Your duties as a policyholder do not stop at merely paying monthly premiums; the policy holder has a few other obligations to the insurer.
As previously discussed in our blog article, Your Insurance Provider’s Rights and Duties Pt. 1: Investigation and Defense, your insurance provider has the right and duty to investigate claims brought against you. This ability to investigate is essential to their ability to defend you in the case of claims. But, to investigate and defend you against claims, your insurance provider must know about the claim and have your cooperation. Thus arises the insured’s duty to notify the insurer of a suit against them in a timely manner and must also cooperate with the insurer in the defense.
If you are involved in an accident or someone brings a claim against you, the insurance company must be notified “as soon as practicable.” Notifying the company allows them time to begin investigating the claim and decide to settle or develop defenses before a claim is filed. This time frame is usually determined by a jury using the standard of the ordinary policy holder. Failing to notify the insurance company in a timely could release them from liability for the claim against the policy holder. However, if the policy holder has a justifiable reason for the delay in notification, the insurer’s liability still remains. The standard insurance policy provides that notice be given to the company “by or for the insured” meaning that someone other than the insured is able to give notice to the company.
Insurance contracts usually include a “cooperation clause” that requires the insured party to assist the insurance company in the investigation. This includes attending hearings or trials and securing evidence. If the insured breaches this duty to cooperate and creates a situation prejudicial to the insurer, the insurer may be relieved of its obligation to defend or pay the judgment. However, the failure to cooperate must have been willful and intentional by the insured to relieve the insured of its duty.
One of the biggest ways to impact your insurer’s investigation and violate the cooperation clause is to misrepresent the facts of the incident which gave rise to the claim. The insured’s testimony usually forms the basis of whether the insurer should settle the claim or defend the insured. If the insured either intentionally lies about the incident or refuses to give requested information in order to deceive the insurer, the insurer is immediately relieved of their duties to the policy holder.
The other sure-fire way to violate your cooperation clause is to not appear at hearings or trials. This is a necessary condition of the policy. Prejudice to the insurer is automatically satisfied by showing that the policyholder did not appear in court when requested, but the insurer must still show that the absence was willful and intentional to be relieved of its duties.
You want your insurance provider to cover you so make sure to fulfill your duties and notify them of an accident or claim against you as soon as you can and cooperate in the investigation.