

California courts have also recognized that estoppel generally cannot be used to create coverage that does not exist under the policy. This is an important distinction. If the policy unambiguously excludes a particular type of loss, estoppel typically cannot override that exclusion to create coverage. However, if the insurer’s conduct led the policyholder to forego other options — such as purchasing additional coverage, pursuing alternative remedies, or taking steps to mitigate the loss within a time limit — estoppel may prevent the insurer from enforcing the exclusion because the policyholder was prejudiced by the insurer’s conduct.

Waiver: When the Insurer Voluntarily Gives Up a Right

Waiver is distinct from estoppel, though the two doctrines are frequently raised together. Waiver is the voluntary relinquishment of a known right. In the insurance context, waiver occurs when an insurer knows about a defense or coverage issue and, through its conduct, intentionally or impliedly gives up the right to assert it.

Unlike estoppel, waiver does not require detrimental reliance by the policyholder. The focus is on the insurer’s conduct, not the policyholder’s reliance. If the insurer knew about a basis for denial and chose not to assert it — or acted in a way inconsistent with asserting it — the insurer may be deemed to have waived that defense.

Common examples of waiver in insurance disputes include:

• Accepting premiums after learning of a misrepresentation: If an insurer discovers that the policyholder made a material misrepresentation on the application but continues to accept premium payments, the insurer may have waived its right to rescind the policy based on that misrepresentation.
• Investigating a claim without reserving rights: If an insurer conducts a full investigation of a claim without issuing a reservation of rights letter, and then denies the claim on a coverage ground it knew about from the beginning, the insurer may have waived that defense.
• Making partial payments: If an insurer makes partial payments on a claim without reserving rights to deny the remaining amount, the payments may constitute a waiver of coverage defenses that existed at the time the payments were made.
• Continuing coverage after a policy violation: If the insurer learns that the policyholder has violated a policy condition (such as a vacancy provision or a condition regarding use of the property) and continues the policy without objection, the insurer may have waived its right to deny coverage based on that violation.

How Estoppel and Waiver Differ

While estoppel and waiver often arise in the same factual scenarios, they are legally distinct:

• Focus:Estoppel focuses on the policyholder’s reliance. Waiver focuses on the insurer’s conduct.
• Reliance requirement:Estoppel requires the policyholder to have relied on the insurer’s conduct to their detriment. Waiver does not require reliance — only that the insurer voluntarily relinquished a known right.
• Knowledge:Both doctrines generally require that the insurer had knowledge of the relevant facts. An insurer cannot waive a right it did not know it had, and estoppel does not apply if the insurer’s conduct was based on ignorance of the true facts.
• Intent:Waiver requires some element of intent (or at least conduct so inconsistent with preserving the right that intent can be inferred). Estoppel is based on the effect of the insurer’s conduct on the policyholder, regardless of the insurer’s subjective intent.

Promissory Estoppel: When the Carrier’s Promise Creates an Obligation

Promissory estoppel is a distinct doctrine from equitable estoppel, and it operates differently in important ways. While equitable estoppel prevents a party from asserting a position that contradicts its prior conduct, promissory estoppel enforces a promise— even in the absence of a formal contract — when the promisor should have expected the promisee to rely on it, and the promisee did rely on it to their detriment.

Under California law, the elements of promissory estoppel are:

1. A clear and unambiguous promise by the insurer (or its agent).
2. The insurer should have reasonably expected the promise to induce action or forbearance by the policyholder.
3. The policyholder actually relied on the promise.
4. Injustice can only be avoided by enforcing the promise.

The critical difference: promissory estoppel can create an enforceable obligation where none previously existed. Unlike equitable estoppel — which most courts say cannot “create coverage” — promissory estoppel is rooted in the law of contracts (Restatement (Second) of Contracts § 90), and its remedy is enforcement of the promise itself or damages measured by the promisee’s reliance. This makes it a potentially more powerful tool for policyholders in situations where the carrier’s promise goes beyond what the policy provides.

