Dallas Fort Worth Insurance Lawyer Blog
Cooperation with the insurance company investigation of a claim is required under the insurance policy. Failure to cooperate can result in the policy being rescinded and the claim denied.
The 1994, Amarillo Court of Appeals opinion, Andy Costely and Cathy Costley v. State Farm Fire And Casualty Company, illustrates the necessity of cooperation with the insurance company investigation of a claim.
In this case, State Farm was allowed to rescind a policy based on the insured failure to cooperate. Cathy had her truck, tractor, and other personal property destroyed by a fire while it was parked on Andy’s father’s (Robert) property. Andy and Cathy sued Andy’s father. Later Robert sued Andy alleging the damage was due to the negligence of Andy.
Cathy’s attorney gave notice of the lawsuit to State Farm and State Farm hired an attorney to defend Andy under a reservation of rights. Andy refused the representation unless State Farm withdrew its reservation of rights. What followed was numerous claims and cross claims and other legal tactics.
Ultimately, State Farm filed a declaratory judgement seeking a holding that: (1) Andy had repudiated the issued policy; (2) State Farm was entitled to rescind the policy based on Andy’s repudiation; (3) no coverage existed under the policy; and (4) State Farm was under no duty to defend Andy.
There was much litigation over what Andy did or did not do and Andy asserted that he had not received mail or other communication regarding what he should be doing. State Farm asserted that Andy was being indifferent to what was happening and not helping State Farm with the defense of the case.
This court, in ruling in favor of State Farm stated, repudiation of a contract arises when one party to the contract, by unconditional words or acts refuses to perform his obligations under the contract prior to the time when such performance is due. Repudiation of a contract by one party gives rise to a right of rescission when such repudiation is accepted by the other party.