Examinations Under Oath: Be Careful What You Ask For

Edward Eshoo | Property Insurance Coverage Law Blog | August 4, 2018

My article published in Adjusting Today,1 Property Insurance 101: Everything You Always Wanted to Know About Examinations Under Oath – But Were Afraid to Ask!, was the subject of my blog post last month. As discussed in the article, an examination under oath (“EUO”) is not just another deposition. An insured’s counsel must be well-versed on the nature and the extent of the contractual duty to submit to an EUO and the consequence of non-compliance.

The Eleventh Circuit Court of Appeal’s recent decision in Hutchinson v. Allstate Insurance Company,2 demonstrates the harsh consequence of an insured’s refusal to answer material questions during an EUO. There, a fire destroyed the insured’s dwelling. Allstate requested the insured to submit to an EUO because it had doubts he resided at the dwelling at the time of the fire. The insured appeared for the EUO without counsel. But, before answering questions, he expressed concern about a letter he had received from Allstate in which Allstate indicated that he had not responded to communications from its attorney regarding scheduling the EUO. The insured told Allstate’s attorney that the statements in the letter were not true and asked Allstate to recant the statements. Allstate’s attorney refused to recant the statements, to which the insured responded, “We can’t move forward until this letter is corrected. I don’t have a problem answering any questions you ask.”

Allstate’s attorney warned the insured that Allstate would treat his failure to respond to his questions as a material breach of the contract that probably would result in the denial of his claim. The insured again stated that he would answer Allstate’s questions, but insisted that Allstate recant the disputed statements in the letter first. Allstate’s attorney asked the insured questions regarding his residence; the insured sat in silence, giving no responses. Allstate subsequently denied the claim.

Over a year after his claim was denied, the insured retained counsel who sent a demand letter to Allstate threatening to sue unless the claim was paid within 60 days. The letter also indicated the insured was willing to sit for a second EUO. Allstate agreed to a second EUO expressly subject to a full and complete reservation of all rights and defenses. That EUO never occurred, and the insured sued Allstate when it did not comply with his demand.

Allstate moved for summary judgment based on the insured’s failure to answer Allstate’s questions at his EUO. The district court granted the motion and dismissed the suit. In affirming the lower court’s decision, the Eleventh Circuit rejected the insured’s argument that his offer to submit to an EUO over a year after Allstate denied his claim created a genuine issue of material fact regarding his compliance with the insurance contract. The Eleventh Circuit reasoned that the insured’s belated offer did not cure his prior breach or reinstate Allstate’s obligation to pay his claim.

Hutchinson follows other court decisions applying a “strict compliance” standard in determining whether a breach of the EUO requirement is material. Under that standard, an insured’s reliance on the advice of counsel in refusing to answer questions at an EUO is not a reasonable excuse for failing to comply with the EUO requirement.3 Likewise, a refusal to submit to an EUO unless it is a stenographic recording, as opposed to an audio recording, is not a reasonable excuse.4Similarly, the insurer’s failure to provide information concerning its investigation, including copies of previous statements, is not a reasonable excuse.5 Nor is the insurer’s refusal to execute a confidentiality agreement that imposes limitations on the insurer’s use of the insured’s personal information a reasonable excuse for the insured’s non-compliance with the EUO requirement.6

The result in Hutchinson may have been different if the insured had initially retained counsel to represent him at the EUO. Unfortunately, I receive many calls from policyholders whose claims were denied after they submitted to an EUO without legal representation. In many cases, the dye has been cast, and there is little I can do to help them. So, to all insureds out there, make sure you have experienced counsel who understand the EUO requirement attend any EUO.
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1 Adjusting Today is published as a public service by Adjusters International, Inc.
2 Hutchinson v. Allstate Ins. Co., 2018 WL 3359549 (11th Cir. July 10, 2018).
3 See Abdelhamid v. Fire Ins. Exch., 106 Cal. Rptr.3d 26 (Cal. Ct. App. 2010).
4 See N.C. Farm Bur. Mut. Ins. Co. v. Lilley, 2018 WL 414135 (N.C. App January 16, 2018).
5 See Lester v. Allstate Ins. Co., 743 F.3d 469 (6th Cir. 2014); Morris v. Econ. Fire & Cas. Co., 848 N.E.2d 663 (Ind. 2006).
6 See Safeco Ins. Co. of Oregon v. Masood, 330 P.3d 61 (Or. Ct. App. 2014).

Everything You Always Wanted to Know About Examinations Under Oath — But Were Afraid to Ask!

Edward Eshoo Jr. | Adjusting Today | July 2018

Introduction

Property insurance policies impose certain duties or obligations upon an insured in the event of loss or damage.1 One such enumerated duty is submitting to an examination under oath (“EUO”), a formal proceeding during which an insured is orally questioned by a representative of the insurer, usually counsel, under oath and in the presence of a court reporter regarding matters relating to the loss, the claim and the insurance. The insurer’s EUO demand raises a host of questions concerning the nature and the
extent of an insured’s duty to submit to an EUO and the consequence of non-compliance. This article will address those questions.

What is the Purpose of an EUO?

