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S P R I N G 2 0 1 5
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investigation that accompanies litigation.
For example, although the witness
may have an attorney present during
the EUO, he or she cannot participate
in the examination. Additionally, the
insured cannot plead the 5th amendment
in failing to answer questions ­ that
is grounds for voiding the policy. The
attorney should be able to lead the
insurer through the investigation process
and obtain all necessary information
to properly and fairly investigate the
claim. They should not be wholly focused
on providing a "win" to the insurer by
proving a claim is fraudulent as such
an aggressive one-sided approach may
ultimately subject the insurer to a bad
faith claim.
3. Prepare for the EUO
A formal written notice of the EUO
should be sent to the insured. The letter
should cite the policy requirement
for giving testimony, advise of the
insured's right to be represented by legal
counsel, note the time and place of the
examination, request a list of necessary
documents and should reserve the
company's right to designate additional
individuals to sit for an EUO. The date,
time and location of the examination
should be reasonable and convenient to
the insured. The insurer should make
every effort to cooperate in rescheduling
the EUO, if the insured requests this, to
avoid any potential bad faith claims if
the insurer ultimately decides to deny
coverage. If the insured does ultimately
refuse to submit themselves for an EUO,
this may form a valid basis for denying
his/her claim.
An attorney cannot take an effective
EUO if an insured arrives at the
examination with hundreds of pages of
documents that the attorney has never
seen before. As such, the attorney should
request documents well in advance of
the examinations and thoroughly review
them prior to the EUO. If the insured
refuses to comply with a document
request that is material and relevant to
the insurer's investigation, this can also
serve as a legitimate basis for denial
of a claim.
Preparing for the examination also
requires formulating effective topics and
questions in advance of the EUO. This
may include comparing the insured's
claim with documents and expert's
reports. Discrepancies should be noted
for further explanation during the
examination.
4. Properly Take the EUO
Prior to conducting the EUO, it is
important to discuss the examination
with the claims adjuster and the
special investigation unit ("SIU")'s
investigator (if any) and obtain their
complete files. The claims adjuster
and SIU representative will likely have
information invaluable to the attorney
who is conducting the EUO. It may also
be appropriate to have a claims adjuster
or SIU representative present during the
examination.
During an EUO, all questions
considered material and relevant to the
claim must be answered by the insured.
Courts have given a broad interpretation
to what an EUO may encompass. The
only limitation placed on the EUO is
that the information requested must
be "material." Thus, the EUO may
include anything considered material
for purposes of determining the insurer's
liability for a claim and to protect against
fraudulent claims.
It is important for the attorney to set
the proper tone in an EUO. Remember,
the primary purpose of the EUO is to
gather information so that the insurer can
make an informed decision regarding
coverage. While it is important to be
aggressive enough to test the veracity
of the insured's claim, it is not a time to
badger a witness. The attorney should
explain that the company has concerns
about the claim while stating clearly that
the company has made no final decision
regarding coverage, but will base that
decision upon the information and
documents provided by the insured and
the topics discussed at the EUO. Further,
the EUO transcript may be discoverable
in subsequent litigation. Thus, it is
important for the attorney to keep in mind,
during the examination, the potential
ramifications of any questions asked on
future litigation, including a potential bad
faith claim against the insurer.
5. Let the Insured Know the
Purpose of the EUO
At the outset of the EUO, it is important
to advise the insured regarding the
purpose of the examination. The attorney
should remind the insured that the EUO
is used to gather information so that
the insurer can make an informed and
correct decision regarding coverage ­
which has not yet been made. Advise the
insured that you will not conclude the
EUO until the insured is satisfied that
he has been afforded the opportunity
to provide the insurer all information
necessary to substantiate his claim. If it
is clear on the record that both of these
issues are understood by the insured, it
may be sufficient for the insurer to win a
summary judgment or jury verdict on the
question of whether an insurer acted in
bad faith.
An EUO, effectively conducted,
is a useful and expedient method for
assisting the insurer in reaching its
coverage decision with respect to a
claim. If an EUO is properly conducted,
the result should lead the insurer to a
correct and proper decision to either
extend or deny coverage as the evidence
warrants.