2nd Cir. rewrites NBA referee policies based on marketing pitch.

The Second Circuit Federal Court of Appeals reversed a Connecticut Federal District Court’s dismissal of a suit involving two former NBA referees. The policyholders argued that the insurance salesman represented that the “own occupation” policy was broader than a standard disability policy in that it would cover them until age 65, even if they found new work.  The record indicated that the salesman asserted that the policy “changes the benefit period from 10 years to age 65. It covers you in your own occupation. If you can’t do your job, you’re disabled.”  In fact, the policy only provided coverage for five years; therefore, when both referees became unable to serve as NBA referees, their benefits did not pay in accordance with the salesman’s statements.  Despite the fact that the policy was clearly written and the plaintiffs admitted they had not read it, the court applied Pennsylvania’s “somewhat unique” “reasonable expectations” doctrine to conform the policy to the reasonable beliefs of the policyholders based on the salesman’s statements. The Court opined that the absence of fraud was not a bar to the application of the “reasonable expectations” doctrine as long as there is clear evidence of the parties’ understanding. In reaching its decision, the court acknowledged that Pennsylvania law applied to the substantive issues, as the contract state, while Connecticut law applied to procedural issues, as the forum state. However, the Court refused to apply the Connecticut statute of limitations, instead giving the plaintiffs six years from when their benefits were terminated, because to hold otherwise was inconsistent with the court’s application of the “reasonable expectations” doctrine. Nunn, et al. v. Massachusetts Cas. Ins. Co., No. 12-3712 (2d Cir. Feb. 24, 2014).

This case is notable because it applies the reasonable expectations doctrine to contravene the otherwise clear policy language.  Reasonable expectations doctrines exist in states other than Pennsylvania in various forms, but they typically involve interpretive issues and ambiguous policy terms.