How Carriers Create Promissory Estoppel Exposure

Insurance companies and their representatives make promises to policyholders constantly — during the application process, at the time of a claim, and throughout the claims handling process. When those promises are specific enough to be enforceable and the policyholder relies on them, the carrier may find itself bound to a commitment it never intended to make.

Common scenarios include:

• Promises of specific coverage during the sale:An agent tells the prospective policyholder, “Yes, your home business is covered under this homeowner’s policy,” when in fact the policy contains a business use exclusion. The policyholder relies on the promise and does not purchase a separate commercial policy. When a loss occurs and the carrier invokes the exclusion, the policyholder can argue that the carrier is bound by its agent’s promise under promissory estoppel.
• Promises regarding claim coverage:An adjuster or claims representative reviews the damage and tells the policyholder, “This looks like it’s covered — go ahead and start the remediation.” The policyholder hires contractors and incurs significant expense. When the carrier later denies the claim, the policyholder has a promissory estoppel argument based on the adjuster’s promise and the expenses incurred in reliance on it.
• Promises to extend deadlines:The carrier tells the policyholder not to worry about the proof of loss deadline or that the insurer will work with them on timing. The policyholder refrains from filing within the contractual deadline in reliance on the carrier’s assurance. The carrier then denies the claim for late submission.
• Promises regarding policy renewal: The carrier assures the policyholder that the policy will be renewed, and the policyholder refrains from shopping for alternative coverage. The carrier then non-renews the policy, leaving the policyholder without coverage during a critical period.
• Promises regarding claim processing: The carrier promises to process and resolve the claim within a certain timeframe, inducing the policyholder to forego filing a lawsuit. The limitations period expires while the policyholder waits for the promised resolution.

Promissory Estoppel vs. Equitable Estoppel

The distinction between these two doctrines is not merely academic — it determines what remedy the policyholder can obtain and whether the doctrine can effectively create coverage.

• Source: Equitable estoppel arises from conduct or representations. Promissory estoppel arises from a specific promise.
• Coverage creation: Equitable estoppel generally cannot create coverage where none exists in the policy. Promissory estoppel can potentially create an enforceable obligation equivalent to coverage, because the remedy is enforcement of the promise or reliance damages.
• Remedy:Equitable estoppel prevents the insurer from asserting a defense. Promissory estoppel can enforce the promise as if it were a contractual obligation, or alternatively limit recovery to the policyholder’s actual reliance damages (the out-of-pocket costs incurred based on the promise).
• Intent: Equitable estoppel does not require that the insurer intended the policyholder to rely on its conduct. Promissory estoppel requires that the promisor should have reasonably expected the promise to induce reliance.

Can These Doctrines Create Coverage?

This is one of the most frequently debated questions in insurance law, and the answer is more nuanced than most carriers would like policyholders to believe. The standard insurer refrain is that “estoppel cannot create coverage.” That statement is only partially true, and in some situations, it is misleading.

The Majority Rule: Equitable Estoppel Cannot Create Coverage

Most jurisdictions, including California, hold that equitable estoppel cannot be used to create coverage that does not exist under the policy terms. In Waller v. Truck Ins. Exchange(1995) 11 Cal.4th 1, the California Supreme Court stated that the doctrines of waiver and estoppel cannot “be used to create a coverage not provided for in the insurance policy.” This remains the general rule.

But that rule is far narrower than carriers present it. Here is what the rule actually means — and what it does not mean:

• What the rule means: If a policy unambiguously excludes a particular type of loss, and the policyholder was never told otherwise, equitable estoppel alone cannot override the exclusion to create coverage for that loss.
• What the rule does not mean: It does not mean that an insurer can make promises about coverage, induce reliance, and then hide behind the policy language with impunity. It does not mean that waiver and estoppel are powerless in coverage disputes. And it does not mean that the insurer can engage in months of claims handling without a reservation of rights and then claim it never agreed to provide coverage.

