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A Look at an Insured’s Post-Loss Duty to Cooperate: Exactly How Much Cooperation is Necessary?

July 7, 2016

The Eleventh Circuit Court of Appeals reaffirmed that an insurer is entitled to summary judgment when its insured fails to abide by the policy’s cooperation clause, a condition precedent to filing suit. See Wu v. Safeco Ins. Co. of Indiana, 2016 WL 3595702 (11th Cir. 2016, July 5, 2016). The Eleventh Circuit held that the insureds’ failure to provide federal income tax returns to its insurer, Safeco, constituted a failure to comply with the policy’s conditions under Georgia law, and upheld this trial court’s summary judgment ruling.

The opinion does not provide any detail about the insureds’ loss, but it explains that the insureds made a claim under their homeowner’s insurance policy with Safeco. As part of its investigation, Safeco requested that insureds’ produce “income tax returns dating back to 2009, including all worksheets and schedules.” The insureds produced some, but not all, federal income tax returns, and provided Safeco with authorizations to receive the tax returns directly from the IRS. After receiving the authorizations from the insureds, Safeco submitted the authorizations to the IRS, but the IRS sent the tax returns directly to the insureds. Despite multiple requests by Safeco to the insureds to send the tax returns to Safeco, the insureds failed to respond and subsequently filed suit. Safeco filed a motion for summary judgment, which the U.S. District Court for the Northern District of Georgia granted.

On appeal, the insureds argued that the district court erred in granting summary judgment because there was a genuine issue of material fact as to whether they acted in “good faith” in producing some income tax returns and providing authorization for Safeco to obtain the tax returns directly from the IRS. The insureds relied on a Georgia state court case that held, “where an insured ‘cooperates to some degree or provides an explanation for its noncompliance’ or where ‘the insure[r] fail[s] to act with diligence and good faith in securing the necessary information,’ summary judgment in favor of the insurer is inappropriate.” Diamonds & Denims, Inc. v. First of Ga. Ins. Co., 417 S.E.2d 440, 441–42 (Ga. Ct. App. 1992). In Diamonds & Denims, Inc., the insurer generally requested “books and records” from the insureds following a fire loss claim. The insureds explained that most documentation was destroyed in the fire and offered to provide alternative information, but the insurer never followed up on its general requests, nor attempted to obtain the information by other means. There, the Georgia appellate court found that a genuine issue of material existed as to the insureds’ compliance with the policy’s post-loss conditions and the insurer’s diligence in attempting to obtain the information by other means.

The Eleventh Circuit rejected the insureds’ reliance on Diamonds and DenimsInc. and instead agreed with Safeco that Allstate Ins. Co. v. Hamler, 545 S.E.2d 12 (Ga. Ct. App. 2001), applied. In Hamler, the insurer was granted summary judgment when the insured failed to provide the requested documents. In reaching that conclusion, the Hamler Court rejected the insureds Diamonds and Denims good faith argument and held that the insured had “refused to provide information … despite a lengthy and detailed request by Allstate.” Id. at 15. The Eleventh Circuit held that, like in Hamler, Safeco made a diligent effort to get the tax returns from its insureds, and the insureds failed to cooperate despite the IRS has provided the requested documents to the insureds. Thus, summary judgment was proper.

In Florida, whether a court would find that non-compliance with a condition precedent bars suit is district dependent. In the Second District, the issue of substantial compliance is one for the fact finder and is not appropriate for summary judgment. See Curtis v. Tower Hill Prime Ins. Co., 154 So. 3d 1193, 1197-98 (Fla. 2d DCA 2015). In the Third District, the failure to comply with a condition precedent, including the failure to provide requested documents and to submit to an examination under oath, completely bars recovery, and summary judgment is proper. See Edwards v. State Farm Florida Ins. Co., 64 So. 3d 730, 733 (Fla. 3d DCA 2011). In the Fourth District, a complete failure to comply with a condition precedent bars recovery. See Hunt v. State Farm Florida Ins. Co., 145 So. 3d 210, 212 (Fla. 4th DCA 2014). However, if the insured complies, but not fully, with a condition precedent before filing suit, the insurer is presumed prejudiced, and the insured bears the burden of overcoming prejudice. Id. In the Fifth District, regardless of non-compliance, the insurer must prove that it is prejudiced by the insured’s non-compliance. State Farm Mut. Auto. Ins. Co. v. Curran, 83 So. 3d 793, 803 (Fla. 5th DCA 2011), approved, 135 So. 3d 1071 (Fla. 2014).

So, what does this mean for insurers?

  1. Insurers should make reasonable requests to the insureds for information that is material to their claims decisions;
  2. These requests should be specific to the claim and not for documents generally;
  3. If the insureds cooperate to some extent in producing information, insurers should follow up on those requests, and, in some cases, attempt to obtain the information by alternate means;
  4. If the insureds fail to cooperate after multiple attempts, this failure could likely bar the insureds from bringing suit, depending on the jurisdiction.