Insurer Not Required to Share Investigation File with Insured Before EUO per Sixth Circuit

The U.S. Court of Appeals for the Sixth Circuit issued an opinion on February 24, 2014, concerning the ability of an insurance company to refuse to produce its claim investigation file when an insured demands a copy before submitting to an examination under oath.  In the case, which is titled Lester v Allstate Prop. & Cas. Ins. Co., — F.3d —, 2014 WL 687188 (6th Cir. 2014), the insured filed a claim after a fire damaged her house.  As part of its investigation of the fire, the insurance company exercised its right under the insurance policy to request that the insured and her husband submit to an examination under oath (EUO).  The insured agreed that they would sit for the EUO, but only if the insurance company first showed them its investigation file.  The insurance company refused the request, indicating that it would “jeopardize the integrity” of its investigation.  The insurance company eventually denied the claim because the insured continued to refuse to submit to an EUO, unless the insurance company provide its file.

The insured sued the insurance company asserting it breached the insurance contract.  The U.S. District Court that heard the matter granted summary judgment to the insurance company.  The insured appealed the case to the Sixth Circuit, which affirmed the lower court.

The court began by noting that both the insurance policy and Tennessee law provided an insurer with the ability to deny a claim if the insured refused to submit to an EUO.  The insured argued that the insurance company’s implied obligation to act in good faith required it to produce the investigation file before the insured sat for the EUO.  The Sixth Circuit disagreed with the insured.  The court noted that “[t]he point of an examination is to allow insurance companies to sort out fraudulent claims from honest ones, exorbitant claims from accurate ones” and permitting the insured to review the investigation file would undermine the purpose of the EUO by allowing the insured to tailor her answers to the information already uncovered by the insurer.  The insured also argued that the claim denial was improper because she never actually refused to sit for the EUO, she simply made conditions on it.  Calling the argument a “stretch,” the court found that the circumstances amounted to a refusal by the insured.  The insured’s final argument was that the claim should be paid regardless because the insurance company was not prejudiced as is required to deny a claim for non-cooperation with an investigation.  The court also rejected this argument on the basis that Tennessee law presumes that the insurance company is prejudiced by an insured’s failure to submit to an EUO, and the insured did not submit any evidence to overcome the presumption.

Maloney Lauersdorf Reiner is experienced in representing clients in examinations under oath.  Please contact us with any questions about this case summary, or any other matter you see in the Insurance Coverage Blog.

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