The Thin Line Between “Creating” and “Preserving” Coverage

In practice, the distinction between creating coverage and preventing forfeiture of coverage is far thinner than the legal maxim suggests. Consider: a policy covers fire damage but excludes losses in “vacant” buildings. The insurer knew the building was vacant when it issued the policy and collected premiums. A fire occurs. The insurer invokes the vacancy exclusion.

The policyholder is not asking the insurer to cover an uninsured peril. The peril (fire) is covered. The policyholder is asking the court to prevent the insurer from enforcing an exclusion it knowingly waived by issuing the policy and accepting premiums in the first place. The insurer will frame this as “creating coverage.” The policyholder should frame it as preventing forfeiture of existing coverage based on a condition the insurer itself chose to overlook.

Promissory Estoppel: The Exception That Can Create Coverage

Where equitable estoppel stops short, promissory estoppel can potentially go further. Because promissory estoppel enforces a promiseas a substitute for contractual consideration, it is not limited by the rule that estoppel cannot create coverage. If the carrier’s agent promised that a particular loss would be covered, and the policyholder relied on that promise to their detriment (by not purchasing other coverage, by proceeding with repairs, by foregoing other remedies), the court can enforce the promise regardless of what the policy says.

The remedy in promissory estoppel may be full enforcement of the promise (treating it as if the coverage existed) or may be limited to reliance damages (the actual losses the policyholder incurred because of the reliance). Courts have discretion to fashion the remedy that avoids injustice, which means the outcome is fact-specific. But the point is that promissory estoppel is not subject to the same categorical limitation that equitable estoppel faces.

Agent Authority and the Creation of Coverage

A related theory that frequently overlaps with promissory estoppel involves the authority of the insurance agent. Under California law, an insurer is bound by the acts of its agents within the scope of the agent’s actual or ostensibleauthority (Cal. Ins. Code § 1704). If an agent with binding authority represents that a policy provides certain coverage, and the insured relies on that representation, the insurer may be bound by the representation under agency principles — effectively creating the coverage the agent described, even if the written policy does not match.

Carriers routinely attempt to disclaim their agents’ representations by pointing to policy language stating that only written endorsements can modify coverage. But California courts have held that these “merger clauses” do not necessarily defeat an estoppel or agency argument, particularly when the insured had no reason to know that the agent’s representations were inconsistent with the policy. The policyholder is not a party to the agreement between the insurer and its agent regarding the agent’s authority — the policyholder reasonably relied on what the agent said, and the insurer placed the agent in a position to make those representations.

The FAIR Plan Exception: When the “Agent” Is Not the Carrier’s Agent

The agency theory described above has an important limitation that applies to the California FAIR Plan. Unlike traditional insurers, the FAIR Plan does not have agents. The FAIR Plan itself states that it “does not endorse or recommend any agents or brokers” and has no agents or brokers of its own. Instead, it accepts applications from licensed brokers who “represent applicants and insureds in obtaining insurance.”

This distinction is legally significant. Under California Insurance Code sections 31 and 33, an insurance agentacts “by and on behalf of” the insurer, while an insurance brokeracts “on behalf of another person” (the insured) but “not on behalf of” the insurer. Section 1623(c) creates a statutory presumption that a licensee is acting as a broker when licensed as a broker and transacting on behalf of the consumer. Section 1731 reinforces this: a licensee is deemed an agent only in transactions “placed with those insurers for whom a notice of appointment has been filed.” Because the FAIR Plan does not appoint agents, brokers who write FAIR Plan policies are brokers of the insured — not agents of the FAIR Plan.

The practical consequence is that a broker’s representations about FAIR Plan coverage generally cannot be imputed to the FAIR Plan under standard agency principles. In Thompson v. California Fair Plan Association(1990) 221 Cal.App.3d 760, the court recognized that the broker “acted as agent for” the insured when applying for FAIR Plan insurance — not as an agent of the FAIR Plan. And in Wexler v. California Fair Plan Association (2021), the court held that an insurer is “not vicariously liable for actions by an agent that are outside the scope of the agency relationship and were performed in the agent’s dual role as a broker.”