An EUO enables the insurer “to possess itself of all knowledge, and all information as to other sources and means of knowledge, in regard to the facts, material to its rights, to enable it to decide upon its obligations, and to protect it against false claims.”2

Insurers use EUOs to investigate suspicious or questionable claims that have a higher possibility of being fraudulent. The EUO request often comes after the claim has been referred to the insurer’s special investigative unit, or “SIU,” for further investigation. SIU claim representatives are trained to look for suspicious loss indicators that have been
associated with fraudulent claims. These indicators or “red flags” enumerated by the insurance industry include: loss reported as suspect by an informant or the authorities; an incendiary or arson fire; pending mortgage foreclosure/default; loss occurring just
after coverage takes effect, just before it ceases, or just after it has been increased; insured contacts agent prior to a loss to verify coverage or the extent of coverage; building for sale at the time of loss; misrepresentation as to the claimed value of the
loss or damage; inconsistent loss facts; and insured behavior such as insisting on early settlement, avoiding mail or facsimile, or willing to negotiate rather than substantiate the claim.

Insurers also use EUOs to investigate coverage-related issues, including: misrepresentation in the procurement of the insurance; relationship between
insureds; mortgagee and other creditor rights; nature and extent of insurable interest; late notice of loss; residency, vacancy or occupancy of insured property; increase in hazard; and compliance with warranty and protective safeguard endorsements.

And, insurers use EUOs to investigate potential third-party liability for a loss and their right of subrogation.

Does an EUO Differ from a Deposition?

All too often, lawyers agree to represent an insured at an EUO on the mistaken belief it is no different than representing a party at a deposition. Despite their similarity as sworn oral testimony taken before trial,3 depositions and EUOs are different in the
following respects.

• The EUO obligation is contractual and is governed by the express terms of the insurance policy.4 Therefore, the rules of civil procedure governing the taking of depositions, such as the three-hour time limit in Illinois or the seven-hour time limit in
federal court, do not apply to an EUO.5

• Insureds may be represented by counsel at an EUO, though counsel technically is not permitted to participate in the examination either by asking questions or lodging objections.6 Still, insured’s counsel should inquire at the EUO on the materiality of questions. But, he or she must exercise caution in instructing an insured not to
answer questions based on immateriality, as a subsequent determination of materiality may bar the insured’s recovery.7

While his or her role is limited during the EUO to providing legal advice to the insured when issues arise, counsel’s real role is to prepare the insured for the EUO. Effective preparation includes obtaining information about the facts and the circumstances surrounding the loss and the claim. At a minimum, counsel should request from the insurer: all post-lost statements made by the insured, whether hand-written or
tape-recorded; post-loss investigative reports; post-loss photographs; post-loss estimates and appraisals of the damaged or destroyed property; pre-loss underwriting inspection reports and photographs; application(s) for insurance; and a certified copy of the insurance policy. However, the insurer’s failure to provide information concerning
its investigation, including copies of previous statements, is not an excuse for the insured’s noncompliance with the EUO requirement.8

• EUOs are taken before litigation to augment the insurer’s investigation of the claim. In contrast, a deposition is not part of the claim investigation process; it is designed to facilitate the gathering of information once an insurer has made a claim decision, such as a denial of liability.9

• Many courts view the EUO requirement akin to a cooperation clause often included in a liability policy.10 Cooperation is essential to the insurance relationship because that relationship involves a continuous exchange of information between insurer and insured interspersed with activities that affect the rights of both. The relationship can function only if both sides cooperate. So, unlike a deposition, an insured has a duty to disclose during an EUO all facts within his or her knowledge.11

• Depending on the language of the policy, an insurer may be permitted to question insureds separately in sworn examinations; whereas, it would have no parallel right to do so under the rules of civil procedure.12 In that regard, many recently drafted property insurance policies expressly provide for the insurer to examine multiple insureds separately and out of the presence of other insureds.13 Courts have reached
opposite conclusions though where the policy contains no such express provision. Some courts have permitted the insurer to examine each insured separately out of the presence of the other insured, reasoning that the sequestration procedure would
lead to more accurate information and would discourage or prevent fraudulent claims.14 Other courts have permitted an examination to be made of each insured separately but within the presence of the other insured, reasoning that the policy does not mandate requiring insureds to submit to an EUO outside the presence of other insureds
and that if the insurer desired to impose such a condition it could have done so by an express term in the policy.15

• A party in a civil case can invoke his or her Fifth Amendment right against self-incrimination to prevent the disclosure of information that could be used against him or her in a criminal proceeding.16 Similarly, an insured may invoke the Fifth Amendment during the EUO.17 Unfortunately, most courts have concluded that the assertion
of this constitutional right will not insulate an insured from the obligation to submit to an EUO and to answer material questions during the EUO, characterizing it as an impermissible attempt to utilize the right not only as a shield, but also as a sword.18 Thus, in deciding whether to submit to an EUO when he or she is a suspect in a criminal prosecution, an insured may have to choose between possibly breaching the policy and forfeiting benefits thereunder or revealing critical information to state or federal authorities which could be used against him or her. If, however, the insurer has been requested to turn over to the authorities information received from the insured pursuant to an arson reporting immunity act, then the insured’s exercise of his or her Fifth Amendment right may not be a breach of the EUO requirement.19

• Absent good cause, a party deponent is rarely required to give more than one deposition.20 On the contrary, most property insurance policies require an insured to submit to an EUO as often as is “reasonably required.”21 The “reasonably required”
language describes how often the insurer can make requests for an EUO, and not the subject, topic, and scope of the EUO on the one hand, or the length, frequency, or time of the EUO on the other hand. In other words, the number or frequency of EUOs requested must be reasonable under the circumstances.22

• A deponent is not required to sign the deposition transcript.23 Conversely, property insurance policies normally require an insured to read and to sign a copy of the EUO transcript to ensure the accuracy of the testimony.24 Absent a request by the insurer
to do so, the insured’s failure to sign or delay in signing the transcript will not result in a forfeiture of his or her rights under the policy unless the insurer is prejudiced.25 If an insured’s only omission is failing to sign the transcript, then the submission to an EUO may constitute substantial compliance with the policy requirement.26

• The submission by an insured to an EUO does not deprive the insurer of the right to a deposition.27 Even though insurers get a second bite at the testimony apple, a deposition should not duplicate the EUO. It should be limited to those areas not
covered in the EUO.28

Who Must Submit to an EUO?

