What does the principle of estoppel prevent in insurance?

The principle of estoppel is a legal doctrine that prevents a party from taking a position that is contrary to a previous representation or behavior that another party has relied upon. In the context of insurance, this principle primarily applies to situations where an insurer has led an insured to believe that they are covered for a particular risk or loss, and the insured has relied on that belief in good faith.

When an insurer communicates or behaves in a way that causes the insured to believe they have coverage for certain situations, estoppel prevents the insurer from later denying that coverage. This principle is meant to protect the insured from being unfairly disadvantaged when they have reasonably relied on the insurer's previous representations or actions concerning their coverage.

For example, if an insurer has verbally confirmed that a specific loss is covered, but later denies coverage based on a technicality or exclusion in the policy, the insured could claim estoppel to enforce the belief that they were indeed covered due to the insurer’s earlier assurance. This protects the insured's rights and ensures that they are not misled about their coverage.

The other options, while all related to insurance practices, do not align with the definition and application of estoppel. They pertain to different aspects of insurance operations but do not encapsulate