Policies typically require an insured to submit to an Examination Under Oath (“EUO”) at the request of the insurer. The EUO can be a useful tool during claim adjustment in reaching a fair and informed coverage decision by allowing the insured to explain the facts and circumstances surrounding the claimed loss and substantiating valuation of the claimed loss. The EUO is therefore useful in possibly avoiding litigation. See May 4, 2012 post on Hamilton v. State Farm.

In Whistler’s Park, Inc. v. The Florida Insurance Guaranty, Etc., Case No.: 5D10-2410 (May 18, 2012)¹, the Fifth District Court of Appeal of Florida held that the insured’s failure to appear for an EUO before filing suit was not sufficient reason, standing alone, to grant summary judgment to the insurer’s successor in interest. Instead, the insurer must establish prejudice.

The insured in Whistler’s Park incurred property damage due to Hurricane Charley, and the insurer, Southern Family, paid $363,635 for the claim. The insured advised Southern Family that it was dissatisfied with the payment amount and sent a Civil Remedy Notice letter to the Florida Department of Insurance. On August 18, 2005, Southern Family requested that the insured provide Southern Family with specific categories of documents and submit to an EUO. Southern Family assigned its rights to the claim to Whistler’s Park, and several correspondences between attorneys for the insured and insurer ensued. In December 2005, counsel for Whistler’s Park indicated that the documents requested would be made available for inspection in January 2006 and identified the corporate representative for purposes of an EUO. However, before actually providing the documents and submitting to an EUO, Whistler’s Park filed suit against Southern Family. Southern Family moved for summary judgment based on the assertion that the insured failed to comply with policy conditions before filing suit. FIGA became the successor in interest to Southern Family.

The trial court granted FIGA’s motion for summary judgment. The district court of appeal reversed, explaining that:

“The actual, if unglamorous, true purpose of the EUO – verification of the insured’s loss – has been lost in this larger battle.
. . .
No doubt there can be genuine instances of insurance fraud, but the recent and ever-escalating number of EUO cases that have arisen all over the state appear to be more about strategy than truth.”

Whistler’s Park at 8. The district court of appeal held that unless FIGA could show prejudice, the insured’s failure to submit to an EUO would not constitute a material breach of the insurance policy. The Fifth DCA expressly disagreed with the Third and Fourth district courts of appeals’ holdings that a failure to appear for a requested EUO or Independent Medical Exam (“IME”) by itself constitutes a material breach of contract. See De Ferrari v. Government Employees Insurance Co., 613 So. 2d 101 (Fla. 3d DCA 1993); Goldman v. State Farm Fire General Insurance Co., 660 So. 2d 300 (Fla. 4th DCA 1995).

The reasoning and holdings of the 3rd and 4th DCAs adhere to the plain language of the insurance policies and a finding that the requirement that the insured submit to an EUO is a condition precedent to coverage, while the 5th DCA interprets the EUO requirement as a condition subsequent requiring a showing of prejudice before finding a material breach. see also State Farm Mut. Auto. Ins. Co. v. Curran, 83 So. 3d 793 (Fla. Dist. Ct. App. 5th Dist. 2011).

The disagreement between Florida’s intermediate appellate courts could result in the Florida Supreme Court taking up this important issue.

¹ Reproduced by Robinson & Cole LLP with the permission of LexisNexis. Copyright 2012 LexisNexis, a division of Reed Elsevier Inc.  All rights reserved.  No copyright is claimed as to any portion of the original work prepared by a government officer or employee as part of that person’s official duties.