Property insurance policies typically require “the named insured,” “the insured,” “an insured,” or “any insured” to submit to an EUO. All persons who fall within the policy’s definition of these terms must comply with the EUO requirement, which in a
homeowner’s policy may be limited to spouses.29 Recognizing that the EUO obligation is contractual and will be interpreted by courts in favor of the insured if there is ambiguity, some insurers have drafted their policies clearly and broadly to require
employees, representatives of the insured, members of the insured’s household, or others to appear for an EUO to the extent it is within the insured’s power
to do so.30

Many insureds retain public insurance adjusters following a loss to assist them in negotiating or effecting the settlement of the claim.31 Unless the policy is drafted broadly enough to include them, public insurance adjusters are not required to
submit to an EUO.32 Nor is a mortgagee named in a property insurance policy containing a standard mortgagee clause obligated to submit to an EUO.33

When it is an entity and not a person, such as a corporation or a limited liability company, the named insured may select a representative to be examined,
such as an officer, director, shareholder, member, managing agent or key employee. The person chosen must be prepared and knowledgeable regarding the subjects of inquiry to allow the insurer to conduct a meaningful examination.34

Corporate officers, directors, shareholders, and key employees and limited liability company members who submit to an EUO may be required to answer questions about their personal life and to produce personal records such as tax returns, particularly if
the policy’s post-loss duties also require cooperation in the investigation of the claim.35

When Must the Insured Appear for an EUO? 

Absent any time limit in the policy, an insurer must request an EUO within a reasonable time after the loss, which, in turn, means the insured must submit to an EUO within a reasonable time after the request.36 An insurer risks waiving its right to an EUO
if it does not request the EUO until after suit is filed.37 An insurer also may waive a breach of the EUO requirement by denying liability on grounds other than failing to submit to an EUO.38  The insurer must give the insured reasonable notice in writing of the EUO, stating a definite time and place where the examination is to be held and
designating a representative before whom the examination is to be conducted.39 A defense based on an insured’s failure to submit to an EUO is not available if the notice or demand lacks the requisite definiteness. Examples of defective notice include
notice sent only to the insured’s counsel and notice which shifts to the insured the responsibility to arrange the details of the EUO.40

Can the EUO Requirement be Satisfied by the Insured Submitting to a Recorded Interview?

A recorded interview of an insured taken shortly after a loss does not constitute substantial compliance with the policy requirement to submit to an EUO.41 This is so even if the interview ends with the insured stating he or she truthfully answered the questions asked and even if the insured subsequently verifies the truthfulness of the
interview.42 Likewise, the insured cannot satisfy the EUO requirement by providing answers to written questions.43

Is the Insured Obligated to Answer Every Question Asked During an EUO and to Produce Every Document Demanded by the Insurer?

Although an insurer may conduct a “searching examination,”44 questions posed of an insured during an EUO must be confined to matters “material” to the loss, the claim, and the insurance. The EUO notice is usually accompanied by a demand to produce documents, which is another post-loss duty required of an insured.45 Not only must it be material, an insurer’s demand for documents (or releases and authorizations if the documents no longer exist) also must be reasonable and specific.46 Documents and questions are material if they concern “a subject relevant and germane to the insurer’s investigation as it was then proceeding.”47 For instance, if the insurer has a reasonable basis for suspecting a fraudulent claim, then information and documentation concerning the insured’s financial status and prior insurance losses are material to determine whether the insured had a motive for committing fraud.48

What is the Consequence of the Insured’s Refusal to Submit to an EUO and/or Refusal to Answer Material Questions Asked During an EUO?

A “material” breach of the EUO requirement can be a bar to suit and/or recovery.49 While some courts apply a “strict compliance” standard, most courts, including Illinois courts, apply a “substantial compliance” standard in determining whether a breach of the EUO requirement was material. Substantial compliance depends on (a) whether
an insured cooperated or engaged in a pattern of non-compliance and (b) whether an insured provides a reasonable justification, explanation, or excuse for non-compliance.50 An insured’s reliance on the advice of counsel in refusing to answer
questions at an EUO is not a reasonable excuse for failing to comply with the EUO requirement;51 but, death, physical or mental disability, and deportation are reasonable excuses.52 Under a substantial compliance standard, the non-compliance may be cured, either by abating or staying litigation, or by a deposition, provided the insurer was not substantially prejudiced.53 An insured who believes it has a reasonable basis for refusing to comply with the insurer’s demand for an EUO should promptly file a
declaratory judgment action seeking a determination of its rights and obligations under the policy.54

Can One Insured’s Breach of the EUO Requirement be Imputed to Another Insured Who Submitted to an EUO?

An insured’s breach of the EUO requirement can be imputed to an innocent co-insured (another insured who complied with the EUO requirement such as a spouse) if (a) the obligation to submit to an EUO is a “joint” as opposed to a “severable” or “independent”
obligation among multiple insureds 55 and (b) the joint obligation provision is consistent with any mandatory minimum level of protection afforded by statute, such as the Standard Fire Policy.56

What is the Consequence of Concealment or Misrepresentation During an EUO?

