WISCONSIN COOPERATION CLAUSES
Most Wisconsin insurance policies include a cooperation clause whereby the insured property owner must produce documents and records to support an insurance claim. The insurance company can deny a valid claim when a property owner fails to cooperate. Yet the insurer’s right to do so is not absolute.
The Department of Insurance’s Cooperation Clause
The Wisconsin Legislature authorized the Wisconsin Department of Insurance to write form policy language for insurance policies that include fire coverage. The Insurance Commissioner’s standard policy language is known as a cooperation clause. It reads, in part:
The insured, as often as may be reasonably required, shall exhibit to any person designated by this Company all that remains of any property herein described, and submit to examinations under oath by any person named by this Company, and subscribed the same; and, as often as may be reasonably required, shall produce for examination all books of account, bills, invoices, and other vouchers, or certified copies thereof if originals be lost, at such reasonable time and place as may be designated by this Company or its representatives, and shall permit extracts and copies thereof to be made.
With language like this an insurance company can demand financial records regarding the lost or damaged property. It can inquire about the original purchase price, even if technically the original price is not the same as the actual cash value or replacement cost value of the property. An insurance company can ask for billings, invoices, or other data that describe the property before the loss.
The Limits of Cooperation Clauses
No insurer can ask for documents unrelated to an insurance claim. The statute says an insured has to produce “books of account, bills, invoices” which, in context, means document that release to the loss event. This does not encompass accounting for unrelated issues or people. For example, if a company has property insurance and sustains an insured loss, the insurer will have difficulty demanding records from company investors. Only very rare instances of fraud would result in an insurer having the right to such records.
Some insurance companies demand documents the property owner does not have. It is hard for me to see how any cooperation clause can require an insured property owner to produce documents held by a third party not under the control of the property owner. This would not be true for the property owner’s agents, such as banks or accountants. Banks and accountants hold information available to the property owner, and accountants even have a fiduciary duty to hold documents for a client. Such records are “under the control” of the property owner and should be obtained when requested and relevant.
Some insurance companies write cooperation clauses that are more expansive than the Department of Insurance’s clause. Whether insurers can do so is debatable. In my view the cooperation clause is state law and serves as a protection for both insurance companies and property owners, and no insurance policy should be more intrusive than that required by the Department of Insurance.
Materiality
An insurer can only deny an insurance claim if the property owner’s alleged breach of the cooperation clause is “material”. In Wisconsin, a material breach is not “a high bar”. So long as there is a link to understanding the cause and scope of loss an insurance’s request for information is material. Anything germane to an investigation is material. Link v. Link, 2022 W 288222 (Wis. Ct. App. 2022).
Prejudice
Insurance companies that deny claims must also establish prejudice from the alleged noncooperation. Ansul, Inc. v. Employers Ins. Co. of Wausau, 2012 WI App 135 ¶ ¶ 29, 35, 345 Wis. 2d 373, 826 N.W.2d 110 (Wis. Ct. App. 2012). However, the principle is not absolute. If a property owner is concealing something material, there is no need to show prejudice. Yet a request for information of marginal value should require an insurer to demonstrate how its claim investigation was prejudiced if the property owner does not provide the information.
Do not hesitate to contact me if you have any questions about how cooperation clauses operate in Wisconsin. You can e-mail me at ed@beckmannlawfirm.com