When dealing with insurance claims, it is important for there to be ongoing communication and cooperation between the policyholder and the insurer. This relationship is generally to share and obtain information necessary for the insurer to make a fair and prompt determination of whether coverage exists. In the context of a first party claim, the insurer needs information relating to the circumstances of the loss as well as the amount claimed. Similarly, the policyholder needs to know the status of the claim and what he or she could do to help the insurer’s investigation. There are a number of post-loss duties which are necessary to foster this cooperation between the insurer and policyholder.
For the past 12 weeks, I have written about one of these post-loss obligations, the Proof of Loss. Over the next few months, I will delve further into other policyholder obligations, such as the duty to notify the insurer of a loss, to protect the property from further harm, to prepare a detailed inventory of damaged personal property, to show the damaged property, and to provide documents requested by the insurer. These obligations, along with the duty to submit to an EUO when requested, are the main post-loss obligations and are a vital part of all insurance policies. If you have not yet read Bob Reynolds’ recent series on EUOs, I highly recommend doing so to supplement my forthcoming posts.
The duty to cooperate in first party claims differs from third party claims in a significant way. In the third party context, the relationship between the policyholder, the insurer, and the third party is constantly changing. Each claim is different, and the information necessary can be vastly different from case to case.
With first party claims, the information necessary to make a determination of whether coverage exists generally remains constant from case to case. Therefore, property policies tend to spell out the duty to cooperate in a cumulative list of “post-loss duties”.
For instance, a homeowner’s policy may contain some variation of the following language:
B. Duties After Loss
In case of a loss to covered property, we have no duty to provide coverage under this policy if the failure to comply with the following duties is prejudicial to us. These duties must be performed either by you, or your representative, or an “insured” seeking coverage, if not by you:
1. Give prompt notice to us or our agent;
2. Notify the police in case of loss by theft;
3. Notify the credit card or fun d transfer card company in case of loss as provided for in E.6. Credit Card, Electronic Fund Transfer Card or Access Device, Forgery and Counterfeit Money under section I- Property Coverage;
4. Protect the property from further damage. If repairs to the property are required, you must:
a. Make reasonable and necessary repairs to protect the property; and
b. Keep an accurate record of repair expenses;
5. Cooperate with us in the investigation of a claim;
6. Prepare an inventory of damaged personal property showing the quantity, description, actual cash value and amount of loss. Attach all bills, receipts and related documents that justify the figured in the inventory;
7. As often as we reasonably require:
a. Show the damaged property;
b. Provide us with records and documents we request and permit us to make copies; and
c. Submit to examination under oath, while not in the presence of another “insured”, and sign the same;
8. Send to us, within 60 days after our request, your signed, sworn proof of loss which sets forth, to the best of your knowledge and belief:
a. The time and cause of loss;
b. The interests of all “insureds” and all others in the property involved and all liens on the property;
c. Other insurance which may cover the loss;
d. Changes in title or occupancy of the property during the term of the policy;
e. Specifications of damaged buildings and detailed repair estimates;
f. The inventory of damaged personal property described in 6. above;
g. Receipts for additional living expenses incurred and records that support the fair rental value loss; and
h. Evidence or affidavit that supports a claim under E.6. Credit Card, Electronic Fund Transfer Card or Access Device, Forgery and Counterfeit Money Coverages, stating the amount and cause of loss.
These duties are very important to property insurance claims, and the failure to comply with these obligations can delay settlement of the claim or possibly provide an insurer a basis for denial. I hope you will join me over the next few months as I explain what these obligations require.