How many times over the years have we heard the stock phrase, “I plead the Fifth” or “I take the Fifth” uttered during crime sagas? Although nowadays probably not as often quoted as the statement “You can’t handle the truth!!!”, a main reason that the refrain “I plead the Fifth” or “I take the Fifth” is so familiar to us is a result of its melodramatic use on television and in Hollywood films.

The Fifth Amendment

As we all know, the phrase “I plead/take the Fifth” actually refers to the privilege against self-incrimination contained within the Fifth Amendment to the United States Constitution. Specifically, it refers to the provision that no person “shall be compelled in any criminal case to be a witness against himself.” “However, the privilege against self-incrimination also applies in the civil context. A plaintiff in a civil case does not implicitly surrender the right to invoke the privilege merely by the filing of a civil action.” ¹

In the real world, it is unlikely that you will hear such stock phrase being proclaimed in any Congressional hearing or criminal investigation in such over-the-top fashion. It would be even rarer to recount or envision a scenario during an insurance claims investigation in which an insured has asserted/would assert the Fifth Amendment privilege against self-incrimination with such theatrical declaration as one might find in a Hollywood movie. Nonetheless, during a claims investigation, the rights and obligations of an insured and those of the insurer can meet head on. An insured confronted with a criminal investigation has the constitutional right to assert his or her Fifth Amendment privilege. An insurer faced with the vital task of conducting a claim investigation has the right to insist upon the cooperation of the insured in what should be a mutual endeavor to obtain relevant information regarding the facts and circumstances surrounding a claim. As a result, an inherent tension can exist between the rights of the parties to an insurance contract.

The Contractual Obligation to Cooperate

A distinct difference between an insurance claim investigation and a criminal investigation is that an insurance policy’s obligations are contractual. Commentators have noted that “[i]nsurance policies written in this country contain certain rights, responsibilities, and obligations apportioned between the insurance company and the insured.” ² It is standard for an insurance policy to contain a cooperation clause that requires an insured to cooperate with the insurance company during the investigation, settlement, or defense of a claim or suit.³ There are critical purposes for doing so. “Insurance companies insert cooperation clauses into their policies to protect the insurer’s right to a fair adjudication of a first-party claim disposition or the defense of the insured’s liability or loss in the third-party context.” Additionally, with respect to third-party claims, policies contain cooperation clauses “to prevent collusion and fraud between the insured and the injured claimant.”⁵ “Courts have universally found that the insured cannot use the Fifth Amendment, on the one hand, to avoid the contractual obligation to cooperate with the insurance company in its investigation and, on the other hand, compel the insurance company to provide coverage.” ⁶

Examinations Under Oath (“EUO’s”)

Typically, the Fifth Amendment privilege against self-incrimination is invoked by the insured in the midst of a claim investigation to avoid an examination under oath (“EUO”) altogether, or in fear of answering certain questions which may be self-incriminating. Still, “[i]t is almost uniformly held throughout the country that an insured’s EUO obligation is not circumvented by Fifth Amendment protection. Some jurisdictions hold that the insured’s invocation of the Fifth Amendment at their EUO constitutes a breach of the cooperation clause as a matter of law, while other jurisdictions require a showing of prejudice.”⁷

The authority for requiring examinations under oath are the contractual obligations in the insurance policy. “As part of an insured’s general duty to cooperate with the insurer after a loss or once a third-party makes a claim, insurance companies include the examination under oath provision, either specifically or by implication, in both personal and liability insurance policies. While the language in an individual policy may vary, the intent is the same—to obtain as much information from the insured as possible. The examination under oath, therefore, has become one of the insurance industry’s most important tools in determining the accuracy of an insured’s claim and, in turn, in combating fraud and collusion.”⁸