Property insurance policies invariably contain a provision traditionally referred to in the insurance industry as the “fraud and false swearing” clause, which operates to void coverage if an insured intentionally conceals or misrepresents a material fact concerning (a) the coverage, (b) the covered property, (c) the insured’s interest in the covered property, or (d) a claim under the coverage.57

To work a forfeiture and to void coverage under a “fraud and false swearing” clause, the concealment or misrepresentation must be made by the insured knowingly and willfully regarding a material matter with the intent to deceive and to defraud the insurer.58 An innocent mistake or mere inadvertence, however, cannot sustain a charge of fraud or false swearing.59 Also, it does not follow that an insured is guilty of fraud or false swearing simply because there is a difference of opinion on the value of insured property, though an insured cannot inflate or exaggerate the value to gain a bargaining
advantage in the settlement of the claim.60

Materiality of a false statement is not determined by whether the false answer relates to a matter or subject that proves to be decisive or significant in the ultimate disposition of the claim. A false statement is material if it might have affected the attitude and the action of the insurer.61 It also is material if it may be said to have been calculated either to discourage, mislead, or deflect the insurer’s investigation in any area that might seem to the insurer, at that time, a relevant or productive area to investigate.62

Conclusion

An EUO can be an effective tool in the investigation and the resolution of a property insurance claim. Yet, the escalating number of EUO cases throughout the country appear to be more about strategy than truth.63 This cottage industry of EUO litigation shows that wrong advice given by counsel to an insured can lead to a material breach of the EUO requirement, resulting in a forfeiture of coverage. Because an EUO is not just another deposition, an insured’s counsel must be well-versed on the nature and the extent of the contractual duty of an insured to submit to an EUO and the consequence of non-compliance.

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1 Insurance Services Office, Inc. (“ISO”) Homeowners (“HO”) Form 00 03 10 00 at p. 13 of 22; ISO Commercial Property (“CP”) Form 00 10 04 02 at p. 9 of 14.

2 Claflin v. Commonwealth Ins. Co., 110 U.S. 76, 82 (1884).

3 Like deposition testimony, EUO testimony can impeach an insured if his or her testimony at trial is inconsistent or conflicts with such testimony. Hart v. Mechanics & Traders Ins. Co., 46 F.Supp. 166 (W.D.La. 1942). Like deposition testimony, EUO testimony also is an admission of a party opponent, and admissible as direct evidence in support of an insurer’s affirmative defenses. McIntosh v. Eagle Fire Ins. Co. of N.Y., 325 F.2d 99 (8th Cir. 1963); Lentz v. Metro. Prop. & Cas. Ins. Co., 2001 WL 38934 (Mass. App. Ct.).

4 Ahmadi v. Allstate Ins. Co., 22 P.3d 576 (Colo. Ct. App. 2001).

5 Nat’l Athletic Sportswear, Inc. v. Westfield Ins. Co., 528 F.3d 508 (7th Cir. 2008).

6 See Gordon v. St. Paul Fire & Mar. Co., 163 N.W. 956 (Mich. 1917); Shelter Ins. Cos. v. Spence, 656 S.W.2d 36 (Tenn. Ct. App. 1983).

7 In Twin City Fire Ins. Co. v. Harvey, 662 F.Supp. 216 (D. Ariz. 1987), the district court declined to find that the insured breached the EUO requirement in failing to answer certain questions because the insurer’s counsel failed to explain during the EUO the relevance and the materiality of the questions.

8 See Lester v. Allstate Ins. Co., 743 F.3d 469 (6th Cir. 2014); Morris v. Econ. Fire & Cas. Co., 848 N.E.2d 663 (Ind. 2006). Nor is the insurer’s refusal to execute a confidentiality agreement that imposes limitations on the insurer’s use of the insured’s personal information an excuse for the insured’s non-compliance with the EUO requirement. Safeco Ins. Co. of Oregon v. Masood, 330 P.3d 61 (Or. Ct. App. 2014).

9 See Zavakos Enters, Inc. v. St. Paul Surplus Lines Ins. Co., 2006 WL 83502 (S.D. Ohio); Nationwide Ins. Co. v. Nilsen, 745 So.2d 264 (Ala. 1998).

10 See, e.g., Staples v. Allstate Ins. Co., 295 P.3d 201 (Wash. 2013).

11 See, e.g., Brizuela v. CalFarm Ins. Co., 10 Cal.Rptr.3d 661 (Cal. Ct. App. 2004); Piser v. State Farm Mut. Auto Ins. Co., 405 Ill.App.3d 341 (1st Dist. 2010).

12 See Goldman v. State Farm Fire Gen. Ins. Co., 660 So.2d 300 (Fla. Dist. Ct. App. 1995).

13 ISO HO Form 00 03 10 00 at p. 13 of 22 (“As often as we reasonably require… [s]ubmit to an examination under oath, while not in the presence of another ‘insured’….”); ISO CP Form 00 10 04 02 at p. 9 of 14 (“We may examine any insured under oath, while not in the presence of any other insured….”).

14 See State Farm Fire & Cas. Co. v. Tan, 691 F. Supp. 1271 (S.D. Cal. 1988); Lidawi v. Progressive County Mut. Ins. Co., 112 S.W.3d 725 (Tex. App. 2003).

15 See U.S. Fid. and Guar. Co. v. Welch, 854 F.2d 459 (11th Cir. 1988); U.S. Fid. & Guar. Co. v. Hill, 722 S.W.2d 609 (Mo. Ct. App. 1986).

