Policyholder's Duty to Cooperate: Advocating or Defending Against Loss of Coverage for Breach

The duty to cooperate clause imposes certain obligations on the insured to assist the insurer in investigating and defending third-party claims. For first-party claims, the insured has an obligation to provide relevant information or documents to the insurer. Breach of the duty may result in loss of coverage.

In order to disclaim coverage because of the insured’s breach of the duty to cooperate, the insurer must demonstrate that the insurer was actually prejudiced by the insured’s failure to cooperate. An insured’s passive non-responsiveness versus active collusion with a third-party claimant are distinguished.

A critical issue that arises in the context of the scope of the insured’s duty is the disclosure of privileged or confidential information by the insured. The duty to cooperate clause also impacts the insured’s ability to settle third-party claims directly with the claimant.

Listen as our authoritative panel of insurance practitioners examines the scope of the insured’s duty to cooperate with the insurer, what the insurer must demonstrate to disclaim liability because of a breach, and other thorny issues that arise in this context, such as the insured’s obligation to disclose confidential information protected by the attorney-client privilege and the insured’s right to settle directly with third-party claimants.

1. Application and scope of the insured’s duty to cooperate
2. First vs. third-party claims
3. Coverage issues impacting the duty to cooperate
   1. Attorney-client privilege and disclosure of confidential information
   2. Claim settlement
   3. Consent to settle clause
4. Insurer’s requirement to demonstrate prejudice
5. Prejudice arguments—successful and unsuccessful

The panel will review these and other key issues:

• What is the insurer’s burden of proof for disclaiming liability due to the insured’s failure to cooperate?
• Under what circumstances might an insured be justified in refusing to cooperate with the insurer?
• Does a defense under reservation of rights change the scope of the insured’s duty to cooperate?
• How does the duty to cooperate impact the insured’s right to settle the claim?
• Are there circumstances under which the insurer will be estopped from raising the insured’s breach of the duty?