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 concept, EUOs are simple: they’re an investigative device for insurers to collect details about a declare.[1] However in apply, insurers usually 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 art work’s billionaire proprietor and several other different people have been examined underneath oath. The case originated from a 2018 fireplace on the billionaire’s Hamptons home, the place many worthwhile artworks have been saved and subsequently broken within the fireplace. 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 fee. 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 decide’s choice after a mid-summer bench trial, raises attention-grabbing 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 usually impose a broad obligation to cooperate “with the [insurer] in all issues pertaining to the investigation, settlement or dealing with of any declare.” They might additionally listing particular sorts of anticipated cooperation: sitting for EUOs, permitting the insurer to look at books and information, and so on.
Generally the small print of the EUO requirement are written into the contract, like who the insurer can look at and when. Some insurance policies include 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 relations. Beneath any of those clauses, the insurer might insist on EUOs of probably dozens of individuals. Equally, many insurance policies present that the insurer can require EUOs “as usually 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 desires the primary time. Within the artwork insurance coverage case, for instance, the insurers took 10 EUOs, not solely of the billionaire policyholder however of the employees who managed his artwork assortment.
There are limits on the obligation to cooperate, although. Most insurance coverage insurance policies present that the insurer’s requests for the policyholder to cooperate have to be “cheap.” It could 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 depend upon 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 mentioned on the EUO? Policyholders usually sit for EUOs early within the lifetime of an insurance coverage declare. If the insurer refuses to pay the declare, the policyholder might sue and, as a part of the lawsuit, be required to endure examination in a deposition or at trial.
This subject arose within the artwork insurance coverage case. In his EUO, the policyholder made statements about injury to the artworks (he testified they’d misplaced their “oomph,” “lyster,” and “lyricisims”) and whether or not they have been supplied 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 mentioned 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, that means that the examined social gathering should make statements underneath penalty of perjury (authorized punishment). Depositions and trial testimony are additionally underneath oath. Additional, caselaw usually holds that litigation testimony concerning the info of the case is binding, that 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 concept, voluntary: each side are working collectively to resolve a declare. EUOs are purported to encourage the policyholder to be as forthcoming and correct as potential, even when the testimony might damage the declare. They’re not topic to guidelines of civil process, and the policyholder is normally not represented by counsel. However litigation testimony is adversarial and required by courtroom. It protects the authorized rights of the analyzing social gathering, 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 analyzing social gathering), 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 might seize on any discrepancies to assert that the policyholder is mendacity and thus protection is void. Whether or not the insurer is profitable in doing so will depend upon the circumstances and jurisdiction’s caselaw, in addition to the flexibility of the policyholder’s lawyer to coach the courtroom 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, take a look at “The ABCs of EUOs.”