16 See, e.g., Cordeck Sales, Inc. v. Constr. Systems, Inc., 382 Ill. App.3d 334 (1st Dist. 2008).

17 The insurer’s right to require an insured to submit to an EUO does not include the right to require the insured to submit to a polygraph test. Mize v. Hartford Ins. Co., 567 F.Supp. 550 (W.D.Va. 1982); Walker v. Tenn. Farmers Mut. Ins. Co., 568 S.W.2d 103 (Tenn. Ct. App. 1977). Nor does it include the right to conduct a warrantless search of an insured’s residence. Honeycutt v. Aetna Ins. Co., 510 F.2d 340 (7th Cir. 1975).

18 See Warrilow v. Superior Court of Arizona, 689 P.2d 193 (Ariz. Ct. App. 1984); Hickman v. London Assur. Corp., 195 P. 45 (Cal. 1920); Tarcicani v. Nationwide Mut. Ins. Co., 822 A.2d 341 (Conn. App. Ct. 2003); Abraham v. Farmers Home Mut. Ins. Co., 439 N.W.2d 48 (Minn. 1989).

19 Weathers v. Am. Fam. Mut. Ins. Co., 793 F.Supp. 1002 (D.Kan. 1992) (court’s instruction to jury allowed it to consider the insured’s constitutional rights in determining whether the insured breached the EUO requirement).

20 Under Federal Rule of Civil Procedure 30 (a) (2) (ii) for example, a party must obtain leave of court to take a second deposition.

21 ISO HO Form 00 03 10 00 at p. 13 of 22 (“As often as we reasonably require…submit to an examination under oath….”); ISO CP Form 00 10 04 02 at p. 9 of 14 (“We may examine any insured under oath…at such times as may be reasonably required….”).

22 Foster v. State Farm Fire and Cas. Co., 674 F.3d 663 (7th Cir. 2012).

23 Under Illinois Supreme Court Rule 207(a) and Federal Rule of Civil Procedure 30(f), the deponent is afforded the right to examine the deposition after it has been transcribed, which right may be waived.

24 ISO HO Form 00 03 10 00 at p. 13 of 22 (“As often as ‘we’ reasonably require…submit to an examination under oath,…and sign the same.”); ISO CP Form 00 10 04 02 at p. 9 of 14 (“In the event of an examination, an insured’s answers must be signed.”); Country Mutual Ins. Co. Home Insurance Policy Form at pp. 29-30 of 35 (“As often as ‘we’ reasonably require… submit to examinations under oath, … and sign the same within a reasonable amount of time of ‘our’ request, after having been informed: (1) of‘your’ right to counsel; and (2) that ‘your’ answers may be used against ‘you’ in later civil proceedings or criminal proceedings;”).

25 See Wood v. Allstate Ins. Co., 21 F.3d 741 (7th Cir. 1994); Varda, Inc. v. Ins. Co. of N.A., 45 F.3d 634 (2nd Cir. 1995); Campuzano v. Sentinel Ins. Co., 2015 WL 520901 (S.D.Tex.).

26 See, e.g., Herman v. Safeco Ins. Co. of Am., 17 P.3d 631 (Wash. Ct. App. 2001).

27 Joe’s Mkt. Fish, Inc. v. Scottsdale Ins. Co., 1998 WL 851504 (N.D. Ill.); Kamin v. Central States Fire Ins. Co., 22 F.R.D. 220 (E.D.N.Y. 1958).

28 Jones v. State Farm Fire & Cas. Co., 129 F.R.D. 170 (N.D. Ind. 1990).

29 See, e.g., GuideOne Mut. Ins. Co. v. Rock, 2009 WL 1854452 (N.D. Miss.); State Farm Fire & Cas. Co. v. Miceli, 164 Ill. App. 3d 874 (1st Dist. 1987).

30 See ISO HO Form 00 03 10 00 at p. 13 of 22 (“These duties must be performed either by you, an ‘insured’ seeking coverage, or a representative of either.”). See also West v. State Farm Fire and Cas. Co., 868 F.2d 348 (9th Cir. 1990); Barrie v. Great N. Ins. Co., 2008 WL 3984159 (E.D. Pa.).

31 The Illinois Insurance Code defines a public adjuster as a person, who for compensation, acts or aids an insured in adjusting a claim arising under an insurance contract insuring the real or personal property of the insured. 215 ILCS 5/1510.

32 See Palace Cafe v. Hartford Fire Ins. Co., 97 F.2d 766 (7th Cir. 1938); H.T. Cain v. U.S. Fire Ins. Co., 2008 WL 2094235 (S.D. Miss.); Florida Gaming Corp. v. Affiliated FM Ins. Co., 502 F. Supp.2d 1257 (S.D. Fla. 2007). Although a public
adjuster may not be not required to submit to an EUO, a public adjuster can attend an EUO unless the policy expressly excludes him or her from attending. See Nawaz v. Universal Prop. & Cas. Co., 91 So.2d 187 (Fla. Dist. Ct. App. 2012).

33 See U.S. Fid. & Guar. Co. v. Annunziata, 67 N.Y.2d 229 (1986). A standard mortgagee clause grants special protection for the interest of a mortgagee named in the policy, in effect setting up a separate contract between the insurer and the mortgagee. Among other things, it grants continuing coverage for the benefit of the mortgagee in the event the policy is voided by some act of the insured, such as arson.See 4 Couch on Insurance 3d sec. 65:8 et. seq. (2018).

34 See, e.g., 2000 Leslie Condo Ass’n, Inc. v. QBE Ins. Corp., 965 F.Supp.2d 1386 (S.D. Fla. 2013); Paulucci v. Liberty Mut. Fire Ins. Co., 190 F.Supp.2d 1312 (M.D.Fla. 2002).

