Is Substantial Compliance with a Proof of Loss Enough?

The purpose of a sworn proof of loss is to enable the insurer to properly investigate the circumstances of a loss while the occurrence is fresh in the minds of the witnesses, to prevent fraud, and to enable it to form an intelligent estimate of its rights and liabilities so it may adequately prepare to defend any claim. But, if that information is not submitted in the form requested by the insurance company, has an insured still complied with the proof of loss requirement?

The Northern and Eastern Districts of Texas have addressed this issue recently regarding Allstate’s “Action Against Us” provision.¹ Traditionally, proof of loss provisions have been considered a condition precedent to recovery under an insurance policy. If an insured did not comply with the proof of loss provision, they could not recover under the policy. Under Texas law, however, the insurer must demonstrate that it was prejudiced by the insured’s failure to comply, regardless of whether the provision is a condition precedent. In order to establish prejudice, the insurer must prove that one of the recognized purposes of the proof provision has been frustrated. Unfortunately for Allstate, in the recent cases cited at the end of this post, it was unable to do so.

For instance, in Rogers, the court concluded that Allstate was not prejudiced by the insured’s failure to provide a sworn proof of loss because the insured filed a timely claim and submitted an estimate from a public adjuster. The court in Rogers reasoned that Allstate had ample opportunity and time to inspect the alleged damage, determine the validity of the claim, and engage in settlement discussions.

Similarly, in Lopez, the court found that Allstate could not establish prejudice where the insured filed suit without submitting a sworn statement in proof of loss at least ninety-one days before suit. The court noted that by filing suit earlier than allowed in the proof of loss clause, plaintiffs ensured that the occurrence was fresher in the minds of the witnesses and that Allstate would likely obtain all the information required from the proof of loss in the complaint.

Note, however, that strict compliance with a proof of loss under a Standard Flood Insurance Policy is required. This issue was recently addressed in Scharr v. Selective Insurance Company of New York,² where the court granted the insurer’s motion for summary judgment when the insured failed to submit a signed and sworn proof of loss within 60 days of their flood-related loss as required by the policy. The insured attempted to argue substantial compliance through the submission of a proof of loss for the undisputed damage, and the submission of various reports and estimates which included the estimated amount of damages. The court concluded the insureds’ submission of a sworn statement in proof of loss setting forth the undisputed amount did not relieve the insured of obligations under the policy to submit a sworn proof of loss setting forth all damages claimed under the policy, within 60 days.
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¹ See Vilaythong v. Allstate Ins. Co., 2017 WL 4805522, at *3 (N.D. Tex. Oct. 25, 2017); Rogers v. Allstate Vehicle and Prop. Ins. Co., 2017 WL 3215292, at * 2 (N.D. Tex. July 28, 2017); Wilson v. Allstate Ins. Co., 2017 WL 1313854, at *1 (E.D. Tex. April 10, 2017); Lopez v. Allstate Vehicle and Prop. Ins. Co., 2017 WL 1294453, at *3 (E.D. Tex. April 4, 2017); and Polen v. Allstate Vehicle and Prop. Ins. Co., 2017 WL 661836, at *2 (E.D. Tex. Feb. 17, 2017).
² Scharr v. Selective Ins. Co. of New York, 2017 WL 4778449 (W.D. NY Oct. 23, 2017).