Property and Casualty Insurance Practice Exam

What does the legal term estoppel refer to?

1. A requirement to disclose all information

2. A restriction on changing prior statements

3. Permission to alter insurance contracts

4. A form of policy endorsement

The correct answer is: A restriction on changing prior statements

Estoppel is a legal principle that prevents a party from arguing or disputing a fact or claim that is contrary to what has already been established as true or accepted based on previous statements or conduct. In essence, it acts as a restriction on changing prior statements or positions that have led another party to rely on those statements. This means that if someone has made a claim or representation that others have relied upon, they may be "estopped" or barred from later denying that claim or representation in a legal dispute. In the context of property and casualty insurance, estoppel can play a critical role when determining liability or covering a loss based on prior communications or acknowledgments between the parties involved. For instance, if an insurer previously indicated coverage for a particular situation, they might be estopped from denying that coverage later, provided the insured relied on that representation. The other options do not accurately capture the meaning of estoppel. The concept of requiring disclosure of all information relates more to transparency and good faith in contractual relationships. Permission to alter insurance contracts refers to modifying terms, which does not involve the principle of estoppel. A form of policy endorsement serves a different purpose, focusing on amendments or additions to policy terms rather than the implications of prior statements or conduct.