In our firm, we often get calls from potential clients asking about their obligations during this process, particularly regarding cooperation with their insurer. This guide will discuss your duties under California law as to when you have to cooperate, what type of information you have to provide your insurance company, and the consequences of not cooperating. 

Your Duty to Cooperate with Your Insurance Company

Most insurance policies include a “duty to cooperate” clause, requiring policyholders to assist the insurer in investigating and processing claims. In California, this obligation is reinforced by law. According to the California Insurance Code Section 1063, insured individuals must cooperate with their insurance company as stipulated in their policy agreements.

Failure to cooperate with your insurance company can lead the insurance company to deny your claim. However, insurers must demonstrate that any lack of cooperation has substantially prejudiced their ability to investigate or process the claim.

What Does The “Duty to Cooperate” Mean

Examinations Under Oath (EUO): What They Are and Their Implications

An Examination Under Oath (EUO) is a formal proceeding during which a policyholder provides sworn testimony regarding their claim. Insurers may request an EUO to gather detailed information and assess the validity of a claim. Under California law, attending an EUO is a condition of coverage. As noted in California Fair Plan Ass’n v. Superior Court (2004) 115 Cal.App.4th 158, an insurance company has the right to deny a claim if a policyholder refuses to appear for an EUO.

It’s essential to attend the EUO as scheduled and provide truthful, comprehensive answers. Delays or refusals can be interpreted as non-cooperation, potentially jeopardizing your claim.

Consequences of Non-Cooperation

Non-cooperation can have significant repercussions. If an insurer can prove that a policyholder’s lack of cooperation has materially hindered their investigation, they may deny the claim. In Billington v. Interinsurance Exchange (1969) 71 Cal.2d 728, the court highlighted that an insurer must demonstrate substantial prejudice resulting from the insured’s non-cooperation to justify denying coverage.

Insurance Company’s Duties to Policyholders

While policyholders have a duty to cooperate, insurance companies also owe several obligations to their clients under California law:

• Duty of Good Faith and Fair Dealing: Insurers must act fairly and in good faith when handling claims. Unreasonable delays or unwarranted denials can constitute bad faith.
• Prompt and Thorough Investigation: Upon receiving a claim, insurers are required to conduct a timely and comprehensive investigation.
• Clear Communication: Insurance companies must keep policyholders informed about the status of their claims and promptly respond to inquiries.
• Disclosure of Policy Benefits: Insurers are obligated to inform claimants of all benefits, coverage, and time limits that may apply to their claims, as stipulated in the California Code of Regulations, Title 10, Section 2695.4.

California Legal Cases Regarding Cooperating With Your Insurance Company

Several California cases underscore the importance of cooperation between policyholders and insurers:

