On June 28th, 2018, the Maryland Court of Special Appeals issued an opinion in Dolan v. Kemper Independence Insurance Company, 218 WL 3199548 (Sept. Term, 2017) in which the appellate court affirmed the circuit court’s judgment in favor of the insurer against an insured who refused to submit to an examination under oath (EUO).
Most insurance policies, including the one at issue, contain policy conditions that require a person seeking coverage to cooperate with the insurer in the investigation, settlement, or defense of any claim or suit. These conditions usually require a person seeking coverage to submit to examinations under oath and subscribe the same, as often as the insurer reasonably requires. In Dolan, the Kemper Independence Insurance Company filed a declaratory judgment action seeking to establish that it had no duty to pay underinsured motorist benefits to appellant Gary Dolan. Kemper argued that Mr. Dolan had breached the insurance contract by refusing to submit to an EUO as required under the policy. Furthermore, Kemper argued that submission to an EUO was a condition precedent to Mr. Dolans’ ability to file suit against Kemper for breach of contract.
Mr. Dolan was injured while a passenger in a vehicle insured by Nationwide Mutual Insurance Company. Several months after the accident, Kemper became aware of the accident and, anticipating that Mr. Dolan might make a claim for underinsured motorist (UIM) benefits, requested he give a recorded statement, which Mr. Dolan’s counsel denied. After the initial request was denied, Kemper repeatedly made additional attempts to obtain a recorded statement or EUO, including a request that was rebuffed by Mr. Dolan’s counsel on the grounds that Kemper was not entitled to an EUO until Mr. Dolan made a formal claim for UIM benefits.
Eventually, Nationwide tendered its policy limits and Kemper advanced the equivalent amount from the Kemper policy in order to preserve its subrogation rights. Once Kemper’s check was accepted, Mr. Dolan’s UIM claim against the Kemper policy was triggered. Several other communications transpired where Kemper once again requested an EUO, but to no avail. Mr. Dolan’s counsel stated that Mr. Dolan would appear for a deposition, but would not submit to an EUO. Ultimately, Kemper formally denied Mr. Dolan’s claim for UIM benefits and filed its declaratory judgment action.
After the hearing, the court issued a declaratory judgment in which it concluded: “That submitting to an EUO administered by Plaintiff Kemper was a condition precedent to [Mr. Dolan] receiving UIM benefits under the insurance policy issued by Plaintiff Kemper, that Defendant Gary Dolan’s failure to do so amounted to a material breach of the insurance contract, and that Defendant Gary Dolan is not entitled to receive UIM benefits under the insurance policy issued by Plaintiff Kemper.”
On appeal, Mr. Dolan argued that submitting to an EUO is a condition to recovering benefits under the policy, not a condition for pursuing a lawsuit. The court rejected this contention because the policy language states that “no legal action may be brought against [Kemper] until there has been full compliance with all the terms of the policy.” Mr. Dolan also argued that Kemper was able to obtain the substantial equivalent of an EUO when it took his deposition, but the court rejected that position and cited numerous cases outside of Maryland holding that an insured cannot comply with the requirement of submitting to an EUO by submitting to a discovery deposition.
Insureds under policies permitting an insurer to conduct an examination under oath as a policy condition should submit to an EUO if requested by the insurer, and should not pursue legal action against the insurer until they have done so. Failure to do so will likely result in a loss of coverage.