35 See, e.g., Green v. St. Paul Fire and Mar. Ins. Co., 691 F.Supp. 700 (S.D.N.Y. 1988); Miracle Sound, Inc. v. N.Y. Prop. Ins. Underwriting Ass’n, 564 N.Y.S.2d 346 (N.Y. App. Div. 1991). But see Glados, Inc. v. Reliance Ins. Co., 888 F.2d 1309 (11th Cir. 1987); Double G.G. Leasing, LLC v. Underwriters at Lloyd’s, London, 2008 WL 2345205 (Conn. Super. Ct.).

36 See Marquis v. Farm Fam. Mut. Ins. Co., 628 A.2d 644 (Me. 1993); Home Ins. Co. v. M.T. Olmstead, 355 So.2d 310 (Miss. 1978).

37 See Crowley v. North British & Mercantile Ins. Co., 70 F.Supp. 547 (4th Cir. 1947); Willis v. Huff, 736 So.2d 1272 (Fla. Dist. Ct. App. 1999); In re Cypress Texas Lloyds, 437 S.W.3d 1 (Tex. App. 2011)

38 See, e.g., Kerr v. State Farm Fire & Cas. Co., 934 F.Supp.2d 853 (M.D. La. 2012); Ganz v. Pub. Serv. Mut. Ins. Co., 551 N.Y.S.2d 437 (N.Y. Sup. Ct. 1989).

39 See Kisting v. Westchester Fire Ins. Co., 416 F.2d 967 (7th Cir. 1969); Abudayeh v. Fair Plan Ins. Co., 481 N.Y.S.2d 711 (N.Y. App. Div. 1984).

40 See, e.g., Adamowicz v. N. Country Ins. Co., 2009 WL 4348479 (N.Y. App. Div.); Weber v. Gen. Acc. Fire & Life Assur. Corp., 462 N.E.2d 422 (Ohio Ct. App. 1983).

41 See Pervis v. State Farm Fire and Cas. Co., 901 F.2d 944 (11th Cir. 1990); Fineberg v. State Farm Fire and Cas. Co., 438 S.E.2d 754 (N.C. Ct. App. 1994); State Farm Gen. Ins. Co v. Lawlis, 773 S.W.2d 948 (Tex. App. 1984).

42 See Knowledge A-Z, Inc. v. Sentry Ins. Co., 857 N.E.2d 411 (Ind. Ct. App. 2007); Downie v. State Farm Fire and Cas. Co., 929 P.2d 484 (Wash. Ct. App. 1997).

43 See Saucier v. U.S. Fid. and Guar. Co., 765 F.Supp. 334 (S.D. Miss. 1991); Ransom v. Selective Ins. Co., 550 A.2d 1006 (N.J. 1998).

44 Gipps Brewing Corp. v. Cent. Mfrs. Mut. Ins. Co., 147 F.2d 6, 13 (7th Cir. 1945).

45 ISO HO Form 00 03 10 00 at p. 13 of 22 (“As often as we reasonably require…[p]rovide us with records and documents we request and permit us to make copies.”); ISO CP Form 00 10 04 02 at p. 9 of 14 (“As often as may be reasonably required, permit us to…examine your
books and records.”).

46 See Chavis v. State Farm Fire and Cas. Co., 346 S.E.2d 496 (N.C. 1986).

47 Fine v. Bellafonte Underwriters Ins. Co., 725 F.2d 179, 183 (2nd Cir. 1984).

48 See Woods, 21 F.3d at 747; Powell v. U.S. Fid. & Guar. Co., 88 F.3d 271 (4th Cir. 1996); Deguchi v. Allstate Ins. Co., 2008 WL 1780271 (D. Haw.); Maurice v. Allstate Ins. Co., 570 N.Y.S.2d 654 (N.Y. App. Div. 1991); Dlugosz v. Exch. Mut. Ins. Co., 574 N.Y.S.2d 864 (N.Y. App. Div. 1990).

49 See 13 Couch on Insurance 3d sec. 196:22-196:31 (2018).

50 See, e.g., Woltman v. Am. States Ins. Co., 2006 WL 1305236 (C.D. Ill); Hartshorn v. State Farm Fire Ins. Co., 361 Ill. App.3d 731 (2nd Dist. 2005); Patel v. Allstate Ins. Co., 211 Ill. App.3d 324 (1st Dist. 1991); Piro v. Pekin Ins. Co., 162 Ill. App.3d 225 (1st Dist. 1987); Horton v. Allstate Ins. Co., 125 Ill. App.3d 1034 (1st Dist. 1984). See also Solano v. State Farm Fla. Ins. Co., 15 So.3d 367 (Fla. 4th DCA 2014).

51 Abdelhamid v. Fire Ins. Exch., 106 Cal. Rptr. 3d 26 (Cal. Ct. App. 2010); Evans v. Int’l Ins. Co., 562 N.Y.S.2d 692 (N.Y. App. Div. 1990). Nor is a refusal to submit to an EUO unless it is a stenographic recording, as opposed to an audio recording, a reasonable excuse. N.C. Farm Bur. Mut. Ins. Co. v. Lilley, 2018 WL 414135 (N.C. App.).

52 See Roberto v. Hartford Fire Ins. Co., 177 F.2d 811 (7th Cir. 1949); Blackburn v. State Farm Fire & Cas. Co., 329 S.E.2d 284 (Ga. Ct. App. 1985). Postponement due to unavailability of counsel is not a failure to submit to an EUO, and thus is a reasonable excuse. McCullough v. Travelers Cos., 424 N.W.2d 542 (Minn. 1988).

