Lincoln Sieler and I wrote this paper for the 2001 Lorman Auto Insurance Seminar.
The examination under oath (EUO) is a new wrinkle to
most lawyers. Although long used in property insurance
claims, EUOs started to appear in auto accident
litigation only recently. We now regularly see demands
for EUOs in PIP and UIM claims. Between medical exams
and EUOs, an insurer can require the insured to miss at
least two full days from work, hire a lawyer, and spend
more money that a small PIP claim is worth. Perhaps it
will help to learn something about examinations under
oath in the PIP and UIM context.
With no authority to guide us in this new field, how
are we to handle the carrier's demands? Where should the
exam be held? Must we provide documents prior to the
exam? Who may be examined? Who pays for the transcript?
Before answering these questions, however, consider
the begging question: Does the carrier have a right to
demand an EUO in the first place?
1. Bases for the Right to Examine
A. The Policy: An insurance policy is a
contract which defines the rights and duties of the
parties. Any right to examine must be found within the
four corners of the policy. The policy will also answer
some, but not all, of the many questions surrounding
this unique discovery tool.
Most EUO clauses simply give the carrier the right to
examine the insured. If so, the carrier has no right to
examine anyone else. Usually, the policy says the
insured must sign the transcript. Beyond that, most
policies are silent. Carriers may try to read further
"reasonable" requirements into the policy, and
such efforts should be resisted.
B. The Proof of Loss Statute: Real problems
emerge when the policy is silent. No examination under
oath provision appears anywhere in the policy, yet the
carrier says it can examine your client. What gives?
In 1995, the Washington Legislature passed a
comprehensive anti-insurance fraud law. One part of this
legislation amended the proof of loss statute:
RCW 48.18.460 Proof of loss--Furnishing forms--May
require oath. An insurer shall furnish, upon request of
any person claiming to have a loss under any insurance
contract, forms of proof of loss for completion by such
person. But such insurer shall not, by reason of the
requirement so to furnish forms, have any responsibility
for or with reference to the completion of such proof or
the manner of any such completion or attempted
completion. If a person makes a claim under a policy
of insurance, the insurer may require that the person be
examined under an oath administered by a person
authorized by state or federal law to administer oaths.
(New language is italicized).
Insurers argue that the italicized language permits
an examination under oath whether the policy says so or
not. Some trial judges buy this argument. The insurers'
argument, however, ignores key facts.
RCW 48.18.460 was amended, not to give insurers a
blanket EUO authorization, but to plug a judicially
created loophole in the perjury laws created by the
opinion in State v. Hovrud, 60 Wn. App. 573, 805
P.2d 250 (1991). The court said:
Hovrud allegedly lied under oath while being
interrogated by his insurance company's lawyer, who
was investigating Hovrud's fire loss claim. The
examination under oath was required by a provision in
Hovrud's standard form insurance policy.
RCW 9A.72.040 provides, in relevant part:
(1) A person is guilty of false swearing if he makes a
false statement, which he knows to be false,
"under an oath required or authorized by
law". (Italics ours). . . . RCW 9A.72.010(3)
defines the phrase "required or authorized by
law", as follows: "[a]n oath is
"required or authorized by law" when the use
of the oath is "specifically provided for by
statute or regulatory provision."
State v. Hovrud, 60 Wn. App. 573, 805 P.2d 250
(1991). Hovrud was tried for criminal arson and for
making a false statement at his EUO. The jury acquitted
him of the arson charge, but convicted him of lying at
the EUO. The trial court overturned the conviction, and
the Court of Appeals affirmed. Since Hovrud was required
to appear and testify by his policy, rather than by a
statute or regulation, he could not be convicted of a
crime for lying at the exam under oath. The use of the
oath by the insurer was not "specifically provided
for by statute or regulation." As a result, between
1991 and 1995, it was legal to lie at an EUO.
