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Atwater Creamery Co. v. Western Nat'l Mut. Ins. Co

Minnesota Supreme Court






Contract Interpretation and Construction





Quick Notes

An insured reasonable expectations regarding burglary insurance

Book Name

Contracts Cases, Discussions, and Problems.  Blum Bushaw, Second Edition.  ISBN:  978-0-7355-7069-6.



o         Whether the reasonable expectation of the insured as to coverage governed to defect the literal language?  Yes.




o         Trial Ct dismissed the jury for lack of disputed issued.


o         Reverse the policy coverage.

o         The court affirmed a directed verdict for defendant agent, but reversed a judgment in favor of defendant insurer, in plaintiff's action seeking coverage for losses sustained during a burglary, where the court held that the definition of burglary in the policy could not be interpreted to defeat plaintiff's reasonable expectations





o         Pl   Atwater Creamery

o         Df - Western National Mutual Insurance

What happened?

o         Pl - sought a declaratory judgment seeking coverage for losses sustained during a burglary.

o         Trial Ct dismissed the jury for lack of disputed issued.

o         T.Ct concluded that the burglary insurance policy in effect defined burglary so as to exclude coverage of this burglary.



o         $15,587.40 worth of chemicals were stolen.

o         Was insured up to 20K.

o         The policy contained a requirement of evidence of forcible entry.

o         AtWater brought a claim.

o         Western denied.

o         Atwater filed suit for 15,875.40 (loss), and $7500 for business losses and attorney fees.

Reasonable Expectations of the Insured

1.       Where there is unequal bargaining power between the parties, the contract will be strictly construed against the party who drafted it.

2.       A lay person lacks the necessary skill to read and understand the insurance policy.

3.       The insurance agent is supposed to provide a policy that meets the needs of a lay person.


Tradition approach to reasonable expectations.

o         Is to require some kind of ambiguity in the policy before applying the doctrine of reasonable expectations.


Keetons Approach to reasonable expectations

o         The objectively reasonable expectations of applicants and intended beneficiaries regarding the terms of insurance contracts will be honored even though painstaking study of policy provisions would have negated those expectations.


o         Ambiguity of the language is not irrelevant under this standard, but becomes a factor in determining the reasonable expectation of the insured.

o         The doctrine does not automatically remove the insured a responsibility to read the policy.

o         It does recognize that certain instances, such as where major exclusions are hidden in the definitions section, the insured should be held ONLY to reasonable knowledge of the literal terms and conditions.

o         The insured may show what ACTUAL expectations he had, but the factfinder should determine whether those expectations where REASONABLE under the circumstances.



o         A burden is placed on the insurance company to communicate coverage and exclusions of policies accurately and clearly.

o         It does require that expectations of coverage by the insured by reasonable under the circumstances.



o         The burglary exclusion will not defeat the reasonable expectations of the purchaser of the policy.

o         AtWater reasonably expected that its burglary insurance policy with Western would cover the burglary that occurred.

o         Reversed.