Unreason in Action: A Case Study in the Wrong Approach to Construing the Liability Insurance Pollution Exclusion

For more than twenty-five years, a significant component of the scholarly commentary on insurance law has focused on the so-called “reasonable expectations doctrine” enunciated by then-Professor (now Judge) Robert Keeton in his justly celebrated 1970 article. The reasonable expectations principle made a seemingly sudden emergence with the appearance of Keeton\u27s article and has held particular attraction to academics while simultaneously prompting resistance from elements of the bench and bar, and particularly from the insurance industry. The doctrine\u27s life to date can be described as one of early growth followed by subsequent retreat and dilution, with continuing controversy. However, despite the prominence of the reasonable expectations debate in insurance law and the large volume of insurance litigation, Florida courts avoided taking a definitive position on the role of reasonable expectations in construing insurance policies until 1998. Unfortunately, Florida\u27s resolution of the matter was not worth the wait. In Deni Associates, Inc. v. State Farm Fire & Casualty Insurance Co., the court faced two cases that presented a powerful argument for embracing reasonable expectations analysis. The Supreme Court of Florida not only spurned the opportunity, but rejected the concept curtly in the course of rendering two problematic holdings. Worse than the actual holdings of non-coverage for non-extraordinary tort claims against commercial policyholders was the contract doctrine adopted by the court almost without dissent. In an opinion notable for its formal, superficial analysis and tone, the Supreme Court exhibited a fundamental misunderstanding of the reasonable expectations concept and appeared mired in an orthodox form of textual literalism well outside the mainstream of American contract law