In addition to detecting FRAUD, examinations under oath serve a number of other purposes. For example in the case of Yeo v. State Farm Ins. Co., 219 Mich. App. 254, 258, 555 N.W.2d 893, 895 (1996) the court explained that an examination allowed an insurance company to gather facts it would need to determine whether it would adjust the claim or defend a denial. In other words, examinations under oath also help prevent unnecessary litigation.
In the case of Dietz v. Hardware Dealers Mut. Fire Ins. Co., 88 Wisc. 2d 496, 276 N.W.2d 808, (Wis., 1979) the court explained that:
generally, the insured’s contractual duties of notice and cooperation are designed: ’ to protect the insurer from the responsibility of the insured, to prevent collusion between the insured and a friendly claimant and ‘ … to put (the) insurer on notice and afford it an opportunity to make such investigation as it may deem necessary to properly defend or settle claims which may be asserted. . . .Schoone and Berzowski, Liability Insurance: Effect of Fault Statements on Duty to Cooperate”, 52 Marq. L. Rev. 221, 222-23.
276 N.W.2d at 811-812.
If in fact, the examination is meant to give the insurance company information as to whether it should pay or sue, the most logical consequence of failure to provide a requested examination would be to prevent suit from moving forward until compliance takes place. For example, in the unpublished opinion of Patenaude v. Safeco Ins. Co. of America, 639 N.W.2d 224, 249 Wisc. 2d 489 (Wis. Ct. App., 2001) the court said that the insured’s failure to provide an examination when requested constituted a substantial breach of his duties under the insurance policy. The court explained that:
the duties on an insured to cooperate re intended in part to avoid litigation by permitting the insurer to fully and fairly evaluate the claim. These duties are especially important to an insurance company that is evaluating a claim arising out of a suspected arson. Patenaude’s refusal to submit to an examination and filing of the lawsuit caused the insurance policy clauses to fail in one of its essential purposes, avoiding litigation. Even if Patenaude is correct and the lack of cooperation must be substantial, his lack of cooperation with Safeco’s investigation fulfills that standard as a matter of law.
That substantial failure to cooperate coupled with the “no-action” clause (which usually reads, “We may not be sued unless there is full compliance with all terms of this policy.”) resulted in a dismissal of the action against Safeco. Nevada follows the “substantial compliance” rule. See, Walker v. American Bankers Ins., 108 Nev. 533, 836 P.2d 59 (1992). So, if an insurance company faces a situation in Nevada where an insured has refused to give an examination under oath but instead has filed suit, an appropriate response would be to follow Safeco’s example and file a motion to dismiss based on the insured failure to substantially comply by refusing to provide an examination under oath.
If you have questions about examinations under oath, contact Mills & Associates and we will gladly respond.