In the first-party setting, “Duties of cooperation include the duty to submit to an examination under oath, the duty to respond to reasonable requests for information and documents, and the duty of candor which would prohibit the insured from concealing material information from the insurer or from providing false information in support of the insured’s claim.” ⁹ An examination under oath and the information obtained therefrom is at the core of the duty to cooperate. The regard the courts have for the duty to cooperate is illustrated by the case Aetna Casualty & Surety Co. v. State Farm Mut. Auto. Ins. Co., 771 F. Supp. 704 (W.D. Pa. 1991),aff’d, 961 F.2d 207 (3d Cir. 1992). Mona Dobbins, the State Farm insured, refused to give a statement to State Farm regarding a motor vehicle accident that occurred on August 8, 1987. During the accident, Ms. Dobbins struck and killed a pedestrian with the vehicle she was driving, which had been leasedby her employer Brookline Social Club.¹⁰ Ms. Dobbins left the scene of the accident. ¹¹ In light of the criminal proceedings pending against her, Ms. Dobbins refused to give a statement to State Farm on the basis of her Fifth Amendment privilege against self-incrimination. ¹² On August 24, 1987, State Farm sent Ms. Dobbins a reservation of rights letter. ¹³ In December of 1987, a civil action was filed against State Farm’s insured [Ms. Dobbins] by the estate of the pedestrian killed. ¹⁴ After a default judgment was obtained by the estate against Ms. Dobbins, State Farm sent two letters to Ms. Dobbins in March of 1989 “denying coverage under its liability policy issued to the Brookline Social Club and refusing to defend or indemnify her because of her refusal to cooperate with State Farm’s investigation.”¹⁵ Following State Farm’s denial of coverage, the estate of the pedestrian killed presented an uninsured motorist claim to Aetna, the uninsured motorist insurer. ¹⁶ After Aetna paid the claim under its uninsured motorist coverage, it filed an action against State Farm for indemnification from State Farm for the uninsured motorist claim that Aetna paid. ¹⁷ The jury returned a verdict in favor of State Farm finding that State Farm insured, Ms. Dobbins, breached her duty to cooperate and that State Farm had suffered substantial prejudice. ¹⁸ Aetna filed a motion for judgment notwithstanding the verdict. ¹⁹ Upon consideration of Aetna’s motion for judgment notwithstanding the verdict, the court upheld State Farm’s coverage denial, rejecting Aetna’s argument that Ms. Dobbins’ Fifth Amendment privilege excused her breach of contract as a matter of law. ²⁰ Indeed, as one commentator indicated, “In these trying times of exaggerated and intentionally false claims, examinations under oath offer the insurance company’s best chance of aggressively investigating first party claims in a good faith atmosphere. Examinations under oath should be effectively utilized by the insurance company in its search for truth in the war against arson and false claims.”²¹

A common examination under oath provision in a homeowner’s insurance policy states:

In case of a loss, anyone we protect must:

. . .

at our request, separately submit to examinations and statements under oath and sign a transcript of the same.

Whereas submitting to an EUO is a contractual duty, conversely, “[t]he Fifth Amendment privilege against self- incrimination applies to a ‘proceeding’ or an ‘action.’”²² An EUO does not involve state action and is, thus, neither a “proceeding” nor an “action” as those terms are contemplated by the Fifth Amendment. ²³

Importantly, the court in Aetna Casualty & Surety Co. v. State Farm Mut. Auto. Ins. Co. emphasized that an insured’s Fifth Amendment privilege is “trumped” by the insurance policy’s duty to cooperate and reasoned as follows:

A person may not be penalized for asserting the Fifth Amendment privilege against self-incrimination, but that does not mean that if a person refuses to make a statement in a civil proceeding that the failure to provide evidence may not have adverse consequences. ²⁴

Unlike those jurisdictions that have held that invoking the Fifth Amendment during an EUO is a breach of the cooperation clause as a matter of law, however, the court in Aetna Casualty & Surety Co. v. State Farm Mut. Auto. Ins. Co. discussed the additional requirement under Pennsylvania law that insurers demonstrate prejudice by the assertion of the Fifth Amendment privilege.²⁵ Specifically, the court stated that for an insurer to disclaim coverage on the basis of a breach of a cooperation clause, “the insurer must prove (1) that the putative insured breached its duty to cooperate in the insurer’s investigation and defense of a claim, and (2) that the insurer suffered substantial prejudice as a result.”²⁶ On the substantial prejudice issue, State Farm argued “that the evidence concerning the identity of the driver and the comparative negligence of the [pedestrian] were disputed issues and the absence of any statement by the alleged driver of the vehicle which struck [the pedestrian] materially impaired State Farm’s ability to defend against any civil claim by the . . . estate.”²⁷ The court concluded that the determination by the jury that State Farm’s insured’s refusal to make any statement substantially prejudiced State Farm’s investigation and defense “while of doubtful correctness . . .” was not irrational or having no basis in the record. ²⁸

