(Note: This is the sixth of a thirteen part series he is writing on examination under oath). 

“We are here today for your examination under oath. It is being taken subject to the policy’s terms and conditions to illuminate all facts and circumstances surrounding your claim so the insurer may make an informed decision about your claim.” This is the little speech I would give before taking a policyholder’s examination under oath back in the days when I carried the insurers’ water like Gunga Din. Of course, today I often make light of such statements. That is, it seems like the only reasons insurers demand an EUO are: claim delay, intimidation of the policyholder, and looking for reasons to deny the claim. But where does the truth lie? What are the practical reasons insurers demand an examination under oath?

In Claflin v. Commonwealth Ins. Co., 110 U.S. 81 (1884) the Supreme Court of the United States stated:

The object of the provisions in the policies of insurance, requiring the assured to submit him-self to an examination under oath, to be reduced to writing, was to enable the company to possess itself of all knowledge, and all information as to other sources and means of knowledge, in regard to the facts, material to their rights, to enable them to decide upon their obligations, and to protect them against false claims. And every interrogatory that was relevant and pertinent in such an examination was material, in the sense that a true answer to it was of the substance of the obligation of the assured. A false answer as to any matter of fact material to the inquiry, knowingly and willfully made, with intent to deceive the insurer, would be fraudulent.

Id, at 94-95.

That’s all well and good, but hauling a policyholder in to sit in a room and answer questions under oath posed by a defense attorney is a very harrowing experience for most. It’s my opinion that the EUO should only be employed when absolutely necessary and not as a matter of course. For example, defense counsel is often fond of saying, “We need to know the building’s history to evaluate the claim.” In a word: nonsense. Every policy of insurance issued is preceded by the policyholder submitting an application including questions about pre-existing damage and, further, the carrier has the right to inspect the property prior to underwriting the claim, hence, I don’t care what the building’s history is: the insurance company took the premium and wrote the policy, if it failed to investigate the property’s condition prior to agreeing to insure it, why should the carrier be able to roll back time and indemnify its own negligence in failing to operate in due diligence before accepting the risk? The answer: it shouldn’t.

So when do I think an EUO is proper? I will answer in general: under very limited conditions. That is, the vast majority of policyholders have no training in the evaluation of property damage or construction, hence, they may only testify to what they see with the naked eye. So how much does it really assist the insurance company in evaluating the claim to hear the policyholder assert under oath, “After Wilma I saw brown spots on the ceilings in the den, living room, and master bedroom.” I mean, didn’t the pictures your adjuster should have taken during his/her inspection illustrate these water stains infinitely better than the policyholder’s words? Further, to whom should the insurer listen: the policyholder with no training or the Independent Adjuster who is supposedly an expert in evaluating said damage? I’m sorry to sound so negative, but it’s my observation that EUOs are usually called as a tactic to either prolong the post-loss obligations (usually trying to stave off appraisal) or to bully the policyholder, while defense counsel sits there with a copy of Goldman vs. State Farm, 660 So2d 300 (Fla. 4th DCA 1995) in their mitts, checking their watch, hoping vainly that the policyholder doesn’t show up.

So when do I think EUOs should be taken? First, if there is evidence of fraud. And note I said evidence of fraud, not when the insurer takes their canoe, rod, and bait and decides to go on a fishing trip looking for fraud. Second, if there are multiple claims before an insurer during the same policy period. That is, if the insured has, for example, a fire loss and a pipe break and there may be overlapping areas of damage (and, YES, to insurance defense people reading this blog, multiple legitimate claims do happen to good people). Additionally, when a policyholder has no receipts for repairs, but has mitigated the damage. For example, I recently had a claimant explain that after Wilma her brother applied roof tar to the leaking roof and replaced missing tiles. Moreover, I’d like a study performed by the State of Florida to determine exactly how many handymen were roaming door-to-door after Wilma accepting only cash to effectuate temporary repairs. These are the circumstances where the policyholder’s testimony is important and when an EUO is warranted.

The bottom line is this: almost every jurisdiction gives the insurer an unfettered right to take examinations under oath and to force the policyholder to answer seemingly any question, but the mere “illuminating all facts and circumstances surrounding the claim” shouldn’t be substantiation for putting the policyholder through the wringer of an EUO. There really should be some overriding reason the carrier needs this testimony, besides, of course, for defense counsel’s bi-weekly billing bonanza. Furthermore, this is the main reason why every policyholder should be represented by counsel at an EUO. As it is very clear the insurance companies are using EUOs for an agenda other than to merely ferret out “facts and circumstances,” hence the insureds need an advocate who may assist them in navigating the potential mine field of an EUO while also keeping the opposition in check and honest about the process. Tune in next week insurance fans when we discuss What is the impact of a wrong answer at an examination under oath? Do all incorrect answers lead to denial?