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Quote of the Month

“I never learned from a man who agreed with me.”

Robert A. Heinlein

In New York, a provider of services sued to recover assigned first-party no-fault benefits which the insurer refused to pay because the insured failed or refused to appear for examination under oath. The Civil Court found that defendant had established that it had timely and properly denied the claims at issue after requesting that plaintiff appear for an examination under oath (EUO), and held that "the sole issue remaining to be determined at trial is the EUO no-show as a proper basis of denial".

In opposition to plaintiff's motion and in support of its cross motion for summary judgment, defendant submitted the affirmation of a partner in the law firm retained by defendant to conduct plaintiff's EUO. Counsel alleged facts sufficient to establish that plaintiff had failed to appear at counsel's law office for duly scheduled EUOs. The court, citing to W & Z Acupuncture, P.C. v Amex Assur. Co., 24 Misc 3d 142[A], 2009 NY Slip Op 51732[U] [App Term, 2d, 11th & 13th Jud Dists 2009]; and Stephen Fogel Psychological, P.C. v Progressive Cas. Ins. Co., 35 AD3d 720 [2006]) concluded that the appearance of the eligible injured person's assignee at an EUO upon a proper request is a condition precedent to the insurer's liability on the policy.

In light of the foregoing, and the Civil Court's findings that the EUO requests were mailed and that the claims were timely denied, from which no appeal has been taken by plaintiff, the Civil Court should have granted defendant's cross motion for summary judgment dismissing the complaint. [Crotona Heights Medical, P.C. v. Farm Family Casualty Ins. Co., No. 2009-1178 K C,2010 NY Slip Op 50716 (N.Y.App.Term 04/16/2010)]  The key lesson of this case is proper documentation – the EUO must be demanded in writing and a record made that no one appeared.

Evidence must exist that the EUO was appropriate and necessary to a thorough investigation and that the witness had no excuse for a failure or refusal to appear. The claim can then be denied on that ground. The insurer must be prepared, also, to stand by its decision and when the trial court waffles and refuses to void coverage for breach of contract, it must be ready to appeal to a higher court.  In addition, the United States Court of Appeals for the Eighth Circuit reached a similar conclusion when it held that an insured who invoked his Fifth Amendment privilege against self-incrimination at trial and refused to provide pertinent information to his insurer violated his policy’s cooperation clause and was not entitled to coverage. [Med. Protective Co. v. Bubenik, 2010 WL 547053 (8th Cir. Feb. 18, 2010)].

The insured, a dentist, was sued for medical malpractice. During the course of the malpractice litigation, the dentist refused to respond to interrogatories, attend a deposition or testify at trial. He also declined to provide his medical malpractice insurer with a state dental board report concerning the malpractice. The carrier repeatedly sought the insured’s cooperation and advised the insured multiple times that his refusal to participate in his defense may constitute a breach of his duty to “fully cooperate” and “assist in the preparation and trial” of claims asserted against him. Subsequently, the insurer sought a declaratory judgment regarding its coverage obligations.

The court found that the insurer had presented evidence sufficient under Missouri law to justify a denial of coverage for breach of the duty of cooperation. Specifically, the court found that the carrier demonstrated that the dentist’s breach of the cooperation clause was material, that the carrier’s defense of the malpractice litigation was substantially prejudiced by the insured’s refusal to participate, and that the carrier had acted with reasonable diligence to secure the insured’s cooperation. The court also found that the insurer had not forfeited its right to deny coverage through waiver or estoppel by continuing to provide a defense subject to a reservation of rights after learning that the dentist intended not to testify. A finding of estoppel would be inconsistent with the insurer’s obligation to exercise reasonable diligence to secure the insured’s cooperation, and the insurer’s efforts to secure such cooperation did not manifest an intent to relinquish the right to enforce the insured’s duty to cooperate. Accordingly, the court held that the insurer’s denial of coverage was proper.

If you need additional information contact Barry Zalma, Esq. CFE at 310-390-4455 telephone, zalma@zalma.com (email)