Most policies of property insurance include a provision requiring the insured to assist the insurer in its investigation of a claim by submitting to examination by the insurer’s representatives, under oath, on such occasions as the insurer deems necessary. The California Court of Appeal issues a reminder that the consequences of refusal to participate in the examination process may be severe, including the complete denial of the insurance claim.
Barbara Darwish is trustee of a trust that owns real property. She wanted to insure the property through the California Fair Plan¹, but the Fair Plan does not issue insurance policies to trusts. Darwish therefore transferred a one-tenth of one percent interest in the trust property to Maurice Rivera, with Rivera purchasing the policy (never mentioning his extremely limited interest in the property).
The property was vandalized, and Rivera filed a claim. He failed to appear for a scheduled examination under oath, and did not provide records requested by the Fair Plan. (The Fair Plan was apparently seeking information that would establish whether Rivera actually had any legitimate “insurable interest” in the property, without which the policy would be invalid.) Darwish then took an assignment of Rivera’s rights under the policy, and sued the Fair Plan to recover benefits for the vandalism loss.
The Fair Plan made a motion for summary judgment on the ground that its coverage had been voided by Rivera’s failure to appear for examination under oath. The trial court denied the motion, concluding that the Fair Plan was required to show that Rivera’s non-appearance had caused some actual prejudice to the Fair Plan’s interests. The Fair Plan petitioned the Court of Appeal, and that Court directed entry of judgment in the Fair Plan’s favor.
Citing a number of earlier decisions, the Court emphasized that the insurance policy specifically required the insured’s cooperation in examinations under oath as a precondition to coverage. So long as the insurer’s request for such examinations was not in itself unreasonable -- and the Court found no indication that such was the case here -- the requirement is absolute and enforceable and Rivera’s repeated failure to appear for examination was a proper basis for denial of the claim in its entirety.
The decision in California Fair Plan Association v. Superior Court of Los Angeles County (January 23, 2004), Case No. B169994, can be found at the following links in PDF and Word formats.
¹ The California Fair Plan is a “residual market” providing property insurance for those who are unable to obtain it in the mainstream commercial market. FAIR -- for Fair Access to Insurance Requirements -- were a product of the 1960s, originally intended to meet the basic insurance needs of property owners, particularly in inner city areas, to whom insurance companies were otherwise reluctant to sell coverage. In California, the Fair Plan has evolved away from its original purpose to become the insurer for properties that present higher risks of loss than most insurers want to take on, including expensive properties exposed to a high fire danger because of their locations on hillsides. Policies issued by the Fair Plan provide only the most basic coverage, against loss from causes such as fire and vandalism.
The Plan's own shorthand version of its history can be found on its web site, here.
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