Over the last few years, I noticed a growing trend among my California clients. More insured clients who suffered a property loss are finding that they need to retain attorneys at an earlier stage in the claims process. Instead of seeking the advice of an attorney after their claims are denied, they need the help of an attorney at an earlier stage, just to prove to the insurance company that they suffered a loss. Clients are voicing their opinions that insurance companies are investigating losses more aggressively, and sometimes, these insureds are vexed and outraged when conditions on coverage are imposed.

The California Insurance Code allows insurers to impose conditions on coverage and requirements that must be satisfied by the insured in order to institute coverage for a loss. Sometimes insureds are surprised that they have to provide the expected notice and proof of loss, as well as examinations under oath (EUO). For insureds, an EUO may feel like an inquiry where their integrity is questioned.

The most common complaint I hear among insureds regarding an insurer’s imposition of conditions on coverage is that insurers have difficult standards for a layperson to uphold. There is no concrete roadmap that tells an insured how to structure a proof of loss or what receipts or other paperwork documentation would be needed at the time their property is flooded or burnt.

For those insureds who have attempted their own proofs of loss and were denied based upon a lack of satisfying the conditions for coverage, there is relief. Depending on the circumstances, California courts have been inclined to examine an insureds behavior and sometimes not all coverage is lost. If a carrier denies coverage for a reason other than a failure to satisfy conditions, it waives defenses based upon those conditions. Select Ins. Co. v. Superior Court, (1990) 226 Cal. App.3d 631, 637. “An insurer is not allowed to rely on an insured’s failure to perform a condition of a policy when the insurer has denied coverage because the insure has, by denying coverage, demonstrated performance of the conditions would not have been altered its response to the claim.” Campbell v. Allstate Ins. Co., (1963) 60 Cal.2d 303, 306. “An insurer may assert defenses based upon a breach by the insured of a condition of the policy such as a cooperation clause, but the breach cannot be a valid defense unless the insurer was substantially prejudiced thereby.” This is because a condition in an insurance policy is “not to provide a technical escape-hatch by which to deny coverage in the absence of prejudice not to evade the fundamental protective purpose of the insurance contract to assure the insured and the general public that liability claims will be paid.” Ins. Co. of the State of Pennsylvania v. Associated International Ins. Co., (9th Cir. 1990) 922 F.2d 516, 523.

Insureds should always try to comply with all requirements and conditions contained in most policies, however, in the event that a condition fails, California law provides a scope of protections for the insured. A court may find coverage even when a carrier initially chooses to deny it.