Application Of The "Cooperation Clause" In Insurance Policies

By harley erbe

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An aspect of insurance law that people don't often think about or encounter until they make a claim is the "cooperation clause" in almost all insurance policies.  Whether the claim is for private nuisance, personal injury or wrongful death, a truck accident, a drunk driving accident, a motorcycle accident, a car accident, products liability, a dog bite, or premises liability, your insurance policy likely obligates you to cooperate with your insurer if you want the claim covered. Common examples of an insured's cooperation obligations when the insurer is investigating a claim include providing documents and other information, giving an examination under oath (often to a lawyer for the insurance company), and of course honesty and good faith.  An insured's breach of a cooperation clause can result in forfeiture of the insurance claim.

Cooperation clauses do not give insurers unlimited power to dictate things to insureds.  For example, in many states an insurance company will have to prove that the insured's breach of the cooperation clause prejudiced the insurer in some manner before the insurer can argue that coverage has been forfeited.  Further, most courts will review the insurance company's conduct to ensure that it that it complied with its duties under the insurance policy.

The review of the cooperation exhibited by insureds and insurers depends upon the insurance claim's circumstances and the type of claim.  When the insured is making a claim for money under the policy (for example, a theft claim under a homeowner insurance policy), which is known as a "first-party" insurance claim, as opposed to making a claim for coverage against a third-party loss (for example, a car crash) courts often impose upon the insured a greater standard of conduct.  In fact, for first-party insurance claims many courts have ruled that the duty to cooperate trumps an insured's Fifth Amendment privilege against self-incrimination.

In order to restrict an insurance company's attempt to assert that a minor breach of a cooperation clause causes the forfeiture of an insurance claim, most states, although not necessarily Iowa, allow an insurer to refuse coverage based on a cooperation clause only when the insurance company has been prejudiced by the lack of cooperation.  Even though the focus of the court's attention is upon the insured's conduct, the insurer's behavior will not be ignored.  In fact, some states, including Iowa, have decided that insurance companies must establish that they used due diligence and demonstrated good faith in seeking the insured's cooperation.  In other words, the duty to cooperate is a two-way street.

As noted above, many courts have decided that the Fifth Amendment's privilege against self-incrimination does not apply to an insured's duty to cooperate and provide testimony under oath during the investigation of an insurance claim.  This frequently occurs during the investigation of suspicious fire claims.  Say an insured's house burns down.  The authorities suspect that the insured committed arson, but the insured still makes a claim under a homeowner's insurance policy.  The insurance company decides that it wants to take the insured's examination under oath as part of its investigation into the fire's cause.  Any testimony the insured gives the insurance company can later be used against the insured as part of any prosecution for arson.  That puts the insured in a difficult situation -- Give the testimony to preserve the right to make the insurance claim (which may later be denied regardless) but risk that testimony being used in a criminal proceeding, or refuse to give testimony to the insurance company but likely forfeit the right to make the insurance claim.

By Harley Erbe

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