Washington Supreme Court Finds No Absolute Right to an EUO in First-Party Claims

According to a recent Washington Supreme Court decision, first-party insurers do not have an absolute right to an examination under oath (“EUO”), and are required to show prejudice before denying a claim on the basis that the insured refused to submit to an EUO. Staples v. Allstate Ins. Co., 176 Wash. 2d 404, 406, 295 P.3d 201, 203 (2013). Interpreting a cooperation condition of a homeowner’s policy providing that the insured “must” submit to an EUO at the insurer’s request, the Supreme Court held an insurer cannot demand an EUO that is not “material to the investigation or handling of a claim.” Id. at 411-12, 414. The Court based its holding on “the quasi-fiduciary insurance relationship” between insured and insurer, observing that “it would surely violate an insurer’s good faith duty to demand an EUO from every single claimant simply to burden insureds and set up pretexts for denying claims.” Id. at 414. In doing so, the Supreme Court also expressly disapproved of Downie v. State Farm Fire & Casualty Co., 84 Wash. App. 577, 929 P.2d 484 (1997), in which Washington’s Court of Appeals concluded that an insurer has an absolute right to at least one EUO. Id.

In Staples, the insured failed to produce certain documents prior to a scheduled EUO, and the insurer cancelled the EUO, reiterating its document requests and asking that the insured contact it to reschedule the EUO. Id. at 408-09. The insured provided some of the requested documents, but did not attempt to reschedule the EUO for several months. Id. at 409. The insurer then denied the insured’s claim on the basis that the insured failed to submit to an EUO and, when the insured filed a coverage action, moved for summary judgment on that basis. The trial court granted summary judgment for the insurer, but the Supreme Court reversed, finding that, while the insurer was within its rights to request an EUO in this instance, the insurer did not necessarily have the right to deny the claim. Id. at 414, 421-22.

The Supreme Court held there was a material issue of fact regarding whether the insured substantially complied with his obligation to submit to an EUO, as the record permitted a reasonable inference that the insurer refused to schedule the EUO until the insured complied with its document requests. Id. at 415. Further, the Court held the insurer was required to show prejudice before denying the insured’s claim based on his failure to submit to an EUO, reasoning that such a showing was necessary to prevent insurers from “receiving windfalls at the expense of the public,” and was required by the language of the policy. Id. at 418. Thus, although the Court observed in Staples that the insurance relationship “can function only if both sides cooperate,” it far from encouraged any cooperation on the part of the insured.

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