What Happens When The Insured Does Not Submit To An Examination Under Oath?

Fort Worth insurance lawyers should know about insurance policy provisions that require an examination under oath (EUO). The Houston Court of Appeals [14th Dist.] issued an opinion in May 2013, that helps to understand the process. The style of the case is, Arman A. Shafighi v. Texas Farmers Insurance Company.
Here is some of the relevant information:
Shafighi sued Farmers when it denied his claim for fire damage to his house. The trial court granted summary judgment to Farmers, concluding that Shafighi could not recover because he failed to participate in a sworn examination as part of Farmers’ investigation. Because the insurance policy at issue permits Farmers to abate the case until Shafighi complies with the relevant policy provisions, but does not entitle it to summary judgment under these circumstances, this appeals Court reversed and remanded.
BACKGROUND Farmers insured a house in Houston that Shafighi owned. When fire damaged the building, Shafighi sought to collect on his policy. The insurance policy assigned certain “duties after loss” to Shafighi, among which were cooperating with the Farmers investigation and submitting to examinations under oath.
Over approximately six months, Shafighi and Farmers unsuccessfully attempted to schedule Shafighi’s examination under oath. The parties’ correspondence states that Shafighi lived in California following the fire and feared returning to Houston because he believed the man responsible for burning his house would do him harm. Shafighi asked to conduct the examination in California; this was not acceptable to Farmers. Shafighi’s lawyer eventually suggested a “telephonic statement,” but Farmers believed proceeding telephonically would interfere with the exchange and identification of exhibits.
Notwithstanding the parties’ inability to agree on a suitable examination location, Farmers scheduled two examinations in Houston. It is unclear from the record whether Shafighi agreed to these examinations, but it is undisputed that he did not attend them. Farmers also communicated to Shafighi’s lawyer that it took exception to the untimely “proof-of-loss” form that Shafighi submitted. In a faxed letter, Farmers stated that, among other things, portions of the form were left blank and Shafighi “did not present a total amount being claimed.”
Approximately six months after first contacting Shafighi for an examination, Farmers denied coverage. According to Farmers, the denial resulted from, among other things, Shafighi’s failure to provide his examination under oath and failure to provide a timely and sufficient inventory of losses.
Shafighi later sued Farmers, alleging several causes of action. Farmers moved for traditional summary judgment, arguing that Shafighi’s failure to participate in an examination under oath and submit a properly completed Proof of Loss constituted the failure of conditions precedent to Farmers’ performance, which relieved it of the obligation to pay Shafighi’s claim. Shafighi’s response argued that the reasonableness of his refusal to be examined in Houston raised fact questions precluding summary judgment.
The trial court granted summary judgment in a detailed order, concluding as a matter of law that the disputed facts upon which Shafighi relied, even if true, “did not amount to sufficient defense or excuse for failing to sit for an EUO. Accordingly, the court found that Shafighi failed to comply with a condition precedent to suit, and it granted Farmers summary judgment on that basis.
In a motion for new trial, Shafighi pointed out that even if he failed to comply with the EUO requirement, under well-established Texas law, the insurer’s proper remedy to enforce the EUO condition precedent is abatement rather than bar. The trial court denied the new trial motion, and Shafighi appealed the grant of summary judgment.
The Court then got into a seven page legal discussion explaining it’s decision.
The bottom line here is that an EUO clause in an insurance policy is enforceable and there is not, under current Texas law, a good way of getting around the requirement.