This means that if a broker tells a FAIR Plan applicant that the policy covers a particular type of loss, and the policy does not, the policyholder’s promissory estoppel or agency argument runs against the broker, not the FAIR Plan. The FAIR Plan will argue — with statutory support — that the broker was the policyholder’s own agent and that the FAIR Plan is not bound by what the broker said.

Adjuster Promises: Who Said It Matters

One of the most common scenarios in promissory estoppel and coverage disputes involves promises made by claims adjusters. An adjuster inspects the damage, reviews the policy, and tells the policyholder that the loss is covered. The policyholder relies on that statement and proceeds accordingly. When the carrier later denies the claim, the policyholder asks: is the carrier bound by what its adjuster said?

The answer depends on what kind of adjuster made the statement.

Staff Adjusters: Their Statements Bind the Carrier

Staff adjusters are employees of the insurance company. Their conduct is imputed to the insurer under respondeat superior — the legal principle that an employer is responsible for the acts of its employees performed within the scope of employment. When a staff adjuster tells a policyholder that a loss is covered, that statement carries the weight of the carrier itself.

In Egan v. Mutual of Omaha Insurance Co.(1979) 24 Cal.3d 809, the California Supreme Court held that when insurance company adjusters “dispose of insureds’ claims with little if any supervision,” they possess sufficient discretion for the law to treat their actions as the actions of the corporation itself. The court deemed the adjuster a “managerial employee” whose wrongful acts could be imputed to the carrier — including for purposes of punitive damages. This means that a staff adjuster who makes a coverage promise is not speaking only for themselves; they are speaking for the carrier, and the carrier bears the consequences of that promise.

Independent Adjusters: A Different Analysis

Independent adjusters are third-party contractors hired by the insurer to investigate and evaluate claims. Their role is generally advisory and investigative — they gather facts and make recommendations, but the insurer retains the ultimate authority to grant or deny coverage.

In Sanchez v. Lindsey Morden Claims Services, Inc.(1999) 72 Cal.App.4th 249, the court held that an independent adjuster owes no duty of care to the insured and cannot be held liable in tort for negligent claims handling that causes only economic loss. The rationale was that independent adjusters have no contract with the insured and no ability to define the insured’s risks.

This means that an independent adjuster’s statements about coverage are generally not imputed to the insurer in the same way a staff adjuster’s statements are. The independent adjuster does not have inherent authority to bind the carrier on coverage questions. A policyholder relying on an independent adjuster’s coverage representation has a weaker estoppel argument against the carrier than one relying on a staff adjuster’s representation.

Bock v. Hansen: Adjusters Can Be Personally Liable for Misrepresentation

Regardless of whether an adjuster’s statements bind the carrier for estoppel purposes, there is another avenue available to policyholders. In Bock v. Hansen(2014) 225 Cal.App.4th 215, the California Court of Appeal held for the first time that an insurance adjuster — including a staff adjuster — can be sued personally for negligent misrepresentation for falsely characterizing the scope of coverage during the adjustment of a loss.

In Bock, a tree fell on the insureds’ home. The adjuster removed debris before photographing the damage and told the insureds their policy did not cover cleanup costs. That was false — the policy provided additional debris removal coverage. The court held that the adjuster could be personally liable for negligent misrepresentation, which requires: (1) a misrepresentation of a past or existing material fact; (2) made without reasonable grounds for believing it true; (3) made with intent to induce reliance; (4) justifiable reliance by the insured; and (5) resulting damage.

The Bockdecision is significant because it gives policyholders a cause of action that operates independently of whether estoppel can “create” coverage. Even if a court determines that the adjuster’s promise cannot override the policy language through estoppel, the policyholder may still recover damages from the adjuster (and by extension, from the carrier through respondeat superior if the adjuster is a staff employee) for the misrepresentation itself. Subsequent cases have reinforced this principle, applying Bock to statements about actual cash value, appraisal rights, and other coverage determinations.

The Reservation of Rights Letter: The Insurer’s Shield

The reservation of rights letter exists precisely because of the doctrines of estoppel and waiver. When an insurer investigates a claim and wants to preserve the right to later deny coverage, it sends a reservation of rights letter identifying the specific coverage issues it is reserving. This letter is designed to prevent the insurer’s investigation from being construed as an acceptance of coverage or a waiver of defenses.

