No Action Clause
Many policies contain a provision limiting the amount of time in which an insured can bring suit against its insurer, effectively reducing the statute of limitations by way of contractual agreement. Such a contractual limitation or “no-action” clause provides that any suit against the insurer arising out of the policy must be brought within a specific time following “inception of the loss” or some other trigger. Such provisions are generally enforceable. The Supreme Court of Georgia has expressly rejected arguments that such clauses are “unfair,” ambiguous when, for example, they are read with other requirements allowing an insurer 60 days to decide on payment after submission of a proof of loss.
An insurer may waive the contractual limitation “where the insurer leads the insured by its actions to rely on its promise to pay, express or implied” or where conduct on the part of the insurer reasonably leads the insured to believe that strict compliance with the limitation provision would not be insisted upon. For example, where settlement negotiations lead the policyholder to believe that payment will be forthcoming without a lawsuit, the insurer cannot require the action to be brought within a certain time. Also, if an insurer does not deny liability and takes actions indicating an intent to pay the claim without suit, an issue of fact is presented as to whether the insured was lulled into a belief that the limitation for filing suit was waived. However, “mere negotiation for settlement, unsuccessfully accomplished, is not that type of conduct designed to lull the claimant into a false sense of security so as to constitute a waiver of the limitation defense.”Where suit has been delayed beyond the stipulated time on account of direct promises to pay the claim, the action is not barred by delay. It is not necessary that there be an actual promise to pay in order for the acts of the insurer to effect a waiver of the time limitation if facts show that negotiations for a settlement have led the insured to believe that the insurer will pay the claim. In most cases, whether a waiver occurred is a jury issue.
The Georgia Insurance Commissioner has adopted regulations requiring that no-action clauses in certain policies be no less than two years. The Supreme Court of Georgia has ruled that the regulation violated the Commissioner’s authority by contradicting O.C.G.A. § 33-32-1(a), providing for a no-action clause of no less than two years for fire insurance policies.
Insurer’s Duty To Provide Policy Information
O.C.G.A. § 33-3-28(a)(1) states that:
Every insurer providing liability or casualty insurance coverage in this state and which is or may be liable to pay all or a part of any claim shall provide, within 60 days of receiving a written request from the claimant, a statement, under oath, of a corporate officer or the insurer’s claims manager stating with regard to each known policy of insurance issued by it, including excess or umbrella insurance, the name of the insurer, the name of each insured, and the limits of coverage. Such insurer may provide a copy of the declaration page of each such policy in lieu of providing such information.
In order to trigger the insurer’s duty, the claimant’s request must set forth under oath the specific nature of the claim asserted and must be mailed by certified mail or statutory overnight delivery. The insurer must amend the information provided upon discovery of facts inconsistent with or in addition to the information provided.
Providing information as required by this Code section does not waive the insurer’s coverage defenses and is not admissible in evidence unless otherwise admissible under Georgia law. The statute is directive only; it does not create a cause of action and right of a claimant to seek damages if an insurer fails to comply with the statute. However, an insurer’s failure to disclose limits can give rise to claims for misrepresentation, false swearing, fraud, and RICO violations, and courts have upheld damages for fraud where the insurer failed to disclose limits in response to a valid request. An insurer may not charge the requesting claimant for the expense involved in complying with a request for information pursuant to O.C.G.A. § 33-3-28.
Insured’s Duty To Cooperate
Most policies contain a “cooperation clause” that requires an insured to cooperate with the insurer in the investigation and defense of a claim. More specifically, the insured must cooperate in the insurer’s investigation, attend trial and make “full, fair, complete and truthful disclosures of the facts known to him relative to the [incident] when called upon to do so.”If an insurer’s investigation includes an examination under oath of the insured, and the insured completely fails to appear at the examination under oath, that failure could preclude recovery under the policy.
If the insured willfully and intentionally fails to cooperate, and this failure is prejudicial to the insurer in the defense or settlement of a claim, the insurer is relieved of the duty to defend or indemnify the insured for any judgment the insurer would be required to pay under the policy.
The insurer must show:
(a) that it reasonably requested its insured’s cooperation in defending against the plaintiff’s claim
(b) that its insured willfully and intentionally failed to cooperate
(c) that the insured’s failure to cooperate prejudiced the insurer’s defense of the claim…Once the insurer presents presents evidence that it was entitled to withdraw coverage, the burden shifts to the plaintiff to establish that the insured’s failure to cooperate was justified.
However, if the insured’s non-cooperation is merely technical or inconsequential, the insurer is generally not relieved of its duties. The insurer has the burden of proving that it diligently sought to obtain the insured’s cooperation and that the insured willfully and intentionally failed to cooperate. If the insurer makes a showing of diligence and good faith, the burden shifts to the insured to show that his failure to cooperate was excused or justified.
If an insured voluntarily fails to attend trial after receiving a request to do so, the insured’s actions are generally considered per se prejudicial to the insurer. The insured’s total failure to cooperate may preclude recovery under the policy as a matter of law. However, if the insured cooperates to some
degree or provides an explanation for non-compliance, the insured’s failure to cooperate becomes a jury issue. The insured has a duty to keep up with his case and has a duty to reply to communications addressed to him by or on behalf of the company regarding his claim. At the same time, the insurer has a duty to keep its insured informed once it has taken over the handling of the claim or lawsuit against its insured.
Finally, an insured violates the cooperation clause by collusively assisting maintenance of the claimant’s suit rather than assisting the insurer.