C L A I M D E N I E D February 2003 A publication of the Lowenstein Sandler Insurance Law Practice Group Failure to Cooperate May Eliminate Coverage by Lynda A. Bennett, Esq. E very insurance policy imposes a a liability claim, and generally judge dismissed a suit filed by a duty of cooperation on the pol- complying with the insurer’s rea- dentist who had submitted property icyholder. This duty to cooperate sonable requests for information. damage and business interruption includes providing the insurer with At times, tension develops between claims after the dentist refused to pertinent information about a a policyholder and an insurer when cooperate with the insurer’s inves- claim, assisting the insurer with the a claim has been presented, rele- tigation of the claims. In 1999, the investigation of the claim, partici- vant information has been sup- dentist received notice that his pol- pating in the defense in the case of plied, and the insurer continues to icy had been cancelled because the seek additional information, rather premium had not been paid. In Inside than making a coverage determina- order to reinstate the policy, the NEW JERSEY COURTS tion. The line between legitimate dentist had to pay the past due pre- BROADLY CONSTRUE requests for information and an mium and submit a “no claims” let- RIGHTS OF “ADDITIONAL insurer’s “paper chase” delay tactic ter, certifying that he had no INSURED” is often gray. To complicate mat- knowledge of any losses to be ten- By Kristina D. Pasko, Esq. ters, there is a dearth of reported dered under the policy. Less than case law that addresses the scope of 10 days after his policy was rein- THE MOST RECENT a policyholder’s duty to cooperate. stated, the dentist submitted a REFINEMENTS TO NEW A recent case from the Southern series of claims that totaled more JERSEY’S CONTINUOUS District of New York, however, than $1.2 million. TRIGGER AND demonstrates that coverage may be ALLOCATION RULES In accordance with the terms of lost altogether if a policyholder fails By Lynda A. Bennett, Esq. the policy, the insurer refused to to cooperate. pay the claims until the dentist NEW ARTICLES In Stradford. v. Zurich Insurance appeared for an examination under ON THE OUTPOST Co., et al , 2002 WL 31819215 oath. The dentist appeared for the www.insurance-lowenstein.com (S.D.N.Y. Dec. 13, 2002), a federal first day of the examination but it This document is published by Lowenstein Sandler PC to keep clients informed about current issues. It is intended to provide general information only. A L D
NEW JERSEY could not be completed in one day examination under oath as a pre- COURTS BROADLY because, among other things, the text to delay making its final cov- CONSTRUE RIGHTS dentist had failed to timely submit erage determination. The court OF “ADDITIONAL documents that had previously also rejected the dentist’s plea for a INSURED” been requested. Despite nine second chance to appear for the requests from the insurer, the den- examination because it found by Kristina D. Pasko, Esq. “more than ample evidence to indicate that Dr. Stradford’s lack of The scope of coverage available to . . . a policyholder’s fail- cooperation was willful.” Id . at *6. an “additional insured” is an impor- ure to cooperate with its tant but often overlooked issue, insurer’s investigation As reinforced by the Stradford particularly in the context of con- may lead to a complete case, a policyholder’s failure to struction projects. While the forfeiture of coverage for cooperate with its insurer’s investi- requirement to provide “additional an otherwise valid claim. gation may lead to a complete for- insured” status is standard in many feiture of coverage for an otherwise construction contracts, the word- valid claim. At the same time, pol- tist refused to appear for a continu- ing of an “additional insured” icyholders are not required to ation of the examination. The endorsement can vary significantly expend significant time, resources, dentist also failed to provide addi- from policy to policy. Some policy- and cost responding to multiple tional documents that were holders and/or insurers will attempt and unreasonable requests for requested during the first day of his to limit the scope of coverage information from insurers that are examination. Thereafter, the granted to an “additional insured” engaged in delaying tactics. As a insurer denied coverage for the ten- by wording the endorsement to general rule, policyholders should dered claims on the grounds that provide coverage for the additional provide their insurers with suffi- the dentist had failed to complete insured only for damages that arise cient facts to demonstrate a claim the examination under oath, he out of the work or operations of the under the policy and sufficient doc- had failed to cooperate in the named insured. Recently, the umentation of the damages that are claims investigation, and his “no Appellate Division reviewed this being claimed. Where a policy claims” letter was fraudulent. type of endorsement in two premis- requires submission of a proof of es liability cases, and in both The court held that the dentist loss and/or appearance for an exam- instances, broadly construed the was not entitled to coverage ination under oath, the policyhold- endorsement to afford coverage to because he had breached a condi- er must comply. Once this basic the additional insured. tion precedent in the policy, name- information has been tendered to ly he had failed to cooperate with the insurer and additional requests In Myers v. New Jersey Sports & his insurer. In so holding, the for information are still forthcom- Exposition Auth ., No. A-3750-00T5 court rejected the dentist’s argu- ing, the policyholder should con- (N.J. App. Div. Dec. 12, 2002), a ment that he was excused from sult with coverage counsel to eval- subcontractor’s employee was cooperating because the insurer uate whether cooperation or cover- injured while working on a renova- never had any intention of cover- age litigation is called for. tion project for the New Jersey ing his claim and was using the Sports & Exposition Authority
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