The Court of Special Appeals, in a case argued by DeCaro, Doran, Siciliano, Gallagher & DeBlasis, LLP Managing Partner Thomas L. Doran, upheld the Circuit Court for Anne Arundel County’s ruling that an insured’s refusal to sit for an examination under oath (“EUO”) constituted a material breach under the policy, and thus that Mr. Dolan was not entitled to underinsured motorist (“UIM”) benefits under the policy.

Automobile insurance policies commonly include a provision that requires an insured to submit to an EUO.  An EUO can serve several purposes, including assisting in the evaluation of a claim and protecting an insurer against a false claim.  An EUO is also very different from a pre-trial deposition in a number of ways, including that the EUO is not strictly subject to the rules of civil procedure.

In Gary Dolan, et al. v. Kemper Independence Insurance Company, 237 Md. App. 610 (2017), the Plaintiff/Appellant, Gary Dolan, claimed to have been injured as a result of a motor vehicle accident that occurred on October 27, 2010.  Mr. Dolan was a passenger in a vehicle being operated by Windy Dolan. Mr. Dolan’s parents had an automobile insurance policy with Kemper and he claimed UIM benefits under his parents’ policy. Ms. Dolan’s insurer, Nationwide Mutual Insurance Co., tendered its policy limits of $50,000 in settlement of Mr. Dolan’s claim against Ms. Dolan as the driver.  Under Md. Code §19-511 of the Insurance Article (2011), Kemper made the decision not to consent to the settlement and paid the $50,000 amount to Mr. Dolan in order to preserve its defenses in a UIM claim¹.

At some point after the $50,000 check was paid to Mr. Dolan and the UIM claim was triggered, Kemper requested an EUO.  After Mr. Dolan’s counsel made a formal request to Kemper to tender the policy limits, Kemper’s counsel attempted at least three (3) more times to schedule an EUO, requesting dates and taking steps towards clearing schedules.  On November 23, 2011, Mr. Dolan filed a Complaint in the Circuit Court for Anne Arundel County, claiming negligence against Windy Dolan and breach of contract against Kemper for failure to pay UIM benefits.  On December 9, 2011, Mr. Dolan’s counsel called Kemper’s counsel and notified him that suit had been filed in the case and that Mr. Dolan would sit for a deposition but would not appear for an EUO.    

After a delay due to Mr. Dolan being found incompetent to stand trial in an unrelated case, Kemper filed a complaint for declaratory relief.  Kemper requested that the trial court declare that the policy required Mr. Dolan to submit to an EUO as a prerequisite to receiving UIM coverage and that Mr. Dolan had breached his contract with Kemper by his refusal to submit to an EUO.  The circuit court held a hearing and ruled that Mr. Dolan’s failure to submit to an EUO was a material breach of his contract with Kemper, and that as a result, he was not entitled to receive UIM benefits under the Kemper policy.  Mr. Dolan noted a timely appeal to the Court of Special Appeals.

On appeal, Mr. Dolan argued that the trial court had erred by finding that he had breached his contract with Kemper by filing a law suit against Kemper before submitting to an EUO.  The Court of Special Appeals noted that this argument misstated both the trial court’s finding and Kemper’s position on coverage.

The Court of Special Appeals, in Phillips v. Allstate Indemn. Co., 156 Md. App. 729 (2004), previously ruled that an insured breaches the insurance contract when he or she refuses to submit to an EUO.  Such a breach entitles the insurer to disclaim coverage even in the absence of a showing of actual prejudice.  The Court also reiterated that an insured cannot pursue a claim against an insurer if he or she fails to satisfy a contractual condition precedent to coverage.

Mr. Dolan argued that submitting to an EUO was a condition precedent to recovering benefits under the policy, not to pursuing a lawsuit.  However, the Court pointed to very specific policy language that stated: “No legal action may be brought against us until there has been full compliance with all the terms of this policy.”  The policy language requiring an insured to submit to an EUO was obviously a “term” of Kemper’s policy.  Thus, the Court held, no legal action could be brought against Kemper until an insured has submitted to an EUO, if one was requested.

The stipulated facts showed that, after a formal claim was filed but prior to suit being filed, Kemper made at least four requests for dates for an EUO, and that Mr. Dolan’s counsel made no attempts to cooperate to schedule the EUO.  Instead, Mr. Dolan’s attorneys filed suit and took the position that Kemper was no longer entitled to an EUO.  “On these facts, it is inarguable that Mr. Dolan expressed a determination not to submit to an EUO – i.e., he refused.”  The Court noted that Kemper was not denying coverage because of the timing of Mr. Dolan’s suit, but due to his consistent and continued refusal to submit to an EUO.

Finally, Mr. Dolan argued that Kemper was able to obtain the substantial equivalent of an EUO when it took his deposition.  However, the Court held that an insured cannot comply with the requirement of submitting to an EUO by submitting to a discovery deposition, in part because an EUO and a pretrial deposition serve “vastly different purposes,” as stated above.

¹ In 2012, §19-511 of the Insurance Article was amended so that “an uninsured motorist insurer may consent to settlement with a tortfeasor without waiving its right to contest tort liability[.]”  Morse v. Erie Ins. Exch., 217 Md. App. 1, 22 (2014).