Proof of loss rules are not what I normally think about Kentucky. Kentucky usually makes me think of beautiful rolling hills, great basketball, fast horses and the Kentucky Derby. But, we recently had some questions about proof of loss in Kentucky and thought we would share our findings.
Proof of loss rules vary from state to state. It is important for policyholders and public adjusters to always check their policies following a loss to see if there is a deadline to file a proof of loss. If there is a deadline, policyholders often have problems completing the evaluation of loss during that time and the question then arises, ‘what happens if a proof of loss cannot be fully completed within the time frame?’
When looking at this issue in Kentucky, here are some basic rules:
- In Kentucky, the proof of loss requirement is an enforceable condition precedent to any right of recovery and failure to comply with the requirement entitles the insurer to judgment as a matter of law. American Centennial Ins. Co. v. Wiser, 712 S.W.2d 345, 346 (Ky. Ct. App. 1986) (“In an action on an insurance policy, the insured must prove compliance with the policy’s conditions precedent or a waiver thereof to recover under its terms”); see also, Cothran v. Hartford Acc. & Indem. Co., 1989 WL 165010 * 2 (W.D. Ky. 1989) (insured failed to comply with 60-day proof of loss provision necessary to recover under the policy and “cannot breach the contract and then turn around and sue Hartford for refusing to pay him after he committed the breach”).
- When the policy requires that an insured provide a proof of loss signed and sworn by the insured containing specific policy and loss information within 60 days after the loss, and the insured wholly fails to comply, absent a written extension of time for submission of the proof by the insurer, coverage is completely barred. American Centennial Ins. Co. v. Wiser, 712 S.W.2d 345 (Ky. Ct. App. 1986).
- Kentucky recognizes the doctrine of substantial compliance with regard to duties under insurance companies. See Great Am. Ins. Co. of New York v. Brock Const. Co., No. CIV.A. 05-569, 2007 WL 2844945, at *4 (E.D. Ky. Sept. 28, 2007) citing Westchester Fire Ins. Co. v. Gray, 240 S.W.2d 825, 827 (Ky.1951).
- In Hornback v. Hornback, 667 S.W.2d 399 (Ky. Ct. App. 1824), the court held that if an investigation reveals to the insurance company all or substantially all of the information that would be included on a proof of loss, then the need for a proof of loss is obviated. (See also Aetna Insurance Co. v. Solomon, 511 S.W.2d 205 (Ky. 1974) and Western Automobile Casualty Co. v. Lee, 246 Ky. 364, 55 S.W.2d 1).
- It is well established that strict compliance with the policy may be waived by the conduct of the insurer or its agents. See Fidelity & Guaranty Insurance Underwriters, Inc. v. Gregory, 387 S.W. 2d 287 (Ky. 1965); Hartford Fire Insurance Company v. Moore, 412 S.W. 2d 860 (Ky. 1967).
- Under Kentucky case law any alleged noncompliance with a condition in a policy must be accompanied by a showing that it “sustained prejudice.” Newark Insurance vs. Ezell, 520 S.W.2d. 318, 321 (Ky. 1975).
- If an insurer approves, explicitly or implicitly, a method of compliance not stated on the face of the policy, it cannot later refuse to pay based on the insured’s failure to adhere strictly to the policy’s prerequisites. See Westchester Fire Ins. Co. v. Gray, 240 S.W.2d 825, 829 (Ky.1951). The insured, however, bears the burden of proving that an insurance company waived the insured’s duties under the policy. See id. (citing Conley v. Queen Ins. Co. of America, 76 S.W.2d 906 (Ky.1934)).
In summary, deadlines for filing proofs of loss will be enforced in Kentucky. The rule is that the insured must “substantially comply” with filing of a proof of loss within the time frame. If the policyholder fails to substantially comply with filing a proof of loss and the insurer defends on this basis, the insurer must show that it has been prejudiced.
Positive Thought For The Day
A Goal is a Dream With a Deadline.