When an Insurer Changes Its Coverage Position: Waiver, Estoppel, and Mend-the-Hold
Updated: Oct 20
Sometimes an insurance policy does not cover a claim as written, yet the insurer’s words or conduct may prevent it from relying on an otherwise valid defense. Lawyers usually reach for one of three doctrines: waiver, equitable estoppel, or “mend-the-hold.”
Those doctrines overlap, but they are not interchangeable. Each asks a different question, requires different proof, and may produce a different result. The governing law also varies significantly by jurisdiction.
The practical issue usually arises when an insurer denies a claim for one reason and later identifies another, stronger reason. Should the insurer be allowed to change its position? The answer may depend on what kind of defense was omitted, what the insurer knew, whether the insured relied on the insurer’s position, whether litigation had begun, and which jurisdiction’s law applies.
The Problem of a Late Coverage Defense
Assume an insurer investigates a claim and asserts two independent, valid grounds for denying coverage. If either ground is sufficient, the insurer ordinarily owes no policy benefits.
Now assume the insurer gives only one reason, and that reason proves invalid. During litigation, the insurer identifies a different policy provision that would defeat coverage. The dispute is no longer simply whether the new defense is correct. It is whether the insurer may assert it at all.
Competing considerations are at work:
An insurer should not be encouraged to hold defenses in reserve, wait to see whether a claim becomes expensive, and then change course.
An insured should receive a timely and sufficiently specific coverage position so that it can protect itself, preserve evidence, control a defense, pursue settlement, or obtain other insurance where possible.
On the other hand, a claim outside the policy’s basic grant of coverage ordinarily should not become covered merely because the insurer made a claims-handling mistake.
Waiver, estoppel, and mend-the-hold mediate those competing concerns in different ways.
Waiver: Relinquishing a Known Right
Waiver is the voluntary and intentional relinquishment of a known right. It may be express, as when an insurer states that it will not rely on a policy condition, or implied from conduct inconsistent with an intent to enforce that condition.
The distinction is not between two kinds of waiver. It is between two ways of proving waiver. In either event, the focus is primarily on the insurer’s intent as shown by its words and conduct; detrimental reliance is generally not an element.
Courts are often more willing to find waiver when the omitted defense concerns a condition of forfeiture, such as timely notice, a proof-of-loss requirement, or another post-loss obligation. They are generally less willing to use waiver to create coverage for a risk that never fell within the policy’s insuring agreement.
The Supreme Court of Hawai‘i explained these principles in Enoka v. AIG Hawaii Insurance Co., 109 Haw. 537, 128 P.3d 850 (2006). AIG initially denied a no-fault claim as untimely, then relied in litigation on a policy exclusion. The court held that the exclusion concerned the scope of coverage rather than a technical or forfeiture ground. AIG therefore had not waived the exclusion merely by omitting it from the original denial.
Maryland follows a similar basic-coverage/forfeiture distinction. In Creveling v. Government Employees Insurance Co., 376 Md. 72, 828 A.2d 229 (2003), the Supreme Court of Maryland discussed the rule that waiver generally cannot supply basic coverage the policy did not provide, while recognizing a different treatment for technical conditions subsequent.
The labels matter, but they are not self-defining. Characterizing a defense as “technical” or “coverage-based” is often where the real dispute begins.
Estoppel: Reliance and Detriment
Equitable estoppel focuses less on the insurer’s intent and more on the effect of its conduct on the insured. The familiar elements are:
Voluntary conduct or a representation by the insurer;
Reasonable, good-faith reliance by the insured; and
A detrimental change of position.
Most courts state a general rule that estoppel cannot enlarge coverage beyond the policy’s terms. But that slogan is not the end of the analysis. Courts have recognized exceptions or analogous equitable rules where, for example:
The insurer or its agent misrepresented the available coverage when the policy was purchased, preventing the insured from obtaining the protection it sought;
The insurer assumed and controlled the defense of a liability claim without an adequate reservation of rights, impairing the insured’s ability to protect its own interests; or
The insurer acted in bad faith, or the circumstances otherwise make a later change of position manifestly unjust.
Enoka discussed these exceptions but found no estoppel on the facts before it. The insured had not shown the necessary detrimental reliance, and the court concluded that the insurer had not acted in bad faith merely by relying on unsettled legal questions.
Maryland law illustrates why the reliance element is decisive. In Nationwide Mutual Insurance Co. v. Regional Electric Contractors, Inc., 111 Md. App. 80, 680 A.2d 547 (1996), the insurer’s representative allegedly told the insured to repair damaged property and indicated that Nationwide would take care of the matter. The insured performed the repairs and incurred the expense. The Appellate Court of Maryland held that the evidence supported estoppel because the insurer’s representation induced a detrimental change of position.
