overencourage

Incoherence from the courts has the potential to create an unpredictability that will underdeter frivolous claims and overencourage motions to dismiss.

Cost of Cost of disclosure to disclosure to insurer = insurer < Social cost Social cost Benefit of Cell A Cell D disclosure to insurer > Overencourages Overencourages Social benefit Disclosure Disclosure Benefit of Cell B Cell E disclosure to insurer < Underencourages Ambiguous Social benefit Disclosure Result Benefit of Cell C Cell F disclosure to insurer = Correct Amount of Overencourages Social benefit Disclosure Disclosure As this matrix suggests, in most instances the reasonable expectations rule will not efficiently encourage the disclosure of potentially surprising coverage restrictions.