EUO Demand Indicator #4:
High Exposure and Potential for Bad Faith Claims
When handling high-exposure claims or those with the potential for extra-contractual liability, including bad faith allegations, it’s essential to exercise caution before making a final decision. The Examination Under Oath (EUO) is one of the most effective tools to protect the company and ensure every detail is addressed.
Let’s explore why high-exposure claims are a critical EUO demand indicator and how the EUO can safeguard your decisions.
Why High Exposure Demands Precision
High-exposure claims often involve complex scenarios and increased scrutiny. The stakes are higher, and any misstep could lead to significant consequences, including bad faith litigation. Before making a decision on these claims, consider:
- Avoiding Assumptions: Don’t deny a claim based on what you assume the evidence to be. If clarification is needed, the EUO provides a structured way to ask questions and gather documentation.
- Ensuring Accuracy: The EUO allows you to cross your T’s and dot your I’s, ensuring all potential gaps are addressed before a decision is made
What Happens Without an EUO?
Failing to demand an EUO before denying a claim can lead to serious complications:
- Waived Rights: Once the claim is denied, the company forfeits its right to demand an EUO, leaving potential issues unresolved.
- Bad Faith Allegations: Without the EUO, the company may face litigation claiming it failed to investigate thoroughly or acted unfairly.
- Over-Educating the Insured: Denials that include too much detail about missing documentation can inadvertently educate the insured, leading to sudden “discoveries” of contracts or documents that may be fraudulent.
The Role of the EUO in High-Exposure Claims
The EUO serves as a safeguard, allowing you to:
- Clarify Discrepancies: What may appear as a straightforward denial could shift when the insured provides additional context during the EUO.
- Verify Evidence: Use the EUO to assess whether newly provided documentation is legitimate or created post-loss.
- Protect Against Bad Faith Claims: A well-documented EUO process demonstrates that the company acted in good faith and took every step to investigate the claim thoroughly.
Conclusion
For high-exposure claims or those with potential for bad faith litigation, the EUO is an invaluable tool. It ensures accuracy, clarifies discrepancies, and protects the company from unnecessary risks.
Stay tuned for the next part of this series, where we’ll uncover another EUO demand indicator and how it impacts claims handling.
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Danny Vazquez
Danny Vazquez is the National EUO, LLC CEO.
Danny is a central leader on Claims, Investigations and EUOs in the insurance and legal industries.
As CEO, Danny took the knowledge and insights gained throughout his 25 plus years legal career to establish National EUO as the Nation's leading company on EUO services and EUO training.
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