In the context of a first-party property claim:

[T]he issue is not whether the insurer has been prejudiced in its defense of the third party claim, but whether the insurer has been able to complete a reasonable investigation with regard to whether the insured’s claim is valid. If the insured’s refusal to cooperate prevents the insurer from completing such a reasonable investigation, prejudice should be found to exist. Specifically, it has been held that the insurer can deny coverage, following an insured’s refusal to provide documents reasonably requested by the insurer, on the basis that the insurer has been prejudiced because the insured’s refusal prejudices the insurer by putting the insurer in the untenable position of either denying coverage or paying the claim without the means to investigate its validity. An insurance company does not have to prove that it would have won the case had it obtained the insured’s cooperation. ²⁹

Miller v. Augusta Mut. Ins. Co., 157 Fed.Appx. 632 (4th Cir. 2005), is an example of a third-party case that included a declaratory judgment claim in which the court found that the insured’s invocation of the Fifth Amendment at the EUO itself constituted a breach of the cooperation clause without requiring more. In Miller , the estate of a child who was fatally shot by a friend brought a declaratory judgment action requesting a determination that the wrongful death claim was covered by a homeowner’s insurance policy issued by Augusta Mutual to the friend’s parents.³⁰ Augusta Mutual investigated whether the wrongful death action was covered under the homeowner’s insurance policy. The policy contained a cooperation clause which required the insureds to “secure and give evidence.” ³¹ Despite numerous requests by Augusta Mutual for the insured’s son to do so, the insured’s son refused to provide a statement under oath as a part of the claim investigation in light of the pending criminal charges. ³² Eventually, the insured’s son and his parents did give statements under oath, but the insured’s son, “accompanied by his criminal attorney, refused to answer any questions about the shooting, asserting his Fifth Amendment rights as his attorney advised him to do.”³³ The district court below found that the insured’s son “breached his duty to cooperate by asserting his Fifth Amendment rights and declining to give a statement to Augusta Mutual . . . and that the . . . policy was void as to [the insured’s son] and that Augusta Mutual had no duty to defend [the insured’s son].” ³⁴ The Fourth Circuit Court of Appeals applied Virginia law, which provides that an insurer cannot be liable under a policy when there is a material breach of the duty to cooperate under a cooperation clause, “even if the insurer is not prejudiced . . .” as a result. ³⁵ The court affirmed the district court’s decision, recognizing Virginia law’s requirement that in order to demonstrate a breach of a cooperation clause, there must be proof of a willful breach of the clause and that the insurer made a reasonable effort to secure the insured’s cooperation.³⁶ In so affirming the lower court, the Fourth Circuit reasoned that Augusta Mutual made repeated efforts to obtain information from the insureds about the shooting to no avail, and that the former’s efforts to investigate the claim were reasonable as a matter of law.^{37 38}

Traditionally, the element regarding the willful and intentional violation of the cooperation clause is seen in the context of third-party claims. As the Court stated in Harary v. Allstate Ins. Co.:³⁹

A fire insurance claimant who is suspected of arson has a significant burden of cooperation. Although the plaintiff stresses the ‘heavy burden’ on an insurer to establish non-cooperation . . . the cases cited by the plaintiff almost uniformly involved third party recovery issues under insurance other than fire insurance, where the cooperation requirement is far less stringent. The basis for this distinction was explained in Dyno-Bite:

A distinction may be drawn, however, between a court’s natural reluctance to see an accident victim deprived of his source of payment because a liability carrier claims that its assured has failed to cooperate, and an indemnity carrier denying payment to its insured because the insured has failed to cooperate in discovering a possible arson. The injured accident claimant is an innocent victim of the insured’s failure to cooperate. A fire insured, however, controls his own fate . . . .

