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EmailAlmost all insurance policies give the carrier a right to conduct an Examination Under Oath (EUO) of the insured. However, an EUO is a tool that is less often used. That is because recorded statements are usually enough to get the carrier the information that it needs to address a particular claim. In addition, EUOs are more expensive because the carrier has to hire a court reporter and often a lawyer to conduct the examination. With all of the preparation involved, EUOs will take more time, thus slowing down the claims process. In other words the choice to conduct an EUO is not one that carriers make lightly.
In spite of the disadvantages of using EUOs, insurance companies recognize them as the more appropriate tool when investigating a claim where fraud might be involved. (For an interactive fraud indicator guide from the National Insurance Crime Bureau click HERE.
Sometimes, insureds will say that they don’t need to sit for an EUO because a recorded statement will do. Other insureds will insist that they have provided an affidavit of loss and therefore that should be sufficient. They might also say that they will give a deposition after they file their suit for breach of contract. But the courts have acknowledged the importance of the EUO process and the role it plays in the evaluation of cases. For example in the case of Pervis v. State Farm Fire and Cas. Co., 901 F.2d 944 (1990), the insured made a claim for the fire loss of his business / home. He provided two oral statements to the carrier. However, State Farm decided that it needed an EUO. Within a day of State Farm’s request, Pervis was charged with arson. He failed to provide the EUO. Rather, he filed a suit against State Farm alleging that it had breached the contract. He argued that by providing the recorded statements he had substantially complied with the contract. The court found otherwise and approved the dismissal of the case because the duty to comply with the contract by sitting for an EUO was a condition precedent to filing a suit.
In Lorenzo-Martinez v. Safety Ins. Co., 58 Mass. App. Ct. 359, 790 N.E. 2d 692 (2003), the court expounded on why the Examination Under Oath itself was the unrivaled tool that insurance carriers could insist on when investigating claims, especially those where fraud might be involved. The court said:
The provision [for EUOs] ostensibly exists to weed out fraud by providing an insurer with a mechanism for obtaining formal corroboration of a claim. This mechanism is particularly important in situations like the hit and run accident at issue here, where information about the claim is primarily or exclusively within the possession of the insured. Because of the insurer’s heightened need for reliable information from the insured in such cases, we are of the opinion that the obligation to submit to an examination under oath is distinguishable from other obligations of the insured under the insurance contract in which breach and actual prejudice must be shown. Consequently, an insured’s willful, unexcused failure to submit to an examination under oath constitutes a breach of the standard automobile insurance contract resulting in forfeiture of coverage for uninsured motorist benefits without proof of actual prejudice resulting to the insurer’s interest. Our ruling appears to comport with the law of other jurisdictions. See 13 Couch, Insurance § 196.23 (3d ed. 1999).
In the case of Goldman v. State Farm Fire Genera/Insurance Company, 660 So.2d 300 (Fla. 4th DCA, 1995), the court gave its explanation as to why alternatives to the EUO are insufficient to satisfy the policy. The court said that Examinations Under Oath are meant as an investigative tool and are not the same as say a deposition taken under the Rules of Civil Procedure. While counsel may object to questions asked in an EUO, the discovery and evidentiary rules are inapplicable. Because the EUO process is contractual rather than adversarial, the insured is obliged to volunteer information in an EUO setting and is not if a deposition is involved. Finally, because the examination is contractual, the carrier has the right to question insureds individually, which right may not be possible when in a deposition.
In the end, the U.S. Supreme Court has long recognized that an insured is contractually obligated to provide an EUO and to answer questions relevant to the claim. See, Clafin v. Commonwealth Ins. Co., 101 U.S. 81 (1884). Please contact Mills & Associates if an Examination Under Oath is anticipated. We would be glad to consult, or to conduct the examination where appropriate.
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