The amendment to RCW 48.18.460 plugged the Hovrud
hole, and nothing more. It makes no sense to imply an
EUO provision into a policy which has none. Doing so
violates the basic tenet of policy construction. RCW
"Every insurance contract shall be construed
according to the entirety of its terms and conditions as
set forth in the policy . . .." The most basic
insurance law principles argue against adding unwritten
conditions to a policy. In Washington, insurance
policies are construed as contracts, and interpretation
of policies is a matter of law. State Farm v. Emerson,
102 Wn.2d 477, 687 P.2d 1139, 1141-42 (1984). The basic
rule of construction is that words and language in an
insurance policy must be interpreted as they would be
understood by an average purchaser of insurance. Grange
Ins. Co. v. Brosseau, 113 Wn. 2d 91, 776 P.2d 123,
125 (1989). If policy language is ambiguous, reasonably
susceptible to more than one meaning, the Court must
adopt the meaning favorable to the insured. Government
Employees Insurance v. Titus, 18 Wn. App. 208, 566
P.2d 990 (1977); McDonald Industries v. Rollings
Leasing Corp., 95 Wn.2d 909, 631 P.2d 947 (1981); Boeing
v. Aetna, 113 Wn.2d 869, 784 P.2d 507 (1990). Aetna
Casualty v. M&S Industries, 64 Wn. App. 916, 827
P.2d 321 (1992). Exclusionary clauses are to be
"most strictly" construed against the insurer
in view of the fact that the purpose of insurance is to
insure, and the contract should be construed so as to
make it operative rather than inoperative. Phil
Schroeder, Inc. v. Royal Globe Ins. Co., 99 Wn.2d
65, 68, 659 P.2d 509 (1983), modified on
reconsideration, 101 Wn.2d 830, 683 P.2d 186 (1984).
Given these principles, does it make sense to imply an
insurer's right to take an examination under oath?
Most auto carriers also write property policies.
These policies all contain clauses which give the
carrier the right to take EUOs. If a carrier wants that
right, why not just say so in the policy? As the Court
said in Boeing v. Aetna, 113 Wn.2d 869, 887, 784
P.2d 507 (1990), "The industry knows how to protect
itself and it knows how to write exclusions and
conditions." Absent a policy provision allowing it,
no insurer may force its insured to be examined under
C. The UIM and PIP Statutes: In the UIM
context, the policy is governed in large part by RCW
48.22.030. Our courts have long held that the provisions
of the UIM statute are an expression of public policy.
Therefore, exclusions and limitations not authorized by
the UIM statute are void.
Limits on UIM coverage are valid only upon two
conditions: (1) the exclusion does not conflict with the
express language of the UIM statute and, (2) the
exclusion is not contrary to the statute's declared
public policy. Miller v. Aetna Life & Cas. Co.,
80 Wn. App. 55, 906 P.2d 372 (1995); Rau v. Liberty
Mut.Ins. Co., 21 Wn. App. 326, 585 P.2d 157 (1978).
An insurer cannot avoid the statutorily mandated
coverage by a policy provision which has not been
authorized by the legislature. Hamilton v. Farmers
Ins. Co., 107 Wn.2d 721, 733 P.2d 213 (1987); Touchette
v. Northwestern Mut. Ins. Co., 80 Wn.2d 327, 494
P.2d 479 (1972). RCW 48.22.030, which contains
limitations for accidents caused by phantom vehicles,
did not apply to a policy which provided broader
coverage by not incorporating the statutory limitations.
Liljestrand v. State Farm Mut. Auto Ins. Co., 47 Wn.
App. 283, 734 P.2d 945 (1987), review denied, 108 Wn.2d
Thus, the insured should get whichever coverage is
broader – that set out in the policy, or the
provisions of RCW 48.22.030. If neither authorizes
examination under oath, why should the insurer have a
right to take one? Does this analysis apply to a policy
condition? If the policy contains an EOU clause but the
statute does not, does the statute control? This issue
is unresolved in Washington, but the precedents
developed under the UIM statute suggest the statute
RCW 48.22.085 requires Personal Injury Protection
(PIP) coverage be offered to insureds. The courts have
not thoroughly addressed the similarities and
differences between the PIP and UIM statutes. In one
case, the court held that a policy that required an
insured to submit to reasonable requests to be examined
by a physician of the company's choosing was not invalid
as a violation of public policy. Albee v. Farmers
Ins. Co., 92 Wn. App. 866, 967 P.2d 1 (1998). The
court found little guidance concerning just what public
policy the statute expressed.
