The title of this post is what I thought when I read a motion for summary judgment filed last week in an ongoing case in Arizona in which our company is not involved. Unless the policyholder may have criminal implications arise as a result of testifying, I would suggest that there is no merit in refusing to go to a pre-suit request for an examination under oath.
Perhaps the best way to look at this is to first look at what the law says happens when a policyholder refuses to submit to an examination under oath. The insurer noted Arizona law as follows:
IN Warrilow v. Superior Court of State of Ariz. In and for Pima County, 142 Ariz. 250 (1984), the seminal case on this issue, the insured filed a claim for loss of firearms which was adjusted and paid. Shortly thereafter, the insured changed its gun coverage and again claimed a theft loss for firearms. The insurer acknowledged receipt of the insured’s proof of claim but rejected it as insufficient for several reasons, including that there was no documentation confirming the item’s ownership or value, and requested an EUO under the terms of the policy issued to the insured. The EUO was taken, but the insured refused to answer a number of questions. The insurer’s attorney advised the insured and his attorney that refusal to respond could be considered a failure to cooperate, which could cause the insurer to void its coverage. Id. Nothing further came to light about the claim until the insured filed suit. The insurer filed a motion for summary judgment arguing that the insured’s failure to answer questions on his EUO was a breach of his duty to cooperate with the insurer, which constituted a complete defense to his claim for coverage. The claim was rejected and the insurance company appealed.
The Court of Appeal held that an EUO term is a standard provision of an insurance policy and that the law was “well settled; that failure or refusal to comply will constitute a bar to recovery against the insurer. The “only limitation” the court noted was that “the issues are material to the circumstances surrounding the insurer’s liability and the extent thereof.” The court found that the information sought about the alleged theft of firearms, namely the number of guns the insured owned, whether or not he sold any guns he had purchased, and the source of income, were clearly material for coverage under the policy in light of the express exclusion for coverage of property incidental to the business of a gun dealer and the policy’s requirement that the insured provide satisfactory evidence of an interest in the property and its loss. The court referred to another case authority which held that a complete non-appearance of an EUO also prevents recovery of a claim.
I will predict that the policyholder in this case will argue that the insurance company was not harmed because the insurer eventually took a deposit which is the same as a trial. The policyholder can also claim a waiver.
But why did the policyholder have to make any arguments in this matter? Why not go to the examination under oath and avoid the insurance company’s defense? Why put yourself in the position of losing out on a technicality?
I’m writing this because I routinely field questions asking whether policyholders can refuse to go to an examination under oath or ask for reasons that might counter the insurer’s claim. Even if policyholders can win the legal argument for avoidance, policyholders should not put themselves in that position if they can avoid it. If there are no criminal implications by testifying, there is “everything to lose and nothing to gain” by refusing to attend an examination under oath.
Some people don’t like change, but you have to embrace change if the alternative is disaster.
– Elon Musk