All insurance policies include a section placing specific responsibilities and obligations on policyholders to act in a certain way before entitling them to policy benefits for what should be a covered loss. If policyholders ignore such obligations, insurance companies can try to delay payment or, in more extreme circumstances, even deny payment altogether for what would otherwise be a covered loss had the policyholder only complied with their obligations under the policy.
Most insurance policies include a section titled ‘Duties after Loss’ that goes over all of the policyholder’s specific duties they must comply with after a loss. Typical duties for property claims include:
- Promptly notifying the insurance company of the loss;
- Cooperating with the insurance company in its investigation of the claim, and;
- Protecting/preserving the insured property after a loss.
Be sure to read the specific language of your policy to fully understand your full list of obligations, as these can differ between states, between insurance companies, and between policies. Don’t fall victim to the idea that a policyholder’s duties after a loss remain stagnant between policy renewals either. Insurance companies can update these duties from year to year, so every policyholder should review their ‘duties after a loss’ section each time they receive a new policy or renewal.
Why These Duties Matter
Ultimately, insurance companies place these post-loss obligations/duties on the policyholder to protect themselves. Insurance companies can use a policyholder’s non-compliance with a post-loss obligation as a reason to delay payment of a claim or in more extreme cases, even deny the claim altogether. In effect, a policyholder’s compliance with a post-loss obligation is required before a policyholder can even receive payment for a loss.
Material and Substantial Disadvantage to the Insurer
To argue a policyholder has voided coverage for non-compliance with a post-loss obligation, a carrier must show that the policyholder’s violation resulted in a “material and substantial disadvantage to the insurer.” 1 Such a “disadvantaged’ analysis can include “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.” 2
The Duty to Cooperate
Among a policyholder’s post-lost duties/obligations, the duty to cooperate with the insurance carrier tends to be one of the most important. “The purpose of a cooperation clause is to protect the insurer in its defense of claims by obligating the insured not to take any action intentionally and deliberately that would have a substantial, adverse effect on the insurer’s defense, settlement, or other handling of the claim.” 3 This means a policyholder should not do anything that hurts or stops the insurance carrier’s ability to investigate an active claim.
In my state of Colorado, courts enforce the requirement that an insured must cooperate in the claims investigation by the carrier as a condition precedent to coverage under the insurance policy. 4 Whether a policyholder has sufficiently ‘cooperated’ with the carrier under the policy is a question of fact for the jury to decide. 5 In some cases, it is possible to excuse a policyholder for a supposed violation of the cooperation clause if it’s shown that the policyholder’s failure “was due to some mistake and there was no exercise of bad faith on [the policyholder’s] part.” 6 Ultimately, it is better and more straightforward for a policyholder not to put themselves in a situation at all where this type of argument would need to be presented.
Real World Example
In a 2024 United States District of Colorado case, policyholder plaintiffs were able to overcome a defense motion for summary judgment on a failure to cooperate argument by arguing substantial compliance with the policy. 7 In that first-party property insurance case, the carrier repeatedly requested the policyholders provide specific information on several appliances within the home that were alleged to be damaged in a loss. It is undisputed that the policyholders never provided the requested materials to the carrier. However, the policyholder plaintiffs argued they substantially complied (i.e., cooperated) with the carrier’s request by providing what records they did have on the specific appliances – including estimates, pictures, and reports – even though this was not the specific materials the carrier requested. The policyholder plaintiffs also argued that the carrier had resources available to it to obtain the specific information it wanted without getting in from the policyholder plaintiffs directly.
What’s more, the carrier presented no evidence that it ever informed the policyholder plaintiffs of the potential consequence of denying coverage outright for the loss if the policyholder plaintiffs failed to provide the requested information. Instead, the carrier only presented general evidence of it being ‘disadvantaged’ by the information not being provided rather than it being ‘materially and substantially disadvantaged.’ Because of this, the court agreed with the policyholder plaintiffs that they presented “evidence that could lead a reasonable jury to conclude they complied with the Policy’s duty to provide documentation.” 8
Final Thoughts
What’s clear is that understanding a policyholder’s obligations after a loss can be confusing. The best practice is for policyholders to do what they can to comply with an insurance company’s request during its investigation of a claim. Otherwise, a policyholder risks inadvertently voiding coverage under the policy. If you are not sure what you need to do after experiencing a loss, consider talking to an attorney who is experienced in property insurance law. Insurance is already complicated. By knowing your rights, your options, and your responsibilities when a loss occurs, you can help ensure a smooth process when making a claim and trust that you will not be taking any action that could inadvertently hurt your claim in the process.
1 State Farm Mut. Auto. Ins. Co. v. Secrist, 33 P.3d 1272, 1275 (Colo. App. 2001).
2 Walker v. State Farm Fire & Cas. Co., No. 16-CV-00118, 2017 WL 1386341, at *4 (D. Colo. Feb. 23, 2017).
3 Secrist, at 1275 (citing Am. Policyholder’s Ins. Co. v. Baker, 119 N.H. 958, 409 A.2d 1346 (1979)).
4 Todd v. USAA Gen. Indem. Co., 713 F. Supp. 3d 1088, 1102 (D. Colo. 2024).
5 Todd, at 1105.
6 Farmers Auto. Inter-Ins. Exch. v. Konugres, 119 Colo. 268, 276, 202 P.2d 959, 963 (1949).
7 Todd, at 1102.
8 Id.
