Requirements, Exceptions, and Considerations of an Insurer’s Right to Examinations Under Oath

An insurer’s right to examine its insured under oath in connection with evaluating a claim submitted under the insurer’s policy is well established under the law. Over 130 years ago, the United States Supreme Court in Claflin v. Commonwealth Insurance Co. first outlined the purpose of examination under oath (EUO) provisions in insurance policies, noting the provisions are the necessary means by which an insurer may obtain from the insured all of the information that is material to the question of coverage under the policy. In its holding, the Supreme Court emphasized that the insured is obligated to submit to an examination – where required by the policy – and to provide truthful information and testimony insofar as the information sought by the insurer is pertinent to coverage. Critically, the Supreme Court in Claflin also determined that the insured’s failure to comply with the examination requirement results in a forfeiture of coverage.

More recently, courts construing examination under oath provisions have similarly held that such provisions are valid and enforceable. If and when the insurer exercises its right to conduct an examination under oath, the insured’s compliance generally operates as a condition precedent to recovery under the policy. Indeed, the vast majority of courts have followed the Supreme Court’s holding in Claflin in concluding that an insured’s explicit refusal to submit to an examination under oath vitiates coverage under the policy.

In addition to unqualified refusals, courts have also held that a breach of the examination under oath requirement occurs where the insured: (a) repeatedly postpones scheduled examinations; (b) fails to submit to a continuation of the examination if the continuation is requested by the insured; (c) fails to provide requested documentation; or (d) refuses to answer questions that are material to coverage. To that end, several courts have rejected the proposition that an insured’s provision of a recorded statement or interview constitutes substantial compliance with the EUO requirement.

However, as a general rule, courts have declined to find that the insured breaches the examination under oath requirement where the insured’s failure to comply is justified or excusable. A few examples of excusable non-compliance are where the insured lacks sufficient knowledge of the subject matter of the inquiry or cannot recall the information necessary to formulate a response. On the other hand, non-compliance has been deemed inexcusable where the insured invokes the Fifth Amendment right against self-incrimination as grounds for the failure to appear for an examination or to respond to a particular line of inquiry. Similarly, non-compliance has also been deemed inexcusable where the insured refuses to submit to an examination under oath pursuant to advice of counsel.

A related issue is which insureds are required to submit to an EUO. Most liability policies draw a distinction between named insureds, likely the party paying the premium for the policy (most often referred to in the policy as “you” and “your”) and other insureds. Typically, those are persons or organizations not named as insureds who are afforded insured status through the policy.

Many provisions requiring submission to an examination under oath – generally found in the conditions section of the policy – place this requirement upon the named insured alone. Where the policies limit the application of the EUO requirement to named insureds, the insurer may have no basis to compel other insureds to submit to an examination, and thus, they may not rely on the insured’s refusal to give an examination as a basis to disclaim coverage, even if the insured is the party seeking coverage. However, since so-called “cooperation clauses” found within liability policies, which require cooperation with the insurer in the investigation of claims or defense of lawsuits, generally apply to all insureds, these clauses can provide an alternative basis for an insurer to compel an insured’s cooperation, albeit while not necessarily allowing the insurer to compel the insured’s examination under oath.

While courts recognize some obligation on the insurer to cooperate with its insureds, in some degree this cooperative relationship can be at least a little one-sided. For example, although insurers generally have the right to compel an insured submitting to an EUO to produce documents in advance of the examination, insureds typically do not have this same right. That is, insureds generally may not demand the insurer produce its file concerning the investigation of the insured’s claim prior to the examination, or to refuse to appear for the EUO unless the file is produced. Courts that have refused to compel an insurer to produce its file to an insured prior to an EUO have grounded their decision in the belief that the disclosure of such information likely would undermine the very purpose of the examination – allowing insurers to sort out fraudulent claims from honest ones – by tainting the insured’s perception of the facts, or even worse, inviting or enabling the insured to tailor its testimony to the facts already found by the insurer.

Of course, the legal issues arising from examinations under oath do not end once the examination is completed. Rather, disputes often arise concerning the discoverability and admissibility of EUO transcripts in subsequent litigation, with different jurisdictions reaching varied conclusions on theses issues. For example, several decisions out of Florida have resolved disputes concerning the discoverability of an EUO transcript against the party seeking the disclosure, with the courts finding that the transcript is protected by the attorney work-product privilege because the examination was taken in anticipation of litigation by the insured against the insurer concerning the right to coverage.

Florida courts have also refused to compel production of an EUO transcript where the party seeking the transcript has asserted a tort liability claim against the insured and the transcript contains testimony pertinent to the insured’s defense to those claims. Decisions issued by New York courts, on the other hand, have ordered production of EUO transcripts and have rejected the application of both the attorney-client privilege and the attorney work-product privilege to the transcripts, where the transcripts were sought in litigation between the insurer and the insured and were made during the ordinary course of the insurer’s business of evaluating claims presented for coverage. This is the case even where the EUO is taken by an attorney retained by the insurer, so long as the attorney’s role was assisting in the claims process and not as a legal advisor to the insurer.

As to admissibility, some courts have allowed the introduction of an EUO transcript during trial or on a motion for summary judgment, on the basis that statements by the insured are party admissions under Federal Rule of Evidence 801(d)(2) or an analogous state evidentiary rule. Other courts have refused to admit an EUO transcript on the grounds that, unlike a deposition, an examination under oath is conducted as part of an insurer’s claim investigation, and not for purposes of litigation, and the EUO process is not subject to procedural or evidentiary rules and the insured’s attorney may not question the insured at the EUO. Thus, these courts have found that EUO transcripts lack the same degree of reliability as a deposition transcript. Still other courts have refused to admit EUO transcripts as affirmative evidence at trial on the ground that they are inadmissible hearsay, but have allowed the transcripts to be used for impeachment purposes against an insured that testifies.

Insurers conducting a claim investigation should familiarize themselves with the language of the policy at issue and the rights afforded to the insurer under the policy relating to an EUO, as well as interpretative case law concerning the parties’ rights and obligations concerning an EUO. Relatedly, an insurer faced with an insured who will not submit to an EUO, or will not provide the requested information during the examination, should act diligently in informing the insured of their obligation to cooperate and the consequence of the non-cooperation. Documenting the insurer’s efforts to secure the cooperation, and the insured’s refusal to cooperate, is also critical to support a defense to coverage based on a breach of an EUO or cooperation provision. Lastly, insurers should be familiar with jurisdictional case law regarding subsequent use of an EUO transcript in litigation, particularly if their litigation strategy involves resolution of a coverage dispute through a dispositive motion.