Property Insurance 101: Everything You Always Wanted to Know About Examinations Under Oath - But Were Afraid to Ask!
- The EUO obligation is contractual and is governed by the express terms of the insurance policy. 4 Therefore, the rules of civil procedure governing the taking of depositions, such as the three-hour time limit in Illinois or the seven-hour time limit in federal court, do not apply to an EUO.
- Insureds may be represented by counsel at an EUO, though counsel technically is not permitted to participate in the examination either by asking questions or lodging objections. 6 Still, insured’s counsel should inquire at the EUO on the materiality of questions. But, he or she must exercise caution in instructing an insured not to answer questions based on immateriality, as a subsequent determination of materiality may bar the insured’s recovery.
- While his or her role is limited during the EUO to providing legal advice to the insured when issues arise, counsel’s real role is to prepare the insured for the EUO. Effective preparation includes obtaining information about the facts and the circumstances surrounding the loss and the claim. At a minimum, counsel should request from the insurer: all post-lost statements made by the insured, whether hand-written or tape-recorded; post-loss investigative reports; post-loss photographs; post-loss estimates and appraisals of the damaged or destroyed property; pre-loss underwriting inspection reports and photographs; application(s) for insurance; and a certified copy of the insurance policy. However, the insurer’s failure to provide information concerning its investigation, including copies of previous statements, is not an excuse for the insured’s non- compliance with the EUO requirement.
- EUOs are taken before litigation to augment the insurer’s investigation of the claim. In contrast, a deposition is not part of the claim investigation process; it is designed to facilitate the gathering of information once an insurer has made a claim decision, such as a denial of liability.
- Many courts view the EUO requirement akin to a cooperation clause often included in a liability policy. 10 Cooperation is essential to the insurance relationship because that relationship involves a continuous exchange of information between insurer and insured interspersed with activities that affect the rights of both. The relationship can function only if both sides cooperate. So, unlike a deposition, an insured has a duty to disclose during an EUO all facts within his or her knowledge.
- Depending on the language of the policy, an insurer may be permitted to question insureds separately in sworn examinations; whereas, it would have no parallel right to do so under the rules of civil procedure. 12 In that regard, many recently drafted property insurance policies expressly provide for the insurer to examine multiple insureds separately and out of the presence of other insureds. 13 Courts have reached opposite conclusions though where the policy contains no such express provision. Some courts have permitted the insurer to examine each insured separately out of the presence of the other insured, reasoning that the sequestration procedure would lead to more accurate information and would discourage or prevent fraudulent claims. 14 Other courts have permitted an examination to be made of each insured separately but within the presence of the other insured, reasoning that the policy does not mandate requiring insureds to submit to an EUO outside the presence of other insureds and that if the insurer desired to impose such a condition it could have done so by an express term in the policy.
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