Did you, (the policyholder or the public adjuster), in the wake of a loss and in the midst of an insurance claim, feel like all but the insured’s firstborn child had to be pledged to the insurance company in order to receive the coverage the valuable premium was supposed to afford? If so, I promise you were not the first and will not be the last to feel that way. And, you might be interested in my next several posts concerning compliance (strict compliance, substantial compliance, or something else) with post-claim / pre-suit insurance policy conditions.
This post is introductory, and my following posts will analyze specific policy conditions commonly found in property insurance policies (e.g., loss notice, reasonable repairs, recordkeeping and record production, examinations under oath, property inspections, proofs of loss). As an introduction to the topic, there is no need to reinvent the wheel – here is an excerpt from a well-respected insurance law treatise, Couch on Insurance:
[C]ontract terms, especially those considered conditions precedent, historically were strictly enforced: if the party responsible for their fulfillment deviated from the specified terms, coverage was lost. As with many other aspects of contract law, generally, and insurance law, particularly… this harsh view has been ameliorated in modern times by judicial and/or legislative recognition that such a harsh rule tends to reward the insurer, often unjustly, at the expense of the insured and beneficiaries. A common rule recognized in place of this strict rule is that the party responsible for fulfilling contract requirements need only ‘substantially comply’ with the stated requirements. … Substantial performance of a condition has been said to be simply another way of describing an immaterial breach, with the court focusing on the materiality of the breach rather than on the materiality of the provision at issue. … In some jurisdictions, the substantial compliance rule is limited by the caveat that substantial compliance is sufficient only if the insurer suffers no prejudice by virtue of the difference between strict compliance and the degree of compliance actually made in a given case. This essentially recognizes that a degree of compliance which actually prejudices the insurer should not be considered ‘substantial.’ To prevail on a prejudice argument, an insurer must plead and prove specific facts which establish that the insured’s failure to comply with the notice provision defeated the stated purposes of the breached provisions. There is also some question whether there can ever be ‘substantial compliance’ with requirements that, by their very nature, are dichotomous, such as the obligation to submit proofs of loss under oath – some courts believe that these proofs either are under oath or they are not.1
Stay tuned as to what courts have to say about the common policy conditions noted above.
1 13 Couch on Ins. § 186:33 (West, Nov. 2011) (internal citations omitted).