As most people have never had the pleasure of being browbeaten by an overzealous insurance defense attorney, insureds usually have no idea what is in store for them at an Examination Under Oath (EUO). First and foremost, I implore everyone reading this to hire an attorney before sitting for an EUO. While I know that sounds self-serving, I mean it. If a carrier requests an EUO, its representative will undoubtedly say something like, “We are here to evaluate all facts and circumstances surrounding this claim so that the carrier may make an informed assessment of the claim.” And while this may be true, many EUOs are called so insurance companies can find reasons to deny claims.
Insurance defense attorneys reading this just cringed. Why? Insurance companies are legally obligated to evaluate claims by looking for coverage, and using an EUO to dig for reasons to deny a claim can be considered a violation of an insurer’s duty of good faith. Insurance defense attorneys commonly ask about their policyholder’s financial problems and ask policyholders the exact same questions that were answered on the application for insurance. This is not done merely to confirm the answers given on the application, but to look for motives to defraud the insurance company or misrepresentations which may void an insurance policy. The defense lawyers know that if an insured has missed a mortgage payment, they can argue or insinuate a claim is fraudulent and motivated by financial problems. They also know that a policyholder’s misrepresentation on the application can void the policy, ab initio, that is, as if it never existed. No policy means no claim.
The point is, in the EUO process, the insurance companies have attorneys working very hard for their best interests and most insureds are not experts in insurance law. Even a seemingly innocent question could lead to a denial. If the same question is answered differently, the insurer may not attempt to use it to deny a claim. For example, let’s suppose an insured home suffers a pipe break. Water from the pipe sprays behind a wall and soaks the dry wall. Within a few days, even if reasonable effort is employed to dry the area, mold may grow. If the insured is called to EUO and innocently testifies that his loss consists of mold all over the drywall, the defense attorney may be delighted as mold is usually excluded or severely limited under most policies. What the policyholder should have been said is the broken pipe sprayed the drywall and later, despite efforts to dry the area, mold grew on the drywall. What’s the difference? The drywall damage caused by the broken pipe would probably be covered under most policies. Further, the mold may also be covered as an ensuing loss.
So, what can a policyholder do to prepare for an EUO? First, I recommend that a policyholder sit down and create a timeline for the claim. When did they become aware of damage? What was the property’s condition prior to the loss? What steps were taken immediately to mitigate the damage? When was the insurance company called? Were any statements made by the insured to the insurer? If so, consistency is a must in the EUO process. What repairs were made? Who made the repairs? How much did they cost? If an estimate has been submitted by a public adjuster or other professional, have the person who generated the estimate explain it so everyone agrees on the damage claimed. Also, it is important to note that EUOs are not memory tests. If a policyholder brings information and refers to it at an EUO, they can. One caveat: if notes are used, the defense attorney will ask for a copy and possibly attach the notes to the EUO as an exhibit.
Further, the insurer has probably asked the policyholder for documentation to be provided in conjunction with the examination. The policyholder should diligently gather these documents and provide them to defense counsel BEFORE the EUO in order to avoid having defense counsel demand to review the documents and ask the insured to come back for a second examination. In addition to gathering and providing the documentation, the policyholder should review and become familiar with them to answer questions. In other words, the policyholder should become an expert about the facts and circumstances surrounding his/her own claim. I know some people reading this are saying, “Why? Isn’t the insurance company there to help me?” No. This is why hiring a good attorney for an EUO is incredibly important.