Reminder or threat: an insurance company's intimidation tactics
Insurance companies cite the "duty to cooperate clause" when they are forcing the person they insure, to provide information. If you don't give them the information they ask for, then they will maintain that the entire policy is void and you are not entitled to make any claim. In this case, I'm the one who said no on behalf of my client their insurer - and in return they quoted the clause.
Here is what happened.
This is a lawsuit against an insurance company brought by their own insured for Underinsured Motorist Benefits. The insurance company tried to get documents from a totally different insurance company to use against Mr. X. I said, no you can't do that. They responded with this letter: "Mr. C, as a UIM insured seeking to obtain benefits under the terms of his UIM policy has an obligation to comply with that UIM policy. The cooperation clause of the UIM policy states..." It ended: "Please let me know if your client is going to continue objecting..."
I brought a motion to the court which included this:
Defendant’s threat to invoke the failure to cooperate clause based upon plaintiff counsel’s decision to bring this matter to the court’s attention is an abuse of the litigation process.
This Court has the authority to govern these legal proceedings and specifically, to decide whether a work product privilege exists relative to the other insurance file materials.
In a heavy handed attempt to avoid this Court’s involvement in compelling discovery, Defendant Insurance Co. threatened that it would invoke its failure to cooperate clause and void coverage if plaintiff counsel did not voluntarily permit production of the other files.
Most insurance policies have a cooperation clause. If the insured “substantially and materially” breaches such a clause, they may be contractually barred from bringing suit if the insurer can show it has been actually prejudiced. The burden of proving noncooperation is on the insurer. See Staples v. Allstate Inc. Co., 176 Wn.2d 404, 411, 295 P.2d 201 (2013).
In Staples, before suit was filed, the insured failed to submit to an examination under oath (EUO). The insured’s subsequent suit for bad faith was dismissed due to failure to cooperate to the EUO. The Supreme Court reversed due to the trial court’s failure to require a showing of actual prejudice.
A claim of actual prejudice requires “ ‘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.’ ” Tran v. State Farm Fire & Cas. Co.,, 136 Wash.2d at 228–29, 961 P.2d 358 (quoting Canron, Inc. v. Fed. Ins. Co., 82 Wash.App. 480, 491–92, 918 P.2d 937 (1996) (alteration in original).
In the case at bar, the alleged failure to cooperate does not stem from Mr. Cs’ acts pre-suit. Defendant never claimed that Mr. C failed to cooperate from the date the claim was first made until now.
Instead, the impetus for Defendant’s wielding of the failure to cooperate sword; is the resistance of plaintiff counsel to improper discovery. This counsel’s reasonable and justified actions should not trigger threats that coverage for Mr. C will be voided. D’s bully tactic should not be condoned by this Court.
To which the insurance company responded:
Insurance counsel's reminder that the cooperation clause exists is not an abuse of the litigation process....Counsel's reminder that the cooperation clause requires cooperation is similarly not an abuse, since discovery of facts, statements, and opinions of Plaintiff, his employer, and his doctors is authorized, especially where they will be called as testifying witnessees.
To which I responded:
Defendant's threat to void the policy if the plaintiff pursues judicial relief does not have to technically amount to “abuse of process” for this court to enter a finding. The plaintiff has not (yet) alleged abuse of process. This is a bifurcated UIM damages and bad faith proceeding. Defendant's behavior in telling plaintiff that his counsel’s bringing of a discovery motion will be used as grounds to void the policy should be addressed by this court now. Otherwise, as this matter heads towards trial, Plaintiff will be intimidated from vigorously advancing his case for fear of losing all claim to benefits.
So was it a reminder or a threat.
You be the judge.