(Note: This Guest Blog is by Corey Harris, an attorney with Merlin Law Group in the Tampa, Florida, office. This is part of a series he is writing on post-loss duties).
“In the event of loss or damage, we will adjust the loss with you.” This is a common phrase in property insurance policies, but an important phrase nonetheless. The key word in this sentence is the word with. The insurer will adjust the loss with an insured, not the insurer will adjust the loss for the insured. While the word with may not seem too important at first glance, this phrase can play a very important role in determining whether an insurer or insured may have breached the policy.
Many of an insured’s duties after a loss are very straight forward. An insured should report the loss, notify the police in the event of a theft, mitigate damages to prevent further loss, keep an accurate record of expenses, etc. At a basic level, many people can interpret these obligations for themselves. One instance where a policyholder’s obligations after a loss may be cloudy from the beginning is the duty to cooperate with the insurer in the event of a loss.
Most insurance policies have a clause which states that after a loss, the policyholder has an obligation to cooperate with the insurer. Even if this clause is not expressly included, the duty to cooperate is normally implied by law. Stewart Sleep Center, Inc. v. Atlantic Mut. Ins. Co., 860 F. Supp. 1514 (M.D. Fla. 1993).
The purpose of an insured’s duty to cooperate with the insurer in the adjustment of the claim serves multiple purposes beneficial to both the policyholder and the insurer. The obligation is important to the insurer because it gives the insurer an opportunity to collect important facts and details while the information is still fresh on everyone’s mind. It also helps the insurer make an informed coverage decision and prevent fraudulent claims.
The duty of cooperation after a loss does not only run from policyholder to insurer. It also runs from the insurer to the policyholder. Adjusting the loss with the insured cannot be accomplished if there is no duty of cooperation on the part of the insurer. Cooperation between the insurer and the policyholder helps the claim determination be made quickly and causes the claim to be paid for fairly. As is the case if an insured breaches his post-loss obligations, an insurer that fails to cooperate with the policyholder during the adjustment of the claim may breach the contract and be liable for damages.
Attempting to summarize the cooperation clause in one blog post would be inadequate. Therefore, over the next few weeks I will write about this important aspect of law and some of the nuances which it entails.
