What if the Insured Takes the Fifth?

Mar 28, 2018 | Featured, Insurance, News

By: John D. Barry

Many insurance defense lawyers are asked to take examinations under oath of insureds by an insurance company client.  Typically this occurs when the insurance company has a belief that the insured may have participated in the loss to obtain the benefits of the insurance policy.  The usual examples are arson committed by the insured with respect to real property, or the insured claiming theft of a vehicle when it was not truly stolen.

It is not unusual in such cases, particularly arson, that there may be a collateral criminal investigation being conducted by the State Fire Marshall, or local, county, or city arson squads.  On occasion, at the time the insurer requests that the insured appear for an examination under oath, the insured knows of an ongoing criminal investigation, or in some cases, has already been indicted.

So, the insured is notified to appear and give an examination under oath, as most standard fire policies permit the insurance company to insist upon.  When the insured appears, the insured or his lawyer says, “no questions will be answered about how the fire got started, who might have started the fire, or any other line of inquiry that might incriminate the insured.”  The basis for that refusal is claimed to be grounded on the insured’s Fifth Amendment Privilege.

What is the result of that conduct by the insured with respect to the insured’s right to recover on the policy of insurance?

It appears that the majority rule is that announced in Pervis v. State Farm Fire and Casualty, 901 Fed. 2d 944 (11th Cir. 1990).  That case arose in the northern district of Georgia.  There, the insured was under indictment for arson of the insured building when the insurer demanded examination under oath.  The insured refused to submit to the examination on Fifth Amendment grounds.  The insurer moved for summary judgment, contending that the insured could not recover under the policy because he had breached the policy provision requiring him to submit to examination under oath by the insurer.

The Federal Court of Appeals affirmed the grant of summary judgment.  The Court said the insured could not utilize the Fifth Amendment Privilege as both a sword and a shield.  The Court went on to say that the insured was not compelled to incriminate himself, but he is bound to the contractual provisions contained in the policy.  So, essentially, the insured must choose between relying on the Fifth Amendment Privilege and losing his rights under the policy, or foregoing the Fifth Amendment Privilege and maintaining his right to recover under the policy.

The concept of Pervis has been cited with approval by Tennessee State and Federal courts (on different facts).  See Spears v. Tennessee Farmers, 300 S.W.2d 671 (Tenn. App. 2009) and Lester v. Allstate Property and Casualty, 2013 U.S. District LEXIS 10380 (Ed. Tenn. 2013).  So, when one is confronted with the Fifth Amendment problem in an examination under oath, hopefully, this blog provides a starting point.

John D. Barry has been a civil litigator for nearly 40 years, defending clients in cases involving torts, contracts, product liability, insurance, and casualty. He serves in an Of Counsel role in the Chattanooga office.

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