What does the duty to submit ‘proofs reasonably required’ for a claim entail?

Patrick Bracher

In a UK case the claimant for a business interruption loss was obliged to submit “documents, proofs, information, explanation and other evidence as may be reasonably required by the insurer for the purpose of investigating or verifying the claim”.

The loss arising from thieving activities was reported in December 2008 and in the same month information was requested from the insured. Following various meetings and an email, particulars of the claim were only submitted in February 2009 whereas the information had to be provided within 30 days of expiry of the indemnity period. The loss had allegedly occurred between 2004 and 2008. No details at all were provided for 2004. The court held that there could be no claim for the events in 2004 because no particulars of the claim had been delivered within 30 days of the expiry of the indemnity period regarding these losses.

The next question was whether the information regarding the 2005 to 2008 losses was “reasonably required”. The court held that the request by the insurer for copies of the insured’s profit and loss accounts for the years 2005, 2006, 2007 and if available 2008 was a reasonable request. The request for other information, including details of physical stocktakes, records of shortages, packing of stock items and unsatisfied demand for stock, was held not to be reasonable. It would have cost the insured considerable time and expense to comply with the request at a time when the insurer had wrongly denied liability. Until the insurer was prepared to confirm that employee theft was an insured peril, the insured was not obliged, reasonably, to incur that time and cost. Nonetheless the insurer escaped liability because of the failure to provide the profit and loss accounts requested within the time limit.

An insurer’s request for information must always be reasonable in relation to the liability or quantum. What is reasonable is always a question of fact in the particular circumstances. This case is interesting in putting the time and cost of gathering the information into the equation.

First published by: Financial Institutions Legal Snapshot