The Reasons For the EUO
The insurance Examination Under Oath (“EUO”) is a formal type of interview authorized by an insurance contract. It is taken under the authority provided by a condition of the insurance contract that compels the insured to appear and give sworn testimony on the demand of the insurer or find his, her or it claim rejected for breach of a condition. A notary and a certified shorthand reporter are always present to give the oath to the person interviewed and record the entire conversation.
The EUO is a tool used sparingly by insurers in the United States when a thorough claims investigation raises questions about the application of the coverage to the facts of the loss, the potentiality that a fraud is being attempted, or to assist the insured in the obligation to prove to the insurer the cause and amount of loss. Although rarely used the EUO is an important tool needed by insurers when there is a question of coverage.
Courts that construe submission to an EUO as a condition precedent to recovery generally do not require the insurer to prove that it suffered actual prejudice from an insured’s unexcused refusal to submit to an examination. Lorenzo–Martinez v. Safety Ins. Co., 58 Mass. App. Ct. 359, 790 N.E.2d 692, 695–96 (2003). The EUO provides a mechanism for the insurer to corroborate the claim by obtaining information that is primarily or exclusively within the possession of the insured.
The adjuster, the independent adjuster, the Special Investigation Unit (“SIU”) investigator, the independent insurance adjuster and, in complex cases, the attorney retained to represent the insurer questions the person interviewed in a manner similar to a deposition in a legal proceeding. Because of the formality of the proceeding — it includes an oath, and the presence of a certified shorthand reporter — the task of establishing rapport with the person interviewed so that relevant information may be obtained from the insured is more difficult than in an informal interview. Unlike legal proceedings where questions are limited to those seeking a “yes” or “no” or brief answer the EUO seeks narrative responses from the person questioned.
The person taking the EUO, therefore, must be capable of transitioning from lawyer like questions in litigation to the broad, inquisitive, narrative seeking questioning. An EUO should never be conducted as if it is an adversarial activity but merely a fact seeking activity that is directed to the needs of an insurance policy and the need to prove a loss is either compensable or not.
Because the EUO is a tool for gleaning the maximum amount of information the EUO is an effective weapon against insurance fraud. This is because the person taking the EUO is knowledgeable about insurance and insurance law while the person being questioned is only aware of the claim presented and the fraud he or she may be attempting.
Often, however, the purpose of the EUO is not to stop fraud but to allow an insured the opportunity to prove his or her claim of loss in cases where evidence has been destroyed by a casualty or is otherwise unavailable.
The authority to take an EUO is provided by the insurance contract and exists, as a result of statutes, establishing a state mandated fire insurance policy that must be incorporated in every policy in the state that insures against the peril of fire. For example the New York Standard Fire Policy provides as follows:
The insured, as often as may be reasonably required, shall exhibit to any person designated by this company all that remains of any property herein described and submit to EUO by any person named by this company, and subscribe the same; and as often as may be reasonably required, shall produce for examination and copying all books of account, bills, invoices, and other vouchers…
Similarly, the 1991 edition of the Homeowners policy provides, in easy to read language:
“2. Your Duties After Loss. In case of a loss to covered property, you must see that the following are done:
* * *
“f. As often as we reasonably require:
“(1) Show the damage property.
“(2) Provide us with records and documents we request and permit us to make copies; and
“(3) Submit to EUO, while not in the presence of any other “insured” and sign the same.” [ISO form HO 00 03 04 91, PAGE 9 OF 10]
In Shaw v. State Farm Fire and Cas. Co., 37 So.3d 329, 35 Fla. L. Weekly D1020 (2010) Florida concluded that State Farm had every right to include the EUO provision in its contract as a condition precedent to payment or suit, just as insurance companies have done in Florid for over a century; State Farm had every right to expect and require that the EUO requirement be complied with by any person or organization making a claim or seeking payment so that State Farm can determine whether the claim Claflin v. Commonwealth Ins. Co., 110 U.S. 81, 3 S.Ct. 507, 28 L.Ed. 76 (1884)] is proper or fraudulent; and State Farm had every right to require and expect that this clause be complied with by assignees of PIP benefits who are no less capable of filing fraudulent claims than insureds. According to the Florida Court of Appeal, the insured and his assignees—the Appellants—do not have the right to take this valuable contract right and investigative tool away from State Farm through the mere expedient of an assignment.
Although the EUO is a formal proceeding it is not part of a judicial process. The EUO is not controlled by the rules of civil procedure. In most states it is considered a condition precedent to recovery under a policy of insurance. The EUO is not limited by any statute relating to civil discovery. Some states have enacted regulations that try to limit insurers taking of the EUO and place certain requirements upon the insurer to chill the desire to take an EUO.
Depositions and examinations under oath serve vastly different purposes. First, the obligation to sit for an examination under oath is contractual rather than arising out of the rules of civil procedure. Second, an insured’s counsel plays a different role during examinations under oath than during depositions. Third, examinations under oath are taken before litigation to augment the insurer’s investigation of the claim while a deposition is not part of the claim investigation process. Fourth, an insured has a duty to volunteer information related to the claim during an examination under oath in accordance with the policy while he would have no such obligation in a deposition. [Beasley v. GeoVera Specialty Ins. Co., Slip Copy, 2015 WL 2372328, 2015 WL 2372328 (E.D.La., 2015)]
An insurer’s right to ask questions at EUO is basically unlimited.
As early as 1884, the U.S. Supreme Court explained the purpose of the EUO, as follows:
The object of the provisions in the policies of insurance, requiring the assured to submit himself to an EUO, to be reduced to writing, was to enable the company to possess itself of all knowledge, and all information as to other sources and means of knowledge, in regard to the facts, material to their rights, to enable them to decide upon their obligations, and to protect them against false claims. And every interrogatory that was relevant and pertinent in such an examination was material, in the sense that a true answer to it was of the substance of the obligation of the assured. A false answer as to any matter of fact material to the inquiry, would be fraudulent. If it made, with intent to deceive the insurer, would be fraudulent. If it accomplished its result, it would be a fraud effected; if it failed it would be a fraud attempted. And if the matter were material and the statement false, to the knowledge of the party making it, and willfully made, the intention to deceive the insurer would be necessarily implied, for the law presumes every man to intend the natural consequences of his acts. No one can be permitted to say, in respect to his own statements upon a material matter, that he did not expect to be believed; and if they are knowingly false and willfully made, the fact that they are material is proof of an attempted fraud, because their materiality, in the eye of the law, consists in their tendency to influence the conduct of the party who has an interest in them, and to whom they are addressed. [Claflin v. Commonwealth Ins. Co., 110 U.S. 81, 3 S.Ct. 507, 28 L.Ed. 76 (1884)]
The EUO is an important tool that, if used responsibly, can help an insured prove his or her loss or allow an insurer to obtain sufficient evidence to prove coverage does not apply or fraud is being attempted.
Barry Zalma, Esq., CFE, practiced law in California for more than 43 years as an insurance coverage and claims handling lawyer. He now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes.
He founded Zalma Insurance Consultants in 2001 and serves as its only consultant.
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