A properly issued reservation of rights letter can significantly weaken a policyholder’s estoppel or waiver argument. If the insurer clearly communicated that it was investigating the claim while reserving the right to deny on specific grounds, the policyholder has a much harder time arguing that the insurer’s investigation led them to believe coverage would be provided.

However, the reservation of rights letter is not a universal shield. If the letter is vague, untimely, or does not identify the specific defense the insurer later relies upon, it may not protect the insurer. A reservation of rights letter issued months into an investigation, after the insurer has already requested documentation and engaged experts without any mention of a coverage issue, may be insufficient to overcome an estoppel or waiver argument. The timing and specificity of the letter matter enormously.

Practical Examples

The Extended Investigation Followed by a Technicality Denial

A homeowner files a claim for fire damage. The insurer assigns an adjuster who inspects the property, requests documentation, hires a cause-and-origin expert, and obtains repair estimates. The investigation takes four months. Throughout this period, the adjuster communicates regularly with the policyholder, requests receipts for damaged personal property, and discusses the scope of repairs — all without any mention of a coverage issue. At the end of four months, the insurer denies the claim based on a policy condition that the policyholder failed to maintain a monitored alarm system, a condition that was apparent from the beginning of the investigation.

In this scenario, the policyholder has a strong argument that the insurer waived the alarm-condition defense by conducting a full investigation without reserving rights on that issue. The policyholder may also argue estoppel: the insurer’s conduct led the policyholder to believe the claim would be paid, and the policyholder relied on that belief (for example, by entering into repair contracts or declining to pursue other remedies within the time available).

The Oral Coverage Representation

A policyholder calls the insurer after a loss to ask whether the damage is covered. The claims representative reviews the policy and tells the policyholder that the damage appears to be covered and to proceed with emergency repairs. The policyholder hires a contractor and incurs $15,000 in emergency mitigation costs. Two weeks later, the insurer sends a denial letter stating that the loss is excluded under the policy. The policyholder has now incurred $15,000 in expenses that they would not have incurred — or would have handled differently — absent the insurer’s representation.

This is a classic estoppel scenario. The insurer made a representation (coverage applies), the policyholder relied on it (proceeded with repairs), and the policyholder was harmed by the reliance (incurred expenses). Whether the estoppel argument succeeds will depend on the specific facts — including whether the representation was specific enough, whether the policyholder’s reliance was reasonable, and whether the policyholder can prove the representation was made (which underscores the importance of documenting all communications with the insurer in writing).

Continued Premium Acceptance After Knowledge of Misrepresentation

During an investigation, an insurer discovers that the policyholder failed to disclose a prior claim on the insurance application. The insurer could rescind the policy based on this misrepresentation, but instead it continues the policy, accepts the next premium payment, and says nothing. When a subsequent loss occurs, the insurer attempts to rescind the policy based on the original misrepresentation. The continued acceptance of premiums after learning of the misrepresentation is strong evidence of waiver — the insurer knew about the defense and chose not to act on it.

The Agent Who Promised Flood Coverage

A homeowner purchasing a property near a waterway asks the insurance agent whether the policy covers flood damage. The agent reviews the property and tells the homeowner, “Yes, you’re covered for flooding — this policy has you fully protected.” In reliance on this promise, the homeowner does not purchase a separate National Flood Insurance Program (NFIP) policy. Three years later, a flood damages the home. The insurer denies the claim because the homeowner’s policy contains a standard flood exclusion.

The policyholder has a strong promissory estoppel claim. The agent made a clear and specific promise (“you’re covered for flooding”), the carrier should have expected the homeowner to rely on it (the homeowner asked the question specifically to determine whether to purchase separate coverage), the homeowner did rely on it (did not purchase NFIP coverage), and injustice would result if the promise is not enforced (the homeowner has an uninsured flood loss that would have been covered had the agent’s promise not induced reliance). The homeowner may also assert an agency theory: the agent had ostensible authority to describe the policy’s coverage, and the carrier is bound by what its agent represented.