Whether an insurer can take an exam under oath in a
PIP or UIM dispute is a key question. Once you answer it
in an individual case, many questions remain. For
example, what limits does the carrier work under when it
examines its insured?
2. Extent of the Right to
Examine the Insured
We all know the rules of discovery depositions. The
rules for EUOs are much less understood. They don't
neatly appear in court rules or statutes. If a policy
has an EUO clause, it will simply say the insured must
submit to examination under oath, as often as the
carrier reasonably requests. Some policies insist that
multiple insureds submit separately, or that the insured
obtain the cooperation of others whom the carrier wants
to examine. At least in the property insurance context,
these additional requests may be invalid.
Washington, like most states, requires carriers to
use the 1943 New York Standard Fire Policy as the basis
for all property insurance policies. In the 1960's,
package and multi-peril policies began to appear, and
some carriers began marketing plain language policies.
These states often allowed policies which were different
from the Standard Fire Policy, as long as they were no
less favorable to consumers. Washington has followed
that trend. RCW 48.18.120 authorizes the Insurance
Commissioner to adopt rules promoting uniformity in
property insurance. Pursuant to that authority, the
Commissioner promulgated the following rule:
(3) Except for the provisions of the next
succeeding three paragraphs, no company shall issue
any basic contract of fire insurance covering property
or interest therein in this state other than on the
form known as the 1943 New York Standard Fire
Insurance Policy, herein referred to as the 'standard
. . . .
(c) As an alternative form, a form written in
clear, understandable language, which provides terms,
conditions and coverages not less favorable to the
insured than the 'standard fire policy,' may be used.
WAC 284-20-010(3). Since the Standard policy simply
required the insured to submit to and sign an
examination under oath, any further conditions may be
invalid, at least in the property insurance arena.
In Washington, however, the courts have nurtured the
carrier's right to take examinations under oath.
3. Key Cases Uphold the
Carrier's Right to Examine the Insured
Several recent cases in the property insurance arena
support the carrier's right to an exam, and reject a
variety of defenses interposed by uncooperative insureds. In Downie v. State Farm Fire &
Casualty, 84 Wn. App. 577, 929 P.2d 484 (1997), the
insured failed to appear for an EUO in a property
insurance claim. The court upheld dismissal of his
claims because the policy said that fulfillment of
policy requirements was a prerequisite to filing suit.
He had given a recorded statement, but the court said
that was insufficient.
In Pilgrim v. State Farm Fire & Cas., 89
Wn. App. 712, 950 P.2d 479 (1997), the policy required:
2. Your Duties After Loss. After a loss to which
this insurance may apply, you shall see that the
following duties are performed:
. . . c. prepare an inventory of damages or stolen
Show in detail the quantity, description, actual cash
value and amount of loss. Attach to the inventory all
bills, receipts and related documents that
substantiate the figures in the inventory;
d. as often as we reasonably require: (1) exhibit the
damages [sic] property; (2) provide us with records
and documents we request and permit us to make copies;
(3) submit to and subscribe, while not in the presence
of any other insured:
(a) statements; and (b) examinations under oath;
Pilgrim failed to provide relevant financial
documents. The court found that he forfeited his
coverage as a result:
The Pilgrims promised to cooperate with State
Farm's investigation by producing "records and
documents" as often as State Farm
"reasonably require[s]." The issue is
whether, as a matter of law, they breached their
promise. No evidence is disputed. That evidence
demonstrates that the Pilgrims at least partially
complied with the cooperation duty. For example,
during Keith's and Renae's interviews, both answered
questions about financial accounts they maintained, to
whom and how much money they owed, the status of their
taxes, the absence of judgments, liens, and
outstanding credit card balances. /42 Nevertheless, no
reasonable juror could conclude that the Pilgrims
substantially cooperated in the production of
relevant, reasonable, requested financial documents.
With the exception of their W-2's, they produced
nothing. And they refused to authorize third parties
to disclose relevant financial information to State
Farm. Their substantial failure to cooperate
constitutes a breach of the cooperation clause as a
matter of law.
