Public adjuster and policyholder advocates often get questions from insureds about the extent that insureds must cooperate with insurers during the investigation stage of a claim. As an example, some insureds have asked me whether they really must produce financial documents and receipts in a theft claim. Insureds often ask why the insurer is making their lives so difficult during the investigation.

These questions have prompted me to write this blog addressing a clause in most property insurance policies known as the “Cooperation Clause.”

As a condition to coverage under standard property insurance policies, the insured must cooperate with the insurer. The provision requires the insured to assist with and participate in the investigation of the claim. Because the provision is a condition to coverage, an insured’s failure to comply with the cooperation clause can, in some instances, give insurers a basis to deny coverage.

Unfortunately, some insurers take advantage of this clause. I have seen some insurers try to force insureds to jump through so many hoops during the investigation stage it is clear that the insurer is trying to get the insured to refuse to cooperate so coverage can later be denied.

However, even if an insured does not fully comply with the cooperation clause, coverage is not always necessarily lost. Courts have sought to limit the circumstances under which an insurer can deny coverage on the basis of an insured’s alleged failure to cooperate.

In many jurisdictions, an insured’s failure to fully cooperate may be excused when the insured has otherwise substantially complied. Further, some states impose additional requirements on insurers before permitting an insurer to deny coverage. As an example, some states require insurers to demonstrate (1) diligence in seeking the insured’s cooperation through regular communication with the insured or the insured’s representative; (2) that the insured’s lack of cooperation was material, and/or (3) that prejudice was suffered as a result of the insured’s failure to cooperate.

A recent example of a court addressing the Cooperation Clause can be seen in Hsu v. Safeco Insurance Company.1 In Hsu, the Eleventh Circuit affirmed a summary judgment ruling in favor of the insurer based on the insureds’ failure to cooperate.

Hsu involved the insureds’ failure to produce certain federal income tax returns that the insurer requested in connection with their homeowner’s claim. On appeal, the insureds argued that the district court erroneously granted summary judgment because there was a factual dispute over whether they had acted in “good faith” by producing the tax returns in their possession and authorizing the insurer to obtain the others directly from the Internal Revenue Service. The insureds also claimed that the insurer failed to act with “diligence and good faith” in procuring the returns, even though the record showed that the insurer requested them from the IRS and subsequently confirmed that they had been mailed to the insureds.

In reviewing the district court’s grant of summary judgment, the circuit court noted that, under Georgia law, an insured has a duty to cooperate with the insurer to obtain and reconstruct unavailable documents and that the failure to provide material information required by an insurance policy constitutes a breach of the policy. The circuit court also noted the insurer’s diligence in pursuing the tax returns by first requesting them from the IRS and later following up with its insureds via two written requests to forward the returns. Because the insureds did not respond to either of the insurer’s requests and offered no explanation or excuse for this failure, the circuit court agreed with the district court’s finding that the insureds breached the insurance policy.

This case serves as an important example that, when an insurance company requests certain personal information, the insured must do its best to cooperate. For claims investigations, the cooperation clause is not bilateral—it is unilateral. As a result, public adjusters should work with insureds to ensure that insurers’ requests reasonably related to the claim are complied with by insureds to ensure that insurers cannot simply deny coverage on the basis of an insureds failure to cooperate.

If an insurer appears to be abusing the cooperation clause by requesting documents that have no reasonable relationship to the claim, public adjusters can try to limit the invasiveness of the investigation. As stated in Safeco Insurance Company of Oregon vs. Masood,2 an insurance company owes the insured an “implied duty to act in good faith in making its information demands and in handling [the insured’s] personal information.”

It can be argued that insurers that conduct overly invasive investigations that have no reasonable connection to the factual underpinnings of a claim violate the duty to act in good faith.

1 Hsu v. Safeco Ins. Co., No. 15-14674, 2016 U.S. App. LEXIS 12407 (11th Cir. July 5, 2016).
2 Safeco Ins. Co. of Oregon vs. Masood, 330 P. 3d 61 (Or. Ct. App. 2014).