53 See Crowell v. State Farm Fire & Cas. Co., 259 Ill. App. 3d 456 (5th Dist. 1994). Under ISO HO Form 00 03 10 00, there is no duty to provide coverage under the policy if the failure to submit to an EUO is “prejudicial” to the insurer.

54 See DiFrancisco v. Chubb Ins. Co., 662 A.2d 1027 (N.J. Super. Ct. App. Div. 1995).

55 See Miles v. Great N. Ins. Co., 2009 WL 2998529 (D. Mass.). See, e.g., Aurelius v. State Farm Fire and Cas. Co., 384 Ill. App.3d 969 (2nd Dist. 2008); Wasik v. Allstate Ins. Co., 351 Ill. App.3d 260 (2nd Dist. 2004).

56 Many states have adopted the 1943 New York Standard Fire Policy (“SFP”) as the minimum coverage upon which an insured can rely under any fire insurance policy issued in that state. Any provision which provides less coverage than the SFP is unenforceable. See, e.g., Lundquist v. Allstate Ins. Co., 314 Ill. App.3d 240 (2nd Dist. 2000). The SFP requires “the insured” to submit to an EUO. Courts have concluded that the term “the insured” as used throughout the SFP indicates an intent to provide “several” or “independent” obligations as to each insured, such that the wrongful acts of one insured defeats the rights of the malfeasant insured, but not those of an innocent
co-insured. See, e.g., Streit v. Metropolitan Cas. Ins. Co., 863 F.3d 779 (7th Cir. 2017); Century-National Ins. Co. v. Garcia, 51 Cal.4th 564 (Cal. 2011); Icenhour v. Cont’l Ins. Co., 365 F.Supp.2d 743 (S.D.W. Va. 2004); Volquardson v. Hartford Ins. Co., 647 N.W.2d 599 (Neb. 2002).

57 ISO HO Form 00 03 10 00 at p. 13 of 22; ISO CP Form 00 10 04 02 at p. 9 of 14.

58 Claflin, 110 U.S. at 82. See Weininger v. Metro. Fire Ins. Co., 359 Ill. 584 (1935).

59 See, e.g., Harold J. Warren Co., v. Fed. Mut. Ins. Co., 386 F.2d 579 (1st Cir. 1967); Sentry Ins. Co. v. Rice, 2011 WL 2965799 (C.D. Ill.).

60 See, e.g., Trzcinski v. Am. Cas. Co. 953 F.2d 307 (7th Cir. 1992); Lykos v. Am. Home Ins. Co., 609 F.2d 314 (7th Cir 1979); Transp. Ins. Co. v. Hamilton, 316 F. 2d 294 (10th Cir. 1963); Nagel-Taylor Auto. Supplies, Inc. v. Aetna Cas. & Sur. Co. of Ill., 81 Ill. App.3d. 607 (4th Dist. 1980).

61 See Fine, 725 F.2d at 183-184.

62 See Barth v. State Farm Fire & Cas. Co., 228 Ill.2d 163 (2008); A & A Inc. v. Great Cent. Ins. Co., 259 Ill. App.3d 73 (1st Dist. 1994); Passero v. Allstate Ins. Co., 196 Ill. App.3d 602 (1st Dist. 1990).

63 Whistler’s Park, Inc. v. Florida Ins. Guar. Ass’n, 90 So.3d 841 (Fla. Dist. Ct. App. 2012).

Effective Use Of Examinations Under Oath In Pipe Freeze Claims

Seth I. Weinstein | Lewis Brisbois | March 9, 2018

While the weather has temporarily warmed in parts of the Northeast, January brought bitter cold temperatures throughout the East Coast and elsewhere. A deluge of claims have followed associated with frozen pipes.

Many claim disputes pertain to whether an insured utilized “best efforts,” “due diligence,” or “reasonable care” to maintain heat in an insured property. Further, many claim disputes pertain to whether a property was vacant, unoccupied, or under construction at the time of a loss. It is imperative that insurers request and obtain the necessary documents and information from an insured to evaluate these coverage issues. Utility and maintenance records should be requested and analyzed, as well as documentation concerning the occupancy and use of the property. Third parties reported to be tenants/occupants can be questioned and in many cases on-site inspections of the property reveal alternative and/or contributing causes to pipe bursts often blamed on freeze conditions.

Many insureds are represented by public adjusters who provide limited information on behalf of insureds with regard to efforts made to maintain heat and/or to establish a property was not vacant or unoccupied. Further, often allegations are made that construction was underway at a property at the time of the loss with no supporting documentation.

Utilizing an examination under oath to address and investigate these issues is very often an efficient and important investigation tool. Conducting an examination under oath with coordinated document/information requests will provide an insurer with the opportunity to obtain necessary information which will enable prudent coverage determinations to be made. An examination under oath is an important investigative tool, which permits an insurer to determine the merits of legitimate claims in addition to exposing fraudulent claims.

It is widely recognized that examinations under oath are too infrequently used in claims that do not involve suspicious circumstances. An examination under oath assists the insurer to possess itself of all knowledge and information in regard to the facts, which will enable the insurer to decide upon its obligations under a policy and to protect from false claims.

Although some examinations under oath can be a day long and detailed, many are simple and often take 1 to 2 hours. Examinations under oath provide a cost-effective means to evaluate claims and often lead to the avoidance of litigation. Examinations under oath can be conducted in many claims on an expedited basis, which enables prompt coverage positions to an insured.

