13.2 The Insured’s Duties in the Event of a Loss

• Library: Insurance Law in Virginia (Virginia CLE) (2020 Ed.)

13.2 THE INSURED'S DUTIES IN THE EVENT OF A LOSS

13.201 Notice of Loss.

A. Statutory Requirement. Section 38.2-2105(A) of the Virginia Code mandates the provisions to be included in the fire insurance policy. ⁵⁹

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The statute provides that "[e]xcept as provided in [section] 38.2-2107, each policy shall contain the following provisions, conditions, stipulations, and agreements: . . . [t]he insured shall give immediate written notice to this Company of any loss."

B. Due Diligence Notice. The policy requirement that the insured give immediate notice, or notice forthwith, must be construed reasonably, and all that is required is due diligence under all the circumstances. ⁶⁰

C. Rules. The SCC is "charged with the execution of all laws relating to insurance and insurers. All companies . . . transacting or licensed to transact the business of insurance in this Commonwealth are subject to inspection, supervision and regulation by the Commission." ⁶¹ Section 38.2-223 states that "[t]he Commission, after notice and opportunity for all interested parties to be heard, may issue any rules and regulations necessary or appropriate for the administration and enforcement of this title." Pursuant to this authority, the SCC has issued Rules Governing Unfair Claim Settlement Practices. ⁶²

14 VAC 5-400-10 states that

[t]he purpose of this chapter is to set forth minimum standards for the acknowledgement, investigation, and disposition of claims arising under insurance policies issued pursuant to the laws of the Commonwealth of Virginia. This chapter applies to all persons defined in 14 VAC 5-400-20 and to all insurance policies except policies of worker's compensation insurance, title insurance, and fidelity and surety insurance.

Several of the standards relate to notices of loss.

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14 VAC 5-400-40(D) provides that

[n]o insurer shall deny a claim based on the failure of a claimant to give written notice of loss . . . within a specified period of time unless either or both requirements are policy conditions. If a policy requires a demonstration of prejudice for a claimant's failure to comply with a notice condition, an insurer shall not be relieved of its obligations under the policy unless the failure to comply with the notice condition prejudices the insurer's rights.

14 VAC 5-400-50(A) provides that

[a]n insurer, upon receiving notification of a claim shall, within 15 calendar days, acknowledge the receipt of such notice to the claimant unless payment is made within such period of time, except that if a provider submits a claim, acknowledgement of the claim is satisfied if payment or denial of the claim is made to the provider within 21 calendar days. If an acknowledgement is made by means other than writing, an appropriate notation of such acknowledgement shall be made in the claim file of the insurer and dated. Notification given by a claimant to an agent of an insurer shall be notification to the insurer.

14 VAC 5-400-50(D) provides that

[u]pon receiving notification of a claim, an insurer shall promptly provide necessary claim forms, instructions, and reasonable assistance in order for the claimant to comply with the applicable policy conditions and the insurer's reasonable requirements. Compliance with this subsection within 15 calendar days of notification of a claim shall constitute compliance with subsection A of this section.

14 VAC 5-400-60(B) provides that

[i]f an investigation of a first party claim has not been completed, an insurer shall, within 45 calendar days from the date of the notification of a first party claim and every 45 days thereafter, send to the first party

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claimant a written notice setting forth the reasons additional time is needed for investigation.

13.202 Protection of the Insured Property. Section 38.2-2105(A) of the Virginia Code provides that "[e]xcept as provided in § 38.2-2107, each policy shall contain the following provisions, conditions, stipulations, and agreements: . . . [t]he insured shall . . . protect the property from further damage." ⁶³

13.203 Separation of the Insured Property. Section 38.2-2105(A) provides that "[e]xcept as provided in [section] 38.2-2107, each policy shall contain the following provisions, conditions, stipulations, and agreements: . . . [t]he insured shall . . . forthwith separate the damaged and undamaged personal property [and] put it in the best possible order."