Another instructive decision, a case involving a first-party claim made under a homeowner’s insurance policy, is that of Pilgrim v. State Farm Fire & Cas. Co.,⁴⁰ wherein the insureds “produced their W-2 forms for 1990-1993, but refused to produce anything else” without the insurer executing a confidentiality agreement. The Court found the absence of cooperation as a matter of law, stating:

The Pilgrims promised to cooperate with State Farm’s investigation by producing “records and documents” as often as State Farm “reasonably require[s]”. The issue is whether, as a matter of law, they breached their promise. No evidence is disputed. That evidence demonstrates that the Pilgrims at least partially complied with the cooperation duty. For example, during Keith’s and Renae’s interviews, both answered questions about financial accounts they maintained, to whom and how much money they owed, the status of their taxes, the absence of judgments, liens and outstanding credit card balances. Nevertheless, no reasonable juror could conclude that the Pilgrims substantially cooperated in the production of relevant, reasonable, requested financial documents. With the exception of their W-2s, they produced nothing. And they refused to authorize third parties to disclose relevant financial information to State Farm. Their substantial failure to cooperate constitutes a breach of the cooperation clause as a matter of law. ⁴¹

The Court, therefore, affirmed the insurer’s award of summary judgment. ⁴² See also Porcello v. Allstate Ins. Co.;⁴³ Harary v. Allstate Ins. Co.;⁴⁴ Buongiovanni v. Allstate Ins. Co.;⁴⁵ Levy v. Chubb Ins.⁴⁶

Final Thoughts

Fifth Amendment privilege and duty to cooperate issues implicated during a claim investigation will be unique to the facts and circumstances surrounding such claim, whether first-party or third-party. In the criminal setting, we recognize an insured’s right to assert the Fifth Amendment privilege. In the insurance world, we recognize that an insurer must diligently fulfill its obligations during the investigation of a claim.

_{1 Steven Plitt and Jordan Ross Plitt, 1 Practical Tools for Handling Insurance Cases § 2:5.}

_{2 Steven P. Groves, Sr., Statements/Examinations Under Oath, 2 Law and Prac. of Ins. Coverage Litig. § 3.1.}

_{3 See, e.g., ISO Props., Inc., Commercial General Liability Coverage Form § IV(2)(c) (2006) (“You and any other involved insured must . . . Cooperate with us in the investigation or settlement of the claim or defenses against the ‘suit’ . . .”).}

_{4 Steven Plitt and Jordan Ross Plitt, 1 Practical Tools for Handling Insurance Cases § 2:5. (citing Forest City Grant Liberty Associates v. Genro II, Inc., 438 Pa. Super. 553, 652 A.2d 948 (1995) (holding that an insured must provide the insurer with information necessary to prepare a defense, aid in securing witnesses appearance, attend hearings and trials, and otherwise ren der all reasonable assistance necessary)}

_{5 Id}

_{6 Id.}

_{7 Id.; See, e.g ., Aetna Cas. & Sur. Co. v. State Farm Mut. Auto. Ins. Co., 771 F.Supp. 704 (W.D. Pa. 1991),aff’d, 961 F.2d 207 (3d Cir. 1992) (holding that under Pennsylvania law, for breach of a cooperation clause defense to be valid, an insurer must prove that the putative insured breached its duty to cooper- ate in the insurer’s investigation and defense of a claim, and that the insurer suffered substantial prejudice as a result).}

_{8 Stephen P. Groves, Sr., Insurance policy language requiring an insured to submit to a statement or examination under oath, 1 Law and Prac. of Ins. Coverage Litig. § 3:5.}

_{9 Miss. Ins. Law and Prac.§ 9:1 (footnote omitted).}

_{10 Id. at 706.}

_{11 Michael A. Hamilton, Property Insurance: A Call for Increased Use of Examinations Under Oath for the Detection and Deterrence of Fraudulent Insurance Claims, 97 Dick. L. Rev. 329 (1993) (footnote omitted).}

