After a major loss, an insured is devastated. It is at this time, that an insurance company is needed to aid the insured in accordance with the contract (policy) the insured and insurance company entered into.

It’s also at this time that the insured’s duties to the insurance company kick in. An insured usually must 1) provide notice and a proof of loss outlining his or her losses; and 2) submit to the examination under oath (EUO) if requested by the insurance company. Often times, the insurance company will accompany a request for an examination under oath with an extensive request for documents. Insureds can be outraged by the numerous documents requested and feel that the document request is an onerous fishing expedition on the part of the insurance company.

Time and again, courts have indicated that an insured has the duty to comply with an insurance company’s request because it is a precondition to coverage, and a lawsuit cannot survive unless an insured substantially complies with a policy’s preconditions. On March 16, 2012, in the matter of Foster v. State Farm Fire and Casualty Company, the Seventh Circuit Court of Appeal confirmed that there is no breach of contract and bad faith without compliance.

In Foster, the insureds home was ravaged by fire. State Farm began a timely investigation of the fire and requested numerous documents, a proof of loss and an EUO. Eight months after the initial fire, the Fosters provided their proof of loss and submitted to their EUOS. The insurance company requested additional documentation because the Fosters provided new or changed information during their EUO and agreed to produce more documents during their EUO. As the one year statute approached, the insureds did not complete their additional EUOs or additional document production and filed suit. State Farm brought a motion for summary judgment, which was granted because the Court concluded that the insureds explicitly agreed to produce additional documentation and submit to an additional EUO, and this was not too onerous a burden. Specifically, the Court indicated that the insureds had a duty to obtain the documents in the possession of third parties, including tax returns and bank records.

Letting an insured know that they must comply with a document request, proof of loss and EUO or they may forfeit their rights under the policy and lose any subsequent rights to bring a suit is not only important, but a must. As we guide insureds through the maze of recovery, we see the hardship that insureds go through just to gather documents after a fire or other tragedy, but the reality remains that courts consider reasonable preconditions in policies official duties that cannot be circumvented.