13.204 Inventory. Section 38.2-2105(A) provides that

[e]xcept as provided in [section] 38.2-2107, each policy shall contain the following provisions, conditions, stipulations, and agreements:

* * *

[t]he insured shall . . . furnish a complete inventory of the destroyed or damaged property setting forth for each item, or by category if itemization is not reasonably practicable, the amount of loss claimed. The Company may, in addition, require the insured to furnish a complete inventory of the destroyed, damaged and undamaged property, showing in detail quantities, costs, actual cash value and amount of loss claimed.

13.205 Proof of Loss.

A. Statutory Requirement. Section 38.2-2105(A) provides that

[e]xcept as provided in [section] 38.2-2107, each policy shall contain the following provisions, conditions, stipulations, and agreements:

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* * *

within sixty days after the loss, unless such time is extended in writing by this Company, the insured shall render to this Company a proof of loss, signed and sworn to by the insured, stating the knowledge and belief of the insured as to the following: the time and origin of the loss, the interest of the insured and of all others in the property, the actual cash value of each item thereof and the amount of loss thereto, all encumbrances thereon, all other contracts of insurance, whether valid or not, covering any of said property, any changes in the title, use, occupation, location, possession or exposures of said property since the issuing of this policy, by whom and for what purpose any building herein described and the several parts thereof were occupied at the time of loss and whether or not it then stood on leased ground, and shall furnish a copy of all the descriptions and schedules in all policies and, if required, verified plans and specifications of any building, fixtures or machinery destroyed or damaged.

B. Requirement to Furnish Forms. Section 38.2-320 provides that

[w]henever notice of any loss or damage has been given to the insurer or its agent, the insurer shall, upon written request, deliver to the insured or to the person to whom the benefits are payable the forms for such preliminary proof of loss or damage as may be required under the policy. Such forms shall be delivered within fifteen days after written request has been made or mailed to the insurer by the insured or person to whom benefits are payable. The failure or refusal of an insurer or its agent to deliver such forms within fifteen days of written request shall be deemed a waiver of any condition, stipulation or provision in the policy requiring preliminary proof.

C. Purposes of a Proof of Loss. The purposes of a proof of loss are to enable an insurer to investigate its insured's losses, to estimate its

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rights and liabilities, and to prevent the assertion of fraudulent or unjust claims. ⁶⁴

D. Valuation Stated in a Proof of Loss. An insured is not estopped by the valuation stated in his or her proof of loss. ⁶⁵

E. Time to Render the Proof of Loss. "[I]n an effort to do substantial justice between the insured and the insurer," the Virginia Supreme Court has "with a broad sweep of the hand wiped aside . . . as a technicality" the policy provision that an insured file a proof of loss within 60 days after a loss, holding that the provision should be construed to require only that, unless waived, the proof of loss be filed before suit is brought. ⁶⁶ However, if the policy provides that the insurer cannot be required to settle until 60 days after the proof of loss is filed and that no suit shall be brought unless brought within two years after a loss, then unless the insurer has waived the filing of the proof of loss, failure to file the proof of loss until within 60 days of the expiration of the two-year period will bar an action on the policy. ⁶⁷

Section 38.2-314 of the Virginia Code provides that "[i]f an insurance policy requires a proof of loss, damage or liability to be filed within a specified time, all time consumed in an effort to adjust the claim shall not be considered part of such time."

F. Defective Proof of Loss. Good faith and fair dealing are of the very essence of an insurance policy; before an insurer refuses to pay on account of a defect in a proof of loss, the insurer should point out what the defect is, or what must be supplied, to give the insured an opportunity to correct or supply it. ⁶⁸ The policy will control the content of the proof of loss, and

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the amount of the loss being claimed need not be in the proof of loss unless specifically required by the terms of the policy. ⁶⁹

G. Rules. Two of the standards in the Rules Governing Unfair Settlement Practices, which if willfully violated or violated "with such frequency as to indicate a general business practice," ⁷⁰ relate to proofs of loss.

14 VAC 5-400-40(D) provides that " [n]o insurer shall deny a claim based on the failure of a claimant to give written notice of loss within a specified period of time unless either or both requirements are policy conditions."

14 VAC 5-400-60(A) provides that

[w]ithin 15 calendar days after receipt by the insurer of

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