Bob Reynolds’ recent post, Where Do and Can Examinations Under Oath Be Held? Does a Policyholder Have to go to Timbuktu? is an excellent discussion on the state of Florida law on the subject. Bob has represented more policyholders in examinations under oath over the past twelve months than any attorney I know. He is also one of the best advocates I know at hearings before judges. I am happy that he is with us rather than doing insurance defense, which he did before he came to our firm.

Since my practice is a little more national in scope than Bob’s (he has so much work in Florida he cannot get away) I conducted some more widespread research on his topic. In my practice, I have clients who own property all over the country and the world. I kept thinking that if my client owned property in Chicago, but lived in Timbuktu, a court may reasonably find that the client had to go to Chicago for an examination. “Timbuktu” is a relevant geographic place depending on the circumstances of where you are from and how small the world is for any policyholder. What is “reasonable” is a nebulous concept subject to extreme differences of opinion, even if it is the primary standard for determining where one can be obligated to show up for an examination under oath.

Policies are usually ambiguous as to where the examination or sworn statement must be held. Most language is somewhat similar to this:

The insureds, as often as may be reasonably required, shall exhibit to any person designated by this Company all that remains of any property herein described, and submit to examinations under oath by any person named by this Company, and subscribe the same; and, as often as may be reasonably required, shall produce for an examination all books of account, bills, invoices and other vouchers or certified copies thereof if the originals be lost, at such reasonable time and place as may be designated by this Company or its representative, and shall permit extracts and copies thereof to be made.

“Reasonable time and place” is not exactly apparent in complex commercial losses. For example, if a loss happens in a manufacturing facility in Tennessee, which belongs to a corporation headquartered in Tokyo, whose American finance operations are in New York, where can the insurer examine corporate representatives pertaining to issues of business income and extra expense? What is reasonable to the insurer may be extraordinarily frustrating to a risk manager; who pays the cost of transporting employees internationally? Of course, they ask me, “Chip, do we have to put up with and pay for this?” Most corporate clients do not want an “I dunno” answer—although that may be the best answer when the test is one of a “reasonable place” and the failure to comply penalty is no payment for an otherwise legitimate claim.

Since I represent the policyholder, I love an old Washington case, Pierce v. Globe & Rutgers Fire Insurance Company, 107 Wash. 501, 182 P. 586; (Wash. 1919), which holds that an examination more than 25 miles from the property damage is not enforceable:

The place where the loss occurs is the proper place for the examination, and neither the insurance company nor the insured has the right to demand that it shall take place elsewhere.

That rule may help in most cases, but I wonder if all the property examinations pertaining to Mt. Saint Helens were conducted in catastrophe zones if access could only be gained by helicopter? I could imagine some of my ingenious insurance opponents citing the language about “neither” party being able to change the location as an excuse to do so and demand my client somehow gets there. Usually, the twenty five mile rule from the location of the loss is pretty good to follow as a “reasonable” place.

Of course, the same result can be very bad for the policyholder if he or she owns property in a far away place, as demonstrated in the old case of Fleisch v. Insurance Co. of North America, 58 Mo.App. 596 (1894). There the insured, a resident of New York City, obtained insurance on his stock of goods situated in Missouri, from a Missouri corporation. The policy required that, in case of loss, the insured should submit to an examination under oath touching all matters relating to the claim and the cause of loss. The Missouri court held that the New York insured was required to present himself for the examination to the company’s adjuster in Missouri. The refusal to submit to an examination outside of New York City was a violation of the policy. I would suggest that in 1894, Missouri was about as far from New York City as Timbuktu is from Chicago today.

Illinois courts may be a little more lenient with policyholders than those in Missouri. In American Cent. Ins. Co. v Simpson, 43 Ill App 98 (1892), the insurer sought to examine the insured under oath in another state. The insured declined to appear. The court stated that the insurer had no right to require the insured to bring his books and go to the office of the insurance company in another state to be subjected to an examination under oath. The court reasoned that persons insured would be harassed, and the expense of traveling to the general office of the insurance company was such that the benefit that the insured would derive from the insurance would be destroyed. The court rejected the insurer’s contention that the insured could not recover because he had not substantially complied with the terms and conditions of the policy.

A New York court found that New York was a reasonable place to have the examination under oath despite the insured residing in Liberia and having business in Liberia. Ayuob v American Guarantee & Liability Ins. Co. 605 F Supp 713 (1985, SD NY), applied New York law and rejected the contention that New York was not a reasonable place to hold the examination. The court noted that the policies explicitly stated that the insured “shall appear at such reasonable time and place” as may be designated by the insurer. The court pointed out that Liberia was not the only reasonable location at which the examinations could have been held, and that local conditions in Liberia, including lack of facilities and political unrest, provided further reason why its suitability as a location for the examination was questionable. The court stated that as to those insureds who actually came to New York, or agreed to come, for whatever purposes after the alleged loss, that New York was not an unreasonable site for the examination. As to one insured who neither came nor agreed to come to New York, the court directed him to submit himself for examination in New York, gave him the right to demonstrate the infeasibility of his coming to New York and to suggest some other place, other than Liberia, where he could be examined.

The lesson from all this is that some judges may think that a “reasonable” place is a lot different than what a policyholder may find as reasonable. My experience is that most insurance defense counsel love to take examinations under oath in cities where there is something a lot more fun to do before and after the examination than in Timbuktu. I recently handled a significant Houston commercial loss, with the examination under oath held in our Tampa office. I bet the reasonableness of that location had something to do with my suggestion that the best wine cellar in North America is at Bern’s Steakhouse, a few minutes away from our office conference room overlooking Tampa Bay.