Viewpoint: Insurer Not Prejudiced Despite 4 Requests for Examination Under Oath

A claimant’s refusal to respond to four requests by her insurer to sit for an examination under oath was not enough to persuade a federal judge in Louisiana that she had forfeited coverage.

After two hurricanes, plaintiff Diana Stevens-Reynolds sought property damage coverage under defendant Wilshire Insurance Co.’s commercial insurance policies insuring her properties. (The case is Steven-Reynolds v. Wilshire Ins. Co., Western District of Louisiana.) After plaintiff reported the loss, Wilshire requested proof of plaintiff’s alleged property damages by requesting records, photographs and receipts of her alleged damages.

Reynolds submitted a $3.4 million settlement demand to Wilshire in February 2022, but did not provide many of the requested records, photographs or receipts. Wilshire asked Reynolds to attend an examination under oath.

On Feb.15, 2022, Wilshire sent its first letter to plaintiff requesting an EUO. Reynolds did not respond. On March 29, 2022, Wilshire sent its second letter to Reynolds requesting an EUO. Again, she did not respond. On April 12, 2022, Wilshire sent its third letter requesting an EUO. Reynolds did not respond. Finally, on April 27, 2022, Wilshire sent its fourth letter to Reynolds requesting an EUO. Again, Reynolds did not respond.

On May 5, 2022, Reynolds sued Wilshire for breach of contract, negligent infliction of emotional distress, and bad faith. Wilshire moved for summary judgment because Plaintiff refused to sit for an EUO. As of Aug. 14, 2023, Reynolds had not made herself available for an EUO.

The Wilshire policy contained typical cooperation clause and EUO requirement language:

3. Duties In The Event Of Loss Or Damage

a. You must see that the following are done in the event of loss or damage to Covered Property:

. . .

(8) Cooperate with [Defendants] in the investigation or settlement of the claim.

b. [Defendants] may examine any insured under oath, while not in the presence of any other insured and at such times as may be reasonably required, about any matter relating to this insurance or the claim . . . .”

In an untimely opposition to Wilshire’s summary judgment motion, Reynolds argued that she had never refused to appear for an EUO and she recognized an EUO was a policy requirement. She stated that she would now be willing to cooperate and appear for an EUO.

In deciding Wilshire’s motion, the court looked to Fifth Circuit authority and Louisiana law that held that an EUO is a condition precedent to policy recovery and a failure to appear for one is a breach of the policy:

“[U]nder Louisiana law the [f]ailure of an insured to cooperate with the insurer has been held to be a material breach of the contract and a defense to suit on the policy and such failure to cooperate may be manifested by a refusal to submit to an examination under oath or a refusal to produce documents. E.g., Kerr v. State Farm Fire & Cas. Co., 511 F. App’x 306, 307 (5th Cir. 2013)). “Moreover, Louisiana “[c]ourts have generally reviewed compliance with insurance policy provisions as a condition precedent to recovery.” Lee v. United Fire & Casualty Co., 607 So.2d 685, 688 (La. Ct. App. 4th Cir. 1992)).” (internal quotations omitted).

The Court did not decide whether plaintiff’s refusal to submit to four EUOs amounted to a breach of the policy’s cooperation clause, but merely stated that it was evidence it could consider.

“This is proper summary judgment evidence that shows Wilshire has repeatedly requested plaintiff to submit to an examination under oath, which, according to her policies, is a condition precedent to filing her first-party suit against Wilshire.”

The court also found that Fifth Circuit law required that Wilshire show that it was prejudiced by the plaintiff’s failure to appear for an EUO. Ultimately, the court denied Wilshire’s motion for summary judgment because it did not find that Wilshire was prejudiced by Reynold’s failure to submit for an EUO. The court rejected Wilshire’s argument that relevant obtainable evidence over a year ago when it first requested the EUO was now too remote hindered its investigation. Moreover, the court pointed out that Wilshire waited over a year to raise its prejudice argument. Finally, the court noted that Plaintiff was now willing to cooperate and sit for an EUO.

This case shows that an insured’s pattern of refusing to respond to a request for an EUO will not necessarily amount to a finding of no coverage under the policy’s cooperation clause. The court focused on the element of prejudice and rejected Wilshire’s arguments that the delay of over a year for the EUO impacted its ability to analyze the evidence. A different result might occur where an insurer can prove that critical evidence was lost or destroyed causing prejudice, or if the plaintiff here continued to refuse to appear.