89 Wn. App. at 722-723.
In Tran v. State Farm Fire & Cas. Co., 136
Wn.2d 214, 961 P.2d 358 (1998), the insured failed to
provide business and tax records. The Supreme Court
agreed with State Farm that the carrier could not
properly investigate without the records, and Tran lost
his coverage. The Court said:
Insureds may forfeit their right to recover under
an insurance policy if they fail to abide by
provisions in the policy requiring them to cooperate
with the insurer's investigation of their claim. Georgian
House of Interiors, Inc. v. Glens Falls Ins. Co.,
21 Wn.2d 470, 495, 151 P.2d 598 (1944); McLanahan
v. Farmers, 66 Wn. App. 36, 40, 831 P.2d 160,
review denied, 120 Wn.2d 1006, 838 P.2d 1142 (1992).
The only limitation on the requirement that insureds
cooperate with the insurer's investigation is that the
insurer's requests for information must be material to
the circumstances giving rise to liability on its
part. Pilgrim v. State Farm Fire & Cas. Ins.
Co., 89 Wn. App. 712, 950 P.2d 479, 483 (1997).
Information is material when it "concerns a
subject relevant and germane to the insurer's
investigation as it was then proceeding" at the
time the inquiry was made. Fine v. Bellefonte
Underwriters Ins. Co., 725 F.2d 179, 183 (2d Cir.
136 Wn.2d 214 at 224. It seems the courts are
supporting insurers, and allowing insurers to decide
what is relevant and material to a claim. This is a very
dangerous road to walk, as insurers will test the limits
of materiality and relevance.
For now, the insured is nearly defenseless. If an EUO
can be taken, the limits to the carrier's range of
demands are unknown. The careful practitioner must read Downie,
Pilgrim, and Tran carefully, without guessing
a court would require of the insured.
4. The Insurer Must be
Prejudiced by the Insured's Failure to Comply.
What happens when the insured makes an untrue or
inaccurate statement in the EUO? Carriers argue
that a misstatement of fact by an insured voids
coverage. That view is far too harsh, and ignores the
requirement that a breach of condition by the insured
must cause prejudice to the insurer.
An insured's breach of a cooperation clause releases
the insurer from its responsibilities if the insurer was
actually prejudiced by the insured's breach. Public
Util. Dist. No. 1 v. International Ins. Co., 124
Wn.2d 789, 803, 881 P.2d 1020 (1994). Interference with
the insurer's ability to evaluate and investigate a
claim may cause actual prejudice. Canron, Inc. v.
Federal Ins. Co., 82 Wn. App. 480, 491, 918 P.2d 937
(1996), review denied, 131 Wn.2d 1002, 932 P.2d 643
(1997); Felice v. St. Paul Fire & Marine Ins. Co.,
42 Wn. App. 352, 360, 711 P.2d 1066 (1985), review
denied, 105 Wn.2d 1014 (1986). However, prejudice is an
issue of fact and will seldom be established as a matter
of law. Canron, 82 Wn. App. at 491; Public
Util. Dist., 124 Wn.2d at 804-05; Felice, 42
Wn. App. at 359; Pulse v. Northwest Farm Bureau Ins.
Co., 18 Wn. App. 59, 62, 566 P.2d 577, review
denied, 89 Wn.2d 1011 (1977).
The insurer has the burden of proving that it has
suffered prejudice from its insured's breach. Oregon
Auto Ins. Co. v. Salzberg, 85 Wn.2d 372, 376, 535
P.2d 816 (1975). Claims of actual prejudice require
"affirmative proof of an advantage lost or
disadvantage suffered as a result of the [breach], which
has an identifiable detrimental effect on the insurer's
ability to evaluate or present its defenses to coverage
or liability." Canron, 82 Wn. App. at
491-92. Tran v. State Farm
Fire & Cas. Co., 136 Wn.2d 214, 228, 229, 961
P.2d 358 (1998). In the context of a false statement
case, this means that the statement must be material and
substantial. See the following from the opinion in Tran:
See also 8 John Alan Appleman and
Jean Appleman, Insurance Law and Practice SS 4772, at
p. 215-19 (1981) ("A breach of the cooperation
clause by the insured will operate to relieve the
insurer of liability under the policy. But a lack of
cooperation in an insubstantial or immaterial matter
would not have such an effect." (footnotes
fn. 11, 136 Wn.2d at 239. Once again,
however, read Downie, Pilgrim, and Tran
carefully. The court will find prejudice as a matter of
law for an outright failure to attend an EUO or to
5. Where and When to Appear
A carrier cannot casually ask for an exam. The demand
must be clear and unequivocal. Nicolai v.
