eleventh circuitMost liability insurance policies have provisions stating that the insured has a duty to cooperate with the insurer in the investigation and defense of a claim. In most claims situation, this requirement is not an issue. From time to time, however, questions arise whether or not the insured has fulfilled its duty to cooperate. Questions also arise whether or not the insurer’s conduct (or lack thereof) excuses the insured from the duty to cooperate. Two recent decisions from the Eleventh Circuit, one applying Florida law and one applying Georgia law, involved cases in which the insurer contended that it was relieved of its obligations under the relevant policy because the insured had breached its duty to cooperate. In both cases, the appellate court held that the insureds had breached their duties. The cases provide something of a roadmap for insureds to follow in avoiding challenges based on alleged breaches of the duty to cooperate.


The first of these two appellate rulings involves the Eleventh Circuit’s May 9, 2016 unpublished per curiam decision in Doe v. One Beacon American Insurance Company (here), and the second of the two involves the court’s unpublished July 5, 2016 per curiam opinion in Hsu v. Safeco Insurance Company of Indiana (here). The two cases are discussed in an October 25, 2016 Law 360 article from the Dentons law firm entitled “11th Circuit Cracks Down on Insureds’ Failure to Cooperate” (here, subscription required).


Doe v. One Beacon American Insurance Company: This insurance dispute arose out of an underlying state court tort case that the insured had settled without the insurer’s consent. The insurer contended the settlement constituted a breach of the insured’s duty to cooperate. The insured’s assignee alleged that the failure to cooperate was excused by the insurer’s failure at the time of the settlement to provide an adequate defense to the insured.


In the insurance coverage action that the assignee filed against the insurer, the district court granted the insurer’s motion for summary judgment. The Eleventh Circuit affirmed reasoning  (1) the record the contains insufficient evidence, as a matter of law, to allow a reasonable jury to find that the insurer failed to provide an adequate defense; and (2) the insurer reasonably believed that at the time of the settlement of the underlying claim that it lacked sufficient information to evaluate the claim and that it had a meritorious defenses that would preclude liability for the insured.


The appellate court concluded that that in entering the settlement without the insurer’s consent, the insurer had “breached its duty to cooperate with the insurer in the investigation and defense” of the underlying claim.


Hsu v. Safeco Insurance Company of Indiana: This case involved a question of whether or not the alleged failure by the insureds to produce requested tax returns constituted a breach of their duty to cooperate under the homeowners’ insurance policy. The insurer had requested that the insureds provide their tax returns dating back to 2009. The insureds, according to the appellate court, “failed to provide all of the requested documents, explaining that their tax information had been stolen by a former accountant.” The insureds provided the insurance company with written authorization to obtain the tax returns directly from the IRS.


The insurer attempted to obtain the documents from the IRS but the IRS mailed the documents to the insureds. The insurance company then, according to the appellate court, “diligently pursued the mater and the insureds failed to cooperate.” The insureds failed to respond to the insurer’s two written requests that they (the insureds) forward to the insurer the documents that the IRS has sent to the insureds. The insureds, the appellate court said, “offer no excuse or explanation for this failure to respond” to the insurers requests.


At least according to the appellate court’s retelling, after failing to respond to the insurer’s two written requests for the IRS documents, the plaintiffs filed a lawsuit against the insurer. The district court found that there was no genuine issue of material fact that the insureds had breached the contract of insurance. The appellate court affirmed.



The outcomes of these two cases are very much a reflection of the specific facts and circumstances involved in each case. The cases also to a certain extent reflect the procedural postures of the cases – they were both determined at summary judgment – and the outcomes reflect the record that the plaintiff insureds had established at that stage of the proceedings. The outcome of the first of these two cases in particular was a direct reflection of the fact that the insured had not presented sufficient evidence that the insurer had provided an inadequate defense while the insurer was able to present sufficient evidence that it believed in good faith that it lacked adequate information to assess the proposed settlement and that the insured had valid defenses to the claim.


That said, the cases do provide something of a cautionary tale about the perils to insureds of, for example, settling a case without the insurer’s consent, as in the first example, or failing to provide documents in response to the insurer’s written request for documents, as in the second example.


My own experience is that courts generally are wary of relieving insurers of their obligations under the policy based on an alleged failure by the insured to cooperate. Along those lines, the law firm memo to which I linked above notes that “even if an insured does not honor the cooperation clause, it does not necessarily forfeit coverage.”


An insured’s failure to cooperate, the memo’s authors’ note, is “excused when the insured has otherwise complied.” Several jurisdictions “impose additional requirements on the insurer before absolving it of the duty to defend or indemnify the insured.” For example, the insurer may have to show “that it diligently sought the insured’s cooperation through regular communication with the insured”; that the insured’s lack of cooperation was material; or that the insurer suffered prejudice as a result of the insured’s failure to cooperate; or any combination of these factors.


Nevertheless, notwithstanding the courts’ general reluctance to have alleged breaches of the cooperation clause trigger of forfeiture of the insured’s rights under the policy, courts will, when the factual circumstances involved warrant, hold that the insured’s breach of the duty relieves the insurer of its obligations under the policy, as the two cases discussed above demonstrate.


The two cases discussed above also underscore the importance for the insured of regular communication with the insurer. Both of the cases reflect at some level a breakdown of communications and the consequences that can arise when the insured does not proactively engage in communications with the insurer.


By the same token, the cases also highlight the importance for the insurer of being able to demonstrate diligence in its efforts to secure the insured’s cooperation. The memo’s authors suggest that insurers will want to regularly communicate the following to the insured: the contractual basis for the insured’s duty to cooperate, so that the insured knows its obligations and that it is bound by the policy condition; the specific actions or inactions being request of the insured; the reasons why cooperation is material; and the potential consequences of the insured’s failure to cooperate.


Well-advised insureds, on the other hand, will be well-served to demonstrate their good faith efforts to comply with the insurer’s defense; and to fully document their efforts to satisfy the insurer’s requests for information or other cooperation, including the reasons why the insured is unable to comply with a specific request. These cases underscore the importance of not allowing communications from the insurer to go completed unanswered. The cases also highlight the importance of keeping the insurer fully informed above developments in the underlying claim.


Insureds pay significant amounts of money to obtain insurance protection in the event that claims should arise. Insureds should not lightly be deprived of those rights, even if the insurer should contend that the insured has not cooperated. At the same time, however, insureds should realize they, too, have certain obligations under the policy. Their interests will be well-served if they can demonstrate a good faith effort to comply with the insurer’s reasonable requests for cooperation, or, if the insured believes the insurer is being unreasonable, to try to show how they (the insured) has nevertheless sought to keep lines of communication open and to respond as best as they are able under the circumstances.


There is another more fundamental reason why keeping the lines of communication open is a good idea, separate and apart from issues having to do with the duty to cooperate, and that is that poor or incomplete claims communications contributes friction to the claims resolution process. This friction can contribute to unnecessary contentiousness between the insurer and the insured. It can also result in delays that unnecessarily complicate the claims process. The better course is to keep the carrier in the loop.