The Carrier That Promised to Extend the Filing Deadline

A policyholder suffers a loss and contacts the carrier. The adjuster tells the policyholder that the proof of loss can be submitted “whenever you have everything together — there’s no rush.” The policyholder, who is dealing with displacement and family disruption, takes the adjuster at their word and submits the proof of loss three months after the contractual deadline. The carrier denies the claim for untimely submission.

This involves both promissory estoppel and equitable estoppel. The adjuster’s statement was a promise that the deadline would not be enforced, and the policyholder relied on it by not submitting within the contractual period. Under equitable estoppel, the carrier is estopped from raising the late-filing defense because its own conduct induced the delay. Under promissory estoppel, the carrier’s promise to accept a late filing is enforceable because the policyholder relied on it to their detriment.

Using Estoppel Affirmatively as a Policyholder

Policyholders can strengthen potential estoppel and waiver arguments through proactive documentation:

• Confirm oral representations in writing:If an adjuster or claims representative makes a statement about coverage, follow up with an email or letter confirming the conversation. “This confirms our conversation of [date] in which you stated that the damage to the roof appears to be covered under my policy and that I should proceed with emergency repairs.”
• Document the timeline: Keep a detailed record of every communication with the insurer, including dates, names of representatives, and the substance of each conversation. The longer the insurer investigates without raising a coverage issue, the stronger the waiver argument.
• Track actions taken in reliance:If the policyholder incurs expenses, enters into contracts, or takes other actions based on the insurer’s representations, those actions should be documented. Receipts, contracts, and correspondence showing that the policyholder acted in reliance on the insurer’s position are essential evidence for estoppel.
• Challenge late reservations of rights:If the insurer sends a reservation of rights letter months into the investigation, the policyholder should respond noting the delay and the actions already taken in reliance on the insurer’s prior conduct. This preserves the argument that the reservation came too late to be effective.

Statute of Limitations Implications

Estoppel can also affect the statute of limitations in insurance disputes. If an insurer’s conduct leads the policyholder to believe that the claim is being actively processed and will be resolved, and the policyholder refrains from filing a lawsuit in reliance on that belief, the insurer may be estopped from asserting a statute of limitations defense. This scenario arises when insurers engage in delay tactics — stringing the claim along with requests for additional documentation, promises to review, and assurances that a decision is forthcoming — until the limitations period has run.

Courts have recognized that it is fundamentally unfair for an insurer to lull a policyholder into inaction through its conduct and then claim that the policyholder waited too long to file suit. When the insurer’s own delays caused the policyholder to miss the deadline, estoppel may toll (pause) the limitations period.

The Relationship to Bad Faith

Estoppel and waiver are closely related to bad faith but serve different functions. Estoppel and waiver address whether the insurer can raise a particular defense. Bad faith addresses whether the insurer’s overall conduct was unreasonable. The same facts that support an estoppel or waiver argument — such as an insurer investigating for months without reserving rights and then denying on a known coverage issue — may also support a bad faith claim. The insurer’s inconsistent conduct may be evidence of unreasonable claims handling, which is the foundation of bad faith liability.

In practice, estoppel and waiver arguments are often raised alongside bad faith claims. The estoppel or waiver argument addresses the threshold coverage question (the insurer cannot deny coverage because it waived or is estopped from raising the defense), and the bad faith claim addresses the insurer’s conduct in handling the claim (the insurer acted unreasonably in how it processed, delayed, or denied the claim).

Policy Interpretation and Estoppel

Estoppel also intersects with policy interpretation in important ways. When an insurer interprets a policy provision in the policyholder’s favor during the claims process — for example, by treating a particular type of damage as covered — and then reverses that interpretation later, estoppel may prevent the reversal. The policyholder relied on the insurer’s interpretation, acted accordingly, and would be prejudiced by the change in position. This is particularly significant when the policy language is ambiguous and could reasonably be interpreted either way.