Dissent Cautions Against Improper Use of the EUO as a Claims Denial Tool
The examination under oath (“EUO”) serves as an extremely valuable tool–and right– contracted for by the insurer that is used to investigate claims, determine coverage, and make payment decisions. While the EUO is often cited for its usefulness in investigating suspected fraudulent claims, the primary goal of the EUO is not to deny claims but rather is to enable an insurer to obtain the information necessary to appropriately adjust claims. Although the EUO is the contractual right of the insurer, an EUO also benefits the insured because it allows the insurer to address claims and coverage concerns before litigation is instituted, thus facilitating proper payment of claims and avoiding unnecessary litigation, where possible.
Florida courts have long held that an EUO provision in an insurance policy is a condition precedent to filing suit to recover policy benefits, and as such, an insured’s failure to sit for an EUO is a material breach of the insurance policy that precludes recovery. See e.g. Stringer v. Fireman’s Fund. Ins. Company, 622 So. 2d 145 (Fla. 3d DCA 1993); Goldman v. State Farm Fire Gen. Ins. Company, 660 So. 2d 300, 303 (Fla. 4th DCA 1995); Starling v. Allstate Floridian Ins. Com., 956 So. 2d 511, 513 (Fla. 5th DCA 2007).
Most recently, the Fourth District Court of Appeal in Studio Imports LTD., Inc. v. Landmark Am. Ins. Company, affirmed an insurer’s right to deny a claim based on an EUO no-show. Case No. 4D14-2128 (Nov. 12, 2015) (citing Goldman v. State Farm Fire Gen. Ins. Company, 660 So. 2d 300 (Fla. 4th DCA 1995)). Although Studio Imports is a positive ruling for the insurance industry, the dissent’s opinion echoes the negative stigmas recently expressed by other courts regarding insurance companies’ perceived inappropriate uses of EUOs.
Judge Warner’s dissent in Studio Imports LTD., Inc. cautioned that decisions affirming an insurer’s absolute right to deny a claim for an EUO no-show have led to a proliferation of EUO litigation arising from insurers’ improper use of EUOs as a strategy to deny claims. Id. at 2. Based on these perceived abuses, Judge Warner’s dissent called on the Florida Supreme Court to determine whether State Farm Mut. Auto. Ins. Company v. Curran, 135 So. 3d 1071 (Fla. 2014)–a case involving an uninsured motorist claim and an insured’s failure to attend a compulsory medical examination–also applies to an insured’s refusal to attend an EUO. In Curran, the Florida Supreme Court expressly held that in the uninsured motorist context, a compulsory medical examination (“CME”) provision is not a condition precedent to coverage. State Farm Mut. Auto. Ins. Company v. Curran, 135 So. 3d 1071, 1078–1079 (Fla. 2014). Rather, coverage is only forfeited under an insurance policy if the insurer proves that an insured’s breach of a CME post-loss provision prejudiced the insurer. Id. at 1078–1079.
Judge Warner’s dissent underscores the importance of having safeguards in place to ensure that an insurer’s right to request an EUO is not abused. Such safeguards should provide a workable framework outlining when it is appropriate for the insurer to exercise its right to request an EUO, such as where investigation of a claim is necessary to make a payment decision, and likewise institute limits to ensure that an EUO is not requested as a matter of course as a tool to deny claims simply with the hope that an insured does not attend.
Allyson Jenks, Esquire