If you’re a regular reader of this blog, you know that I have written about how courts interpret ambiguous terms in an insurance policy. We know that in those instances, if the court deems there to be a true ambiguity, it will rule in favor of the policyholder. But what if there is no language regarding a certain issue? What happens then?

In Lidawi v. Progressive Mutual Insurance Company,1 after the husband and wife policyholders submitted their insurance claim to Progressive, Progressive requested an examination under oath (“EUO”), as permitted by the policy. In a letter to the policyholders requesting the EUO, Progressive did not refer to separate examinations. When it was time for the EUO, the policyholders, their attorney, and an interpreter met with two Progressive representatives. Progressive’s team insisted that the EUOs be conducted separately, but the policyholder’s attorney insisted that both policyholders be allowed in the room when the other was examined because “they are husband and wife, and are both claimants and insured under the policy.” Progressive’s representatives left without taking the EUOs.

A few days later, Progressive’s inspector sent a letter formally requesting the policyholders submit to individual and separate EUOs. The policyholders responded by stating there was nothing in the insurance policy that required individual and separate examinations. The policyholders expressed a willingness to submit to EUOs, but only if they were permitted to be in the same room while questioned. A couple weeks later, Progressive wrote the policyholders a letter denying their claim because it claims they violated the policy’s cooperation provision.

The policyholders then filed suit for breach of contract, and both parties moved for summary judgment. The trial court found in favor of Progressive, dismissing the policyholders’ lawsuit. The policyholders appealed the court’s ruling.

On appeal, the appellate court framed this issue of first impression as follows: “whether clauses in an insurance contract requiring the insured to cooperate in the investigation of the claim and to submit to an examination under oath (EUO) permit the insurance company to require separate, segregated examinations of the insureds.” The appellate court determined “the policy is silent regarding the manner in which the EUO is to be conducted.”

Finding in favor of Progressive, the appellate court stated that “[w]hen a contract is silent on an issue, Texas courts will infer reasonable terms…. Texas courts will also supply missing terms when necessary to effectuate the purpose of the parties under the agreement.” The appellate court then quoted a federal district court that dealt with a similar issue:

The [insureds] bargained for the right to make an honest claim under the policy and to receive compensation with a minimum of inconvenience. In return, [the insurer] bargained for a reasonable means to ascertain the truth surrounding a claim. The cooperation clause embodies [the insurer’s] right to uncover the probability of truth from the [insureds].

Ultimately, the appellate court concluded more accurate factual statements could likely be taken in if such statements were taken separately. “Accordingly, we infer a reasonable term permitting Progressive to require separate, segregated EUOs of its insureds.”

1 112 S.W.3d 725 (Tex. 2003).