Transcont'ntal Ins. Co., 61 Wn.2d 295, 378 P.2d 287
The insured also has no duty to appear for an exam in
Seattle, when another county is the site of loss. Demand
for examination under oath elsewhere may be invalid. Pierce
v. Globe & Rutgers Fire Ins. Co., 107 Wash. 501,
182 Pac. 586 (1919).
An insurer's right to examine its insured is a
privilege which may be waived by the insurer. For
example, a waiver of the right to examine the insured
may occur by the insurer accepting or denying liability
for a claim prior to demanding an EUO. Thus, rights
under the policy may be lost by waiver or estoppel.
The authorities are unanimous that an insurer which
breaches the policy by denying the claim, cannot later
demand that its insured comply with the terms of the
policy. As a leading author points out:
It is a basic principle of contract law, that once
one party to a contract breaches the agreement, the
other party is not longer obligated to continue
performing his or her own contractual obligation. As a
result, once the carrier has denied coverage, an
insured is no longer bound by the insurance policy's
provisions governing cooperation, proof of loss
statement, ... access to books and records, and
submission to examination.
Windt, Insurance Claims and Disputes, 139-140. Windt
cites dozens of cases for the last example, examination
under oath. He also points out that the denial of
coverage need not be explicit – an insurer's silence
or delay in accepting or rejecting coverage can
constitute the equivalent of a denial. Id. at 142.
6. The Recorded Statement
We know that a recorded statement is no substitute
for an exam under oath. Where the insured gave a
statement, however, must the carrier provide a copy
prior to the exam? Some are refusing to do so.
The statement of a party or a non party to litigation is
obtainable without any showing of necessity, hardship,
or any showing at all. The courts seem to see such
statements as the property of the maker. CR 26(b)(4)
A party may obtain without the required showing a
statement concerning the action or its subject matter
previously made by that party. Upon request, a person
not a party may obtain without the required showing a
statement concerning the action or its subject matter
previously made by that person.
In Farm Bureau Ins. v. Leyendekker, 17 Wn.
App. 304, 562 P.2d 285 (1977), the court said,
"...once the demand by a nonparty witness is made,
a copy of that statement must be delivered to that
witness ... Any person giving a statement is entitled to
a copy of that statement, and once received, is entitled
to do with it as he desires. Id., at 17 Wn. App 307. The
problem, of course, is that the claim is seldom in
litigation when the issue arises. The letter of the
court rules does not apply, but the spirit certainly
The carrier may argue that it meets that requirement
by offering copies after the EUO was concluded. This
argument was rejected in Tury v. Superior Court,
505 P.2d 1060, 19 Ariz. App. 169 (1973), where
plaintiffs in a dogbite case asked for statements they
had given the defendant's insurer. Defendant offered to
give them the statements, only after they were deposed.
Defendant noted the depositions, and plaintiffs refused
to appear. The court cited 8 Wright & Miller,
Federal Practice and Procedure, 2027 (1970) to support
its view that parties have an absolute right to a copy
of any statements made by the party prior to the
retention of counsel. This "absolute right"
cannot be defeated by withholding the statements, or
delaying their production. See also, Watts v.
Superior Court, 347 P.2d 565 (1959).
Examinations under oath and attendant document
production create a minefield for insureds. If the
policy requires compliance, prudence requires counsel to
carefully read the cases and help the insured comply. If
not, counsel is faced with a dilemma. Should we just say
no, or go to court? The better course is to file an
action, get a quick ruling, and go forward without
risking coverage. Use of the examination under oath in
the PIP and UIM context raises more questions than