Examinations underneath oath (EUOs) are a typical protection situation in property and different first-party insurance coverage insurance policies that may make or break an insurance coverage declare. In principle, EUOs are easy: they’re an investigative instrument for insurers to collect details about a declare.[1] However in observe, insurers typically use them to poke holes within the policyholder’s story, establish grounds to problem protection, and even arrange fraud claims.
These points not too long ago got here to go in a $400 million artwork insurance coverage case when the paintings’s billionaire proprietor and several other different people had been examined underneath oath. The case originated from a 2018 hearth on the proprietor’s Hamptons home, the place many worthwhile artworks had been saved and subsequently broken within the hearth. Although insurers paid claims associated to most of the broken works, they refused to cowl 5 specific items, together with two Warhols. So, the policyholder sued to acquire cost. As a part of the declare course of, the proprietor and others underwent EUOs, which the insurers later used as grounds to disclaim protection for these works on the idea of alleged fraud (amongst different defenses).
This case, which is awaiting the choose’s choice after a mid-summer bench trial, raises fascinating questions on EUO necessities in insurance coverage insurance policies, together with what insurers can require from policyholders and whether or not statements made in EUOs are binding on the policyholder.
(1) What’s an inexpensive EUO request and what can the insurers require?
Almost each insurance coverage coverage requires the policyholder to “cooperate” with the insurer’s investigation. They typically impose a broad responsibility to cooperate “with the [insurer] in all issues pertaining to the investigation, settlement or dealing with of any declare.” They could additionally checklist particular sorts of anticipated cooperation: sitting for EUOs, permitting the insurer to look at books and data, and so on.
Generally the small print of the EUO requirement are written into the contract, like who the insurer can study and when. Some insurance policies comprise extraordinarily broad EUO provisions that enable the insurer to look at “all different individuals within the property and members of the family and workers.” Others restrict the insurer to “any insured” or the insured and members of the family. Beneath any of those clauses, the insurer may insist on EUOs of doubtless dozens of individuals. Equally, many insurance policies present that the insurer can require EUOs “as typically because the [insurer] fairly requires,” opening the door for the insurer to insist on a number of EUOs if it doesn’t get the solutions it needs the primary time. Within the artwork insurance coverage case, for instance, the insurers took 10 EUOs, not solely of the proprietor however of the workers who managed his artwork assortment.
There are limits on the responsibility to cooperate, although. Most insurance coverage insurance policies present that the insurer’s requests for the policyholder to cooperate should be “cheap.” It might be unreasonable, for instance, to require each cousin of an insured to take a seat for an EUO, or to insist that the policyholder endure a number of back-to-back EUOs.
Whether or not a request for a person to take a seat for an EUO and the small print of that request are “cheap” will rely on the circumstances and could also be topic to appreciable dispute.
(2) Are statements made at EUOs binding? How do EUOs intersect with deposition and trial testimony?
What occurs when the policyholder’s deposition or trial testimony doesn’t match up with what the policyholder stated on the EUO? Policyholders typically sit for EUOs early within the lifetime of an insurance coverage declare. If the insurer refuses to pay the declare, the policyholder could sue and, as a part of the lawsuit, be required to bear examination in a deposition or at trial.
This situation arose within the artwork insurance coverage case. In his EUO, the policyholder made statements about harm to the artworks (he testified that they had misplaced their “oomph,” “lyster,” and “lyricisims”) and whether or not they had been provided on the market. In his deposition (and later at trial), he testified about those self same topics. The insurers claimed that his deposition testimony differed from what he stated at his EUO, thus allegedly demonstrating that the policyholder had lied at his EUO and permitting the insurers to void protection.
Whether or not statements made at EUOs versus underneath oath in a litigation must be handled equally is a thorny query. EUOs, by definition, are underneath oath, which means that the examined celebration should make statements underneath penalty of perjury (authorized punishment). Depositions and trial testimony are additionally underneath oath. Additional, caselaw typically holds that litigation testimony concerning the information of the case is binding, which means that policyholders can’t later dispute its accuracy.
However EUOs and litigation testimony serve completely different functions and provides rise to completely different incentives. As famous above, EUOs are cooperative and, in principle, voluntary: each side are working collectively to resolve a declare. EUOs are imagined to encourage the policyholder to be as forthcoming and correct as attainable, even when the testimony could harm the declare. They’re not topic to guidelines of civil process, and the policyholder is often not represented by counsel. However litigation testimony is adversarial and required by court docket. It protects the authorized rights of the inspecting celebration, who’s entitled to confront the witnesses towards it. And litigation testimony is taken at a time within the declare when the events have completely different incentives: to be conservative and sparing (the witness), to be exacting and meticulous (the inspecting celebration), and to supply or elicit testimony supportive of their place (each).
Given these completely different functions and incentives, it could be no shock that testimony at an EUO can differ from testimony at a deposition or at trial. However an insurer could seize on any discrepancies to say that the policyholder is mendacity and thus protection is void. Whether or not the insurer is profitable in doing so will rely on the circumstances and jurisdiction’s caselaw, in addition to the power of the policyholder’s lawyer to teach the court docket on these completely different functions and incentives.
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These EUO-related points will proceed to come up in future circumstances, particularly for contentious, high-dollar circumstances just like the artwork insurance coverage case mentioned right here. That case is AGP Holdings Two LLP, et al. v. Sure Underwriters at Lloyd’s of London, et al., No. 654742/2020 (N.Y. Supr. Ct., N.Y. Cnty.).
[1] For extra on the fundamentals of EUOs, try “The ABCs of EUOs.”
