Insureds Get Two Strikes on EUO No-shows (NY)
Generally, the standard for an insurer to disclaim or withdraw coverage because of an insured’s noncooperation is a high one. Specifically, the Appellate Division First Department recently reiterated, “An insurer that seeks to disclaim coverage based on its insured’s alleged noncooperation is required to demonstrate that it acted diligently in seeking to bring about its insured’s cooperation, that its efforts were reasonably calculated to obtain its insured’s cooperation, and that the attitude of its insured, after the cooperation of its insured was sought, was one of willful and avowed obstruction.”
Often this can leave an insurer uncertain if their insured’s noncooperation rises to a sufficient level to meet this exacting, highly fact-dependent test. However, the First Department recently affirmed a ruling which gives a clear guideline for a specific scenario in Nationwide Affinity Ins. Co. of Am. v. Thomas. The defendants in this declaratory judgment action had filed claims arising out of a motor vehicle accident. The plaintiff insurer had proved that they had properly served defendants with notices for examinations under oath (“EUOs”) on two separate occasions each and the defendants failed to appear for any of them.
The insurer moved for summary judgment, presenting evidence of proper service of the notices and denials of coverage, explained the basis for the EUO demands, and submitted statements on the record from attorneys who had appeared to take the EUOs. The trial court granted summary judgment and the First Department unanimously affirmed, holding appearance for properly noticed the EUOs, which were a condition precedent for coverage. 2018 WL 1587685 (N.Y. Sup. Ct. 2018); aff’d. 2020 NY Slip Op 02258 (1st Dep’t 2020). This decision provides welcome clarity on a scenario where an insurer can protect itself from the noncooperation of its insureds and the steps insurers can take to create the necessary paper trail to support a summary judgment motion.
Thank you to Nicholas Schaefer for his contribution to this post. Please contact Vincent Terrasi with any questions or comments.