_{12 Id.}

_{13 Id.}

_{14 Id.}

_{15 Id.}

_{16 Id.}

_{17 Id. at 707.}

_{18 Id.}

_{19 Id. at 705.}

_{20 Id. at 708.}

_{21 Michael A. Hamilton, Property Insurance: A Call for Increased Use of Examinations Under Oath for the Detection and Deterrence of Fraudulent Insurance Claims, 97 Dick. L. Rev. 329 (1993) (footnote omitted).}

_{22 Steven Plitt and Jordan Ross Plitt, 1 Practical Tools for Handling Insurance Cases § 2:5.}

_{23 Id.; See, e.g., State Farm Indemnity Co. v. Warrington, 350 N.J. Super. 379, 795 A.2d 324 (App. Div. 2002) (“The majority view is premised upon the understanding that the compulsion secured by the Constitution is ‘a compulsion exercised by the State in a sovereign capacity in some manner known to the law .... To bring a case within the constitutional immunity, it must appear that compulsion was sought under public process}

_{of some kind’” ); see also Metlife Auto & Home v. Cunningham, 797 N.E.2d 18, 22 (Mass. App. Ct. 2003) (holding that the insured’s “assertion of rights under the Fifth Amend-ment to the United States Constitution . . . afforded him no sanctuary from his obligation to cooperate [with his insurance company], for it is not by the [Government] or by [MetLife] that [Cunningham] is compelled to . . . furnish evidence against himself, but by his own contractual undertaking”).}

_{24 Id. at 707.}

_{25 Id.}

_{26 Id. (emphasis supplied).}

_{27 Id.}

_{28 Id. at 709. See, e.g., Forest City Grant Liberty Associates v. Genro II, Inc ., 438 Pa.Super. 553, 652 A.2d 948, 951 (1995) (involving a third-party claim in which the court analyzed the duty to cooperate and stated that “[a]lthough a breach of a duty to cooperate will relieve the insurer from liability under the policy, the failure to cooperate must be substantial and will only serve as a defense where the insurer has suff ered prejudice because of the breach.” “Whether there has been a material breach of an insured’s duty to cooperate is a question for the fi nder of fact.”) (internal citations omitted).}

_{29 1 Insurance Claims & Disputes § 3:2 (footnotes omitted).}

_{30 Id. at 633.}

_{31 Id.}

_{32 Id.}

_{33 Id.}

_{34 Id.}

_{35 Id. at 638 (emphasis supplied).}

_{36 Id. at 639.}

_{37 Id.}

_{38 In addition to material breach and prejudice, some courts have found that in order “[t]o deny liability coverage because of a violation of the policy’s cooperation clause, an insurance company must prove . . . the exercise of reasonable diligence to secure the insured’s cooperation,” Steven Plitt and Jordan Ross Plitt, 1 Practical Tools for Handling Insurance Cases § 2:5.}

_{39 988 F.Supp. 93, 102-103 (E.D.N.Y. 1997) (citations omitted).}

_{40 89 Wash. App. 712, 950 P.2d 479, 481 (1997).}

_{41 Id. at 723 (footnote omitted).}

_{42 Id. at 725 (“Without access to financial documents, State Farm could not evaluate the validity of the Pilgrims’ claim. It could not decide whether the claim was covered, much less prepare a defense to the inevitable suit by the Pilgrims if it denied coverage. It could not satisfy its statutory duty to ferret outfraud. The Pilgrims’ refusal to disclose relevant fi nancial information prejudiced State Farm as a matter of law.”).}

_{43 4 Fed.Appx. 531 (9th Cir. 2001) (Production of many documents, but not all requested, and failure to execute authorization for insurer to obtain necessary information, justified summary judgment to insurer).}

_{44 988 F.Supp. 93 (E.D.N.Y. 1997) (“No reasonable jury could find that a failure to provide any of this information [income information] was not material at this point in time.”).}

_{45 240 A.D.2d 455, 658 N.Y.S.2d 431 (1997) (“[P]laintiffs’ continued failure, without explanation or excuse, to provide the defendant with their tax returns and credit history, or authorizations for those documents, constituted a material breach of their insurance policy precluding their recovery”) (citationsomitted).}

_{46 240 A.D.2d 36, 659 N.Y.S.2d 266 (1997) (“The delay and avoidance here has precluded any possibility of obtaining anything but stale information.”).}