“Cooperation” & First Party Claims

How Much “Cooperation” Is Required When An Insured Makes A First Party Insurance Claim?

The property provisions of most insurance policies usually include conditions requiring the policyholders’ cooperation before payments are due; e.g., timely notice and proof of loss, examination under oath, and production of requested documents. The policyholder’s compliance is usually made a condition precedent to the insurer’s obligation to pay benefits. (Hickman v. London Assur. Corp. (1920) 184 Cal. 524, 529.) However, California Courts have consistently held that an insurer must be able to show actual prejudice as a result of the policyholder’s failure to cooperate before the insurer can base a denial of coverage on the policyholder’s failure to comply with a condition of the policy. (Campbell v. Allstate Ins. Co. (1963) 60 Cal.2d 303, 308; Northwestern Title Co. v. Flack (1970) 6 Cal.App.3d 134, 141-142; Shell Oil Co. v. Winterthur Swiss Ins. Co. (1993) 12 Cal App.4th 715, 763.) Indeed, one Court has held that “substantial compliance” is all that is needed because: “the real question is whether there was enough evidence of whatever form and however acquired that it would be unreasonable for the insurance company to refuse to pay the claim.” McCormick v. Sentinel Life Ins. Co. (1984) 153 Cal.App.3d 1030, 1046.

Examinations Under Oath:

Most policies require policyholders to submit “as often as may reasonably be required” to examination under oath (“EUO”). The unsurer has the absolute right to require the policyholder to submit and the policyholder cannot refuse “notwithstanding that he may believe that the principal object of the company is to find some loophole whereby it might evade payment of the policy. (Hickman v. London Assur. Corp., supra.) Thus, if the policyholder refuses to submit to an EUO the insurer may assert such refusal as a defense to payment of the claim. Robinson v. National Auto & Cas. Ins. Co. (1955) 132 Cal.App.2d 709, 714; Globe Indem. Co. v. Superior Court, supra, 6 Cal.App.4th at 730.

Even though insurers have the right to take EUO’s, the right must be exercised reasonably and certain actions taken by the insurer can expose them to claims of bad faith. (Hickman v. London Assur. Corp. supra.) Insurer cannot use cooperation clause to force disclosure of confidential communications between insured and counsel protected by the attorney/client privilege or work product doctrine. (Rockwell Int’l. Corp. v. Superior Court (1994) 26 Cal App.4th 1255, 1256.) The insured has the right to representation by counsel at his or her own expense throughout the examination and can refuse to submit to an examination unless his or her attorney is present. (Hickman v. London Assur. Corp., supra, 184 Cal. at 529.) Insurer can be held in bad faith for misleading policyholder about the procedure and purpose of EUO (telling them that it was “a procedure to settle the claim” rather than a search for information about policy violations). (Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1281. Insurer can be held in bad faith for dissuading insureds from having their attorneys present and otherwise intimidating and badgering them during the EUO. (Tomaselli v. Transamerica Ins. Co., supra.)

The failure to provide requested information does not necessarily excuse the insurer’s duty to investigate the claim through other channels because the insurer’s duty of good faith and fair dealing is not contingent on the policyholder’s performance of any policy condition. (Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 577; see also, California Cas. Gen Ins. Co. v. Superior Court (1985) 173 Cal App.3d 274.)

Production of Documents and Records

Most policies also require the policyholder: “as often as may reasonably required, shall produce for examination all books of accounts, bills, invoices and other vouchers…” In Othman v. Globe Indem. Co. (9th Cir. 1985) 759, 1485, 1465 the policyholder made a claim when his store was destroyed by fire. The insurer’s investigation indicated that arson might be involved and therefore requested the policyholder to produce his bank records, and other financial information to establish the source of cash the policyholder used to purchase his large inventory. The policyholder refused to produce the requested documentation and the Court held that the insurer had a right to refuse payment of the claim until the insured provided the requested information.

Even though the insurer has the right to demand documentation from the policyholder, the demands must be reasonable. As one Court stated, of course, the insurer is limited by a rule of reasonableness and specificity. It may not “roam at will through all of the insured’s financial records.” [Citation.] “(Stover v. Aetna Casualty and Surety Co. (S.V.W.Va. 1987) 658 F.Sup. 156, 160; see also Happy Hank Action Co. v. Amer. Eagle Fire Ins. Co. (N.Y. 1955) 145 N.Y.S. 2d 206, 211 [Holding that insurers have no license to harass insureds with aimless questions and demands for documents, or with random shots in the dark. The Court noted that circumstances must excite suspicion so that there is a basis for probing the bonafides of the claim and that the questions asked and documents sought must have point and direction.]; Chavis v. State Farm and Fire Casualty (N.Ca. 1986) 346 S.E.2d 496.

In addition, the weight of authority supports the view that the insurer must establish prejudice before it cannot deny coverage based on the insured’s refusal to produce requested documents. (Othman v. Globe Indem. Co. (9th Cir. 1985) 759 F.2d 1458; see also, Wood v. Allstate Insurance Co. (7th Cir. 1994) 21 F.3d 741, 745; Puckett v. State Farm General Insurance Co. (S.C. 1994) 444 S.E.2d 523, 524; King v. Federal Ins. Co. (D.Kan.) 1992 788 F.Sup. 506; Weathers v. American Family Mutual Ins. Co. (D.Kan. 1992) 793 F.Sup. 1002.


Policies generally require policyholder’s cooperation throughout the production of documents and records. In addition, policyholders may be required to give examinations under oath. A policyholder should be careful about refusing to appear for an examination under oath or produce documents because such refusal could result in a delay in resolution of the claim or basis for a denial of coverage if the insurer can establish the refusal has caused the insurer to suffer actual prejudice. However, insurers must exercise those rights within reason. Therefore, in cases where an insurer is making repeated demand for examinations under oath, or large and broadly worded requests for documents, the policyholder may have a legitimate reason to object. In such cases, the policyholder would be well advised to seek the assistance of its insurance agent and/or legal advice.

By James H. Wilkins

© 2000-2013. James H. Wilkins and Wilkins, Drolshagen & Czeshinski LLP. All rights reserved. No portion of this article may be reprinted or distributed without the written consent of the copyright holders.
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