Back in 2009, Parks wrote about the Spears v. TFMIC case and correctly cited it for the proposition that an insured must submit to an examination under oath upon request, and that a failure to do so can bar recovery on an insurance claim. Notably absent from the Spears opinion was any requirement of prejudice in order to avoid payment. However, the Spears opinion is muddied a bit by a prior decision from the Sixth Circuit Court of Appeals in Talley v. State Farm Fire & Cas. Co., 223 F.3d 323 (6th Cir. 2000), in which the court held that an insurance company must prove prejudice in order to preclude recovery.
So what’s the rule? Must an insurance company show prejudice to avoid payment of a claim on the basis of a refusal to submit to an EUO? In 2012, we almost got an answer to that very question in Farmers Mutual v. Atkins, 2012 Tenn. App. LEXIS 184 (Tenn. Ct. App. 2012). In that case, Judge Stafford noted the potential conflict between Spears and Talley, and seemed primed to rule on this murky issue. But unfortunately the ruling wasn’t meant to be. In short, the trial court apparently just noted the divergence of opinion on the issue and then granted an interlocutory appeal without ever ruling at all. Thus, the matter was not ripe for consideration by the Court of Appeals and was remanded.
This particular topic isn’t particularly exciting, but nonetheless should be considered by both insurers and insureds when claims are denied for failure to submit to an EUO. Depending on how this issue is ultimately decided, an insured’s failure to show up just might not put the proverbial "nail in the coffin" of the insured.