Examinations Under Oath – What You Need to Know

Kevin Pollack | Property Insurance Coverage Law | November 27, 2016

Most property and business policies contain a provision requiring the insured to submit to an examination under oath (known as an “EUO”) by the insurance company in connection with an insurance claim. It is similar to a deposition, with the policyholder providing sworn testimony under penalty of perjury. However, it is under a contractual policy requirement not the litigation process.

The standard form policy codified in California requires an insured to “submit to examinations under oath by any person named by” the insurance company.1 The California Court of Appeal has held this means the insured must sit for an examination under penalty of perjury and “answer all proper questions as part of the insurer’s investigation of the insured’s claim.”2

An insured cannot refuse to participate in an examination under oath. Unlike other policy conditions for presenting a claim, like timely notice and submission of a proof of loss, in California there is no requirement that an insurance company show prejudice to deny a claim based on failing to submit to an examination under oath.3 When an insured does not answer material questions during an examination under oath, an insurance company can “properly deny coverage.”4

This near automatic denial rule means that the insured has little choice about doing the examination under oath where requested by an insurer.

Burdensome production of extensive documents are often requested by the insurance company attorney, many of which may be private and objectionable. Although it is part of the claim process, and the insurer’s good faith duties apply, in practice the examination under oath is frequently treated as an adversarial process by the insurer.

That being said, in California—and most states—there are Fair Claim Handling regulations, and laws that tell insurers what they must, can, and cannot do.

Above all, insurance companies have the legal duty to investigate and process insurance claims fully, promptly, and in good faith and deal fairly with insureds.

One thing public adjusters and policyholders should do during a claim is to ask for and get all claim-related documents from your insurer’s files before answering questions under oath and before signing anything relating to settlements or confidentiality.

In California, insureds are legally entitled to see what’s in their claim file.5 Such information can often empower insureds in the claim process and level the playing field.

Below are some legal rights insureds have when insurers ask them to submit to an examination under oath in California. These rights are there to protect insureds:

  1. An insurer that determines that it will conduct an examination under oath of an insured shall notify the insured of that determination and shall include a copy of this section in the notification.
  2. An insurer may conduct an examination under oath only to obtain information that is relevant and reasonably necessary to process or investigate the claim.
  3. An examination under oath may only be conducted upon reasonable notice, at a reasonably convenient place and for a reasonable length of time.
  4. The insured may be represented by counsel and may record the examination proceedings in their entirety.
  5. The insurer shall notify the insured that, upon request and free of charge, it will provide the insured with a copy of the transcript of the proceedings and a tape of the proceedings, if one exists. Where an insured requests a copy of the transcript, the tape, or both, of their examination under oath, the insurer shall provide it within 10 business days of receipt by the insurer or its counsel of the transcript, the tape, or both. An insured may make sworn corrections to the transcript so it accurately reflects the testimony under oath.
  6. In an examination under oath, an insured may assert any objection that can be made in a deposition under state or federal law. However, if as a result of asserting an objection, an insured fails to provide an answer to a material question, and that failure prevents the insurer from being able to determine the extent of loss and validity of the claim, the rights of the insured under the contract may be affected.

An insurer cannot ask for unreasonable “proofs of loss” such as secondary proofs. For example, if an insured provides photographs or video of items in their home, they cannot then be compelled to provide receipts as well if they contain essentially the same information.6


1 California Insurance Code §2071(a).
2 Abdelhamid v. Fire Insurance Exchange (2010) 182 Cal.App.4th 990.
3 Id. at 1004.
4 Id. at 1005.
5 Cal. Ins. Code §2070, 2071.
6 Cal Ins Code §790.03.

 

California Examinations Under Oath: Protecting the Insured through a Reasonable Examination Under Oath

Denise Sze | Property Insurance Coverage Law Blog | December 30, 2015

Over a course of the last few years I’ve written about California Insurance Code 2071.1 and an insured’s rights, which includes the right to review their claim file before an examination under oath (EUO) is conducted. As the year draws to a close and the number of EUOs I witness only go up, I think the topic of EUOs should be revisited. Protecting the insured has become more difficult. Usually, examinations under oath only occur after the insurer has sent the insured’s claim to a special investigation unit and from that point on, the reality for the insured is that the investigation conducted is to find inconsistencies in the insured’s recount of the loss to deny the claim. Although there are many reputable attorneys on behalf of the insurer conducting the requested examinations under oath reasonably and respectfully, there are also a handful out there with the distinct reputation among the insurance community well known for going out of the way to put the insured through a series of events that mimic a criminal inquiry that is both stressful and unnecessary.

If you are an insured about to undergo an examination under oath, the ability to evaluate or know the reputation of the attorney conducting the examination under oath and having proper representation at the time of the EUO, may be the difference to a fairly conducted EUO and that which will be hostile and more likely than not result in a denial of the insured’s claim.

Under California Insurance Code 2071.1(2),

An insurer may conduct an examination under oath only to obtain information that is relevant and reasonably necessary to process or investigate the claim.

When interpreting the Insurance Code, what may be considered “relevant and reasonably necessary” is rather broad. The Code subjects the insured to a litany of questions during the EUO regarding financial viability in the form of banking statements, cash withdrawals, taxes and credit card statements over the last few years, along with cell phone records and receipts for purchases to be open and fair game for the insurer to question an insured about after a loss. All these stressful questions that open up an insured’s life to the scrutiny of the insurer and their representatives can be overwhelming and intimidating therefore the insured must be protected to make sure that the pace, tone, and tenor of the EUO being conducted is proper, and if not, that these issues must be documented onto the EUO transcript appropriately. Making sure that the insured’s testimony is properly interpreted in subsequent questioning may prove to be the difference between coverage or denial of a claim.

The reality is…

To finish reading this article