Doctrine of Reasonable Expectations Does not Apply

Fire Policy Does Not Provide Liability Insurance

Another case of leading a horse to water but not being able to make him drink.

When an agent explains to a non-resident owner of a dwelling that homeowners insurance is not available and that the resident must have their own insurance, the agent can’t force the insured’s to buy what is needed. When a loss occurs, the insureds then sue the agent because they didn’t buy what they needed and there was no coverage available. The mere fact that there was no coverage available does not create a reasonable expectation of coverage without evidence to support it.

Anyone can allege a cause of action. Proving it true is more difficult. In Francine Hamilton and Raymond Hamilton, Plaintiffs-Appellants v. Deborah Galati, Albert Galati, and Patricia Galati, Defendants, and Deborah Galati, Third-Party Plaintiff v. First Brokers Insurance and Farmers Insurance Company of Flemington, Third-Party Defendants-Respondents, Docket NO. A-5462-16T1, Superior Court of New Jersey Appellate Division (May 9, 2019) a suit was properly alleged but proof was impossible.


Albert and Patricia are Deborah’s parents. They purchased a home for her and her children. After Deborah moved into the property, she acquired an Alaskan Malamute dog, who broke free of its outside tether and attacked Francine Hamilton, causing personal injuries.

Before the Malamute attacked Francine Hamilton, around the time Deborah moved into the property, Patricia contacted First Brokers for homeowner’s insurance for Deborah’s house. Bonnie Bowen, a First Brokers agent, explained that Patricia could not obtain homeowner’s coverage because she did not reside there. Instead, Bowen was willing to issue a dwelling/fire policy, but this would only cover Albert and Patricia for losses to the real property.

Bowen suggested that Deborah separately obtain renter’s insurance. Patricia told Bowen that Deborah did not pay rent, but Bowen repeated that she should have renter’s insurance. Patricia testified in deposition that she believed renter’s insurance only covered the value of contents, did not understand it would have provided Deborah property liability coverage because it was never explained to her, and thus she did not encourage Deborah to obtain it. Deborah did not obtain renter’s insurance.

The trial judge found in favor of Farmers and First Brokers because the policy unambiguously defined “insured” as including only Albert and Patricia. He considered construction of the policy language to be “really a plain language type of situation, and it’s not something that needs any further description. You can’t define every word in a policy, and that’s one of the words I don’t think you have to define.” Because terms in insurance policies are to be given their plain meaning, in the absence of ambiguity, Deborah was not an additional insured.

The judge also concluded that the insureds could not reasonably expect to include their daughter in the definition of “insureds” when she resided in another household. He also did not consider Deborah to be a third party beneficiary, or that the broker or insurance company had a fiduciary or other duty to her based on the phone call from her mother.


The words of an insurance policy are to be given their plain, ordinary meaning. In the absence of any ambiguity, courts should not write for the insured a better policy of insurance than the one purchased. An ambiguity exists where the average policyholder would not be able to ascertain the boundaries of coverage.

In order to be covered by the policy, the additional insureds must reside in Albert and Patricia’s household. There is no ambiguity in the term “household” and Deborah did not live there.

Deborah did not fall within the term “resident,” nor was she a member of Albert and Patricia’s “household.” There is no ambiguity here; the doctrine of “reasonable expectations” simply does not apply.

Equity will grant reformation of an insurance policy where there is mutual mistake or where a mistake on the part of one party is accompanied by fraud or other unconscionable conduct of the other party. The record revealed that Patricia made no mistake as to the scope of coverage; she only made assumptions and no further inquiries. Albert and Patricia knowingly purchased a dwelling/fire policy, and knew it would only cover them and not Deborah. Deborah did not obtain a renter’s policy as the broker suggested. There was no mutual mistake.

The Hamiltons allege that since Albert and Patricia now have a new insurance policy on Deborah’s home, listing Deborah as an “additional insured” under the policy, it was in fact possible for First Brokers and Farmers Insurance to have added Deborah as an “additional insured.” They contend that the broker and insurer’s failure to do so initially is a breach of fiduciary duty.

Here, the agent for First Brokers was clear about the type of insurance she was providing to Albert and Patricia. She was clear that the policy only covered Albert and Patricia and that Deborah would have to obtain her own policy. While the agent could have recommended another policy under which Deborah could be added as an “additional insured party,” the agent owed no fiduciary obligation to Deborah. Her failure to do so does not rise to a breach of fiduciary duty. That the agent and the carrier owed a duty to Albert and Patricia did not translate into a duty to Deborah.

The motions for summary judgment were properly granted in this case. The judge based his decision on relevant law, and took into account all the probative, competent evidence.


In this case the only policy issued was a dwelling fire policy that did not insure third party liability and only insured the owners of the property, not the resident, Deborah. The Malamute’s actions causing injury – even if there was liability coverage – would only apply to the owners, not their daughter who lived at the dwelling rent free. Deborah could have followed the advice of the agent and been covered for the Malamute’s attack. This case is a silly waste of the court’s time.

© 2019 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at and

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 51 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

“Arson-For-Profit Fire at the Cowboy Bar & Grill”

A true crime novel based on the experience of the author, Barry Zalma, who for more than 51 years has acted for insurers who were faced with arson-for-profit, one of the most dangerous insurance fraud schemes. The book explains how an insurance claims adjuster, working with a fire cause and origin expert, a forensic accountant and insurance coverage lawyer, were able to defeat an arson-for-profit scheme and obtain a judgment requiring the perpetrator to take nothing and repay the insurer all of its expenses in defeating the claim.

Available as a paperback.

About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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