• In Brizuela v. Calfarm Ins. Co., 116 Cal.App.4th 578, 10 Cal. Rptr. 3d 661 (Cal. Ct. App. 2004), the California Court of Appeal upheld an insurer’s right to deny a claim when the policyholder fails to comply with the policy’s examination under oath (EUO) requirement. Sergio Brizuela’s market was destroyed by fire, and during the subsequent investigation, CalFarm requested that Brizuela submit to an EUO—a standard procedure to verify claim details. Over six months, Brizuela did not attend the scheduled EUO or propose alternative dates. Consequently, CalFarm denied his claim for non-compliance. Brizuela sued for breach of contract and bad faith, but the court ruled that his failure to attend the EUO constituted a material breach of the policy, justifying the claim denial without the need for the insurer to demonstrate prejudice. This case underscores the importance for policyholders to adhere to all policy conditions, including attending examinations under oath, to ensure their claims are honored.
• In Billington v. Interinsurance Exchange (1969) 71 Cal.2d 728, the California Supreme Court addressed the consequences of an insured’s failure to cooperate with their insurer during legal proceedings. The case arose when Dorothy Billington was injured while riding as a guest in a car driven by Michael Giesler, who was insured by Interinsurance Exchange. Billington sued Giesler, alleging willful misconduct and intoxication. Despite multiple attempts by the insurer to involve him, Giesler failed to participate in his defense, leading to a default judgment against him. Billington then sought to recover $10,000 from Interinsurance Exchange, the policy’s liability limit. The insurer contended that Giesler’s lack of cooperation breached the policy terms, releasing them from liability. The court held that for an insurer to deny coverage based on an insured’s non-cooperation, it must demonstrate substantial prejudice resulting from the breach. In this instance, the court found that the insurer failed to prove such prejudice and ruled in favor of Billington, emphasizing that insurers cannot evade their obligations without clear evidence of harm caused by the insured’s actions. 
• In McCormick v. Sentinel Life Ins. Co., 153 Cal.App.3d 1030, 200 Cal.Rptr. 732 (Cal. App. 1984), the California Court of Appeal ruled in favor of a policyholder, reinforcing consumer protections against unfair insurance practices. The case involved a life insurance company that denied benefits based on a misrepresentation in the policy application. The court held that an insurer cannot void a policy due to an incorrect statement unless the misrepresentation was made with intent to deceive or was material to the insurer’s risk assessment. This decision emphasized that insurance companies cannot unfairly deny claims based on minor or unintentional errors in applications, protecting policyholders from unjust claim denials. This ruling remains crucial in California insurance law, ensuring fairness in the industry and preventing insurers from using technicalities to avoid payouts.
• In Clemmer v. Hartford Insurance Co., 22 Cal.3d 865, 151 Cal. Rptr. 285, 587 P.2d 1098 (Cal. 1978), the California Supreme Court examined whether an insurer is obligated to cover a wrongful death judgment when the insured committed a deliberate act resulting in death. The case involved Dr. Daniel Lovelace, who fatally shot his employer, Dr. Hugh Clemmer, after their professional relationship ended. Dr. Clemmer’s widow and son obtained a wrongful death judgment against Dr. Lovelace and sought payment from his insurer, Hartford Insurance Company. Hartford argued that coverage was excluded under Insurance Code section 533, which denies indemnity for willful acts. The court determined that for an act to be excluded under section 533, it must be committed with a “preconceived design to inflict injury.” Due to complexities regarding Dr. Lovelace’s mental state at the time of the incident, the court concluded that Hartford did not conclusively prove the act was willful under this standard. This decision highlights that insurers must demonstrate an insured’s deliberate intent to cause harm to deny coverage under willful act exclusions. 
• In Robinson v. National Automobile & Casualty Insurance Co., 132 Cal.App.2d 709 (1955), the California Court of Appeal addressed an insurance claim dispute following an alleged theft. Louise Robinson held a “residence and outside theft policy” with National Automobile and Casualty Insurance Company, covering personal property up to $5,000. In May 1953, Robinson reported a burglary at her Beverly Hills residence, claiming losses exceeding the policy limit. She submitted a proof of loss, which the insurer rejected, leading her to file a lawsuit for the policy amount. The insurer denied liability, citing several defenses, including Robinson’s refusal to provide a proper proof of loss, lack of cooperation during the investigation, and alleged false statements in her policy application and claim. The trial court granted a nonsuit in favor of the insurer, effectively dismissing Robinson’s case. On appeal, the court upheld the nonsuit, agreeing that Robinson’s actions, particularly her failure to cooperate and alleged misrepresentations, justified the insurer’s denial of the claim. This case underscores the importance of policyholders adhering to policy terms, especially regarding cooperation and truthful disclosures, to ensure coverage in the event of a loss. 

Best Practices for Policyholders

To ensure a smooth claims process, policyholders should:

• Review Your Policy: Understand the specific cooperation requirements outlined in your insurance policy.
• Maintain Open Communication: Respond promptly to your insurer’s requests and provide accurate information.
• Document Everything: Keep detailed records of all communications, submitted documents, and any other interactions with your insurance company.
• Seek Legal Counsel if Needed: If you’re uncertain about your obligations or feel your insurer isn’t upholding their duties, consult with an attorney experienced in insurance law.

Conclusion

In California, particularly in Los Angeles, policyholders are legally obligated to cooperate with their insurance companies during the claims process. This includes attending Examinations Under Oath when requested. Fulfilling these duties not only ensures compliance with your policy terms but also facilitates a more efficient and favorable claims experience. Simultaneously, insurers are bound by law to act in good faith, conduct prompt investigations, and communicate transparently with policyholders.