Once property loss has occurred, policyholders understandably want to move on as quickly as possible in order to get their lives and businesses up and running again. Insurance companies often share these goals . . . but not always. For any number of reasons, the insurer can slow down the recovery process to investigate the loss further. The result can transform what was once a cooperative and collaborative exchange into a bitter fight.
Before putting on the boxing gloves, however, policyholders should take heed. Refusing to cooperate can be grounds to deny a claim, even where there is coverage under the policy. In addition to keeping a level head, policyholders should consider whether they need outside help, whether through a public adjuster or an attorney, to assist them in navigating this uncertain territory.
Policyholders often think about their insurance company’s obligations, especially once a loss has occurred. You expect the insurer to assist you with calculating your loss, guiding you through the paperwork, and most important of all, paying out the necessary money to replace your property.
But what are your obligations to the insurance company? Unfortunately, simply paying your premiums on time is not the only requirement. Under virtually all policies, policyholders also have a broad duty to cooperate with their insurer. Failure to comply with this requirement can lead to your claim being denied, even if there is no issue of coverage.
One of these obligations is known as the Examination Under Oath (EUO). Nearly all commercial and residential policies contain language requiring the policyholder to submit to an EUO if requested by the insurer. Furthermore, these policies also include language stating that no lawsuit may be brought unless the policyholder complies with all terms of the policy, including submitting to an EUO.
Part of the problem with an EUO falling under the policyholder’s cooperation duty is that it often feels more like an interrogation (not a very cooperative atmosphere!) where the insurer’s lawyer asks piercing questions that make the policyholder feel like the loss was their fault. It’s bad enough to sit through one of these, but what if the insurer asks you to submit to second EUO? Unfortunately, the duty to cooperate is broad and unless it is unreasonable, an insurer can require the policyholder to submit to multiple EUOs.
To illustrate how harsh these results can be take the case of Munoz v. State Farm Gen. Ins. Co., No. B279830 (Cal. Ct. App. Nov. 9, 2017). In this fire loss case, the insurance company had already taken an EUO of the policyholder, but still required more information because they suspected arson in the loss. The insurer then requested the policyholder submit to a second EUO. The policyholder refused and sued for the policy limits.
The trial court granted summary judgment to the insurance company and the court of appeal affirmed because full cooperation is required under the policy before any bad faith suit can be brought. The court was unpersuaded by the policyholder’s argument that she had already fully cooperated by submitting to one EUO. The court noted that while an insurer cannot interrogate a policyholder an unreasonable number of times, in this case the policyholder’s refusal to submit to a second EUO was a breach of her duty of cooperation. Thus, even assuming the loss was covered under the policy, the policyholder’s failure to cooperate barred all recovery.
The lesson is that despite the potential for frustration and anger when an insurer gums up the claims process, policyholders would do well to keep their cool. However, once an insurer has made clear that they require additional information in order to investigate the claim including requesting a policyholder submit to an EUO, it might be time to contact an attorney to help navigate the post-loss and investigation process. The policyholder cannot be expected to navigate this process alone.
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