By contrast, Nationwide Mutual Insurance Co. v. Regency Furniture, Inc., 183 Md. App. 710, 963 A.2d 253 (2009), rejected estoppel where the record contained no evidence that the insured changed its position in reliance on the insurer’s statement. A denial of coverage, even an erroneous one, does not by itself establish the reliance and detriment required for equitable estoppel.
Bad Faith Without Coverage
A separate but related question is whether an insurer can mishandle a claim in bad faith even if a policy exclusion ultimately defeats coverage.
Under Hawai‘i law, the answer can be yes. Enoka held that an insured was not categorically barred from pursuing a claim for bad-faith mishandling merely because the policy did not require payment. The duty of good-faith claim handling was distinct from the express contractual duty to pay benefits. The court nevertheless affirmed judgment for the insurer on the bad-faith claim because its position involved unsettled questions of law and was not unreasonable on that record.
Later Hawai‘i decisions continue to apply that distinction between contractual liability and claim-handling conduct. That point should not be generalized into a nationwide rule: the relationship between coverage and bad faith varies by jurisdiction, claim type, and governing statute.
Mend-the-Hold: Changing Grounds
“Mend-the-hold” is a contract doctrine limiting a party’s ability to change the stated ground for nonperformance. The phrase comes from nineteenth-century wrestling and refers to improving one’s grip on an opponent.
The classic formulation appears in Railway Co. v. McCarthy, 96 U.S. 258, 267–68 (1877): after a party gives a reason for its conduct in a controversy, it may not, once litigation has begun, change to a different ground and thereby improve its position.
Judge Richard Posner gave the doctrine its best-known modern insurance treatment in Harbor Insurance Co. v. Continental Bank Corp., 922 F.2d 357, 362–65 (7th Cir. 1990). The insurers first alleged that bank directors had acted so wrongfully that indemnification would violate public policy. After the bank settled the underlying cases and sought coverage, the insurers changed direction and argued that the directors had committed no wrongdoing, so the settlement was premature. The Seventh Circuit treated the insurers’ original pleading as relevant to whether the change in position violated mend-the-hold.
The doctrine is not a uniform nationwide rule. Some courts confine it to positions taken during litigation. Others reach pre-suit grounds for nonperformance. Some require bad faith or prejudice; others frame the rule more strictly. And some jurisdictions have not adopted it at all. See, for example, Genzer v. James River Insurance Co., 934 F.3d 1156 (10th Cir. 2019), declining to predict that Oklahoma would adopt the doctrine after surveying competing approaches.
Mend-the-hold therefore should not be pleaded as merely another name for waiver or estoppel. It is a contract doctrine whose availability, timing, and elements must be researched under the governing law.
General Reservations Are Not a Cure-All
Insurers sometimes include broad language in a denial or reservation-of-rights letter purporting to preserve every other defense that may later be discovered. Such language may be prudent, but it does not necessarily answer whether the insurer gave fair and timely notice of the defense it ultimately intends to assert.
The effectiveness of a general reservation will depend on governing law, the policy language, the information available when the letter was issued, later disclosures, and prejudice to the insured. A blanket reservation is not a substitute for a prompt investigation and a clear explanation of the known grounds for contesting coverage.
Practical Lessons
For policyholders and their counsel:
Compare every stated ground for denial with the policy language and the governing law.
Identify defenses raised later in correspondence, pleadings, discovery responses, or dispositive motions.
Preserve evidence of reliance: litigation strategy, defense control, settlement decisions, repair expenditures, lost opportunities to obtain substitute coverage, and other changes of position.
Determine whether the omitted ground concerns basic coverage, an exclusion, or a condition of forfeiture.
Research waiver, estoppel, mend-the-hold, reservation-of-rights rules, and any applicable claims-practices statute separately.
For insurers and coverage counsel:
Investigate before taking a final coverage position.
State known grounds with enough specificity to permit a meaningful response.
Supplement the coverage position promptly when new facts or policy provisions become relevant.
Explain why a newly asserted ground could not reasonably have been identified earlier.
Avoid treating boilerplate reservations as a substitute for analysis.
The soundest rule is also the most practical: coverage positions should be timely, specific, and candid. That discipline protects insureds from unfair surprise, improves the quality of claim decisions, and reduces satellite litigation over whether an otherwise valid defense was asserted too late.
This article provides general information and is not legal advice. Insurance-coverage outcomes depend on the policy language, facts, and governing law.
Updated October 2026 from an Insurance Scrawl article originally published March 12, 2006.
Topics: Waiver · Estoppel · Mend-the-Hold
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