On the earth of insurance coverage claims, a easy but typically ignored step could make or break a policyholder’s likelihood of restoration: The proof of loss. This was pushed residence within the 1891 case of German Insurance coverage Firm v. Fairbank, 1 the place the Supreme Court docket of Nebraska issued a important reminder that compliance with coverage phrases is not only a formality—it’s the muse of any declare. This case, although over a century previous and involving solely $30 relating to the worth of a cow, holds classes for at present’s policyholders.
I’m scripting this as a part of a examine and follow-up to The place Did the Proof of Loss Requirement in a Property Insurance coverage Coverage Originate? What Was Its Unique Goal? and Proof of Loss Necessities: A 222-Yr-Previous Case Nonetheless Related for Fashionable Insurance coverage Claims. I shall be writing about older and historic circumstances determined in numerous jurisdictions concerning the proof of loss and what it means over the following a number of months.
The dispute arose when Loren Fairbank sought to recuperate damages underneath an insurance coverage coverage for the lack of a cow, which had met an unlucky finish towards a barbed wire fence throughout a windstorm. The German Insurance coverage Firm denied the declare, citing a number of coverage violations, together with the insured’s alleged failure to submit the required proof of loss. Whereas the trial court docket initially sided with Fairbank, the Nebraska Supreme Court docket reversed the judgment, highlighting the significance of 1 central concern: The insured’s obligation to reveal {that a} proof of loss was filed or that the insurer had waived the requirement.
The coverage in query was complicated, masking a number of forms of property, together with a dwelling, family items, and livestock, with separate quantities allotted to every. Importantly, the court docket emphasised that the coverage was severable—that means a violation affecting one class of protection (comparable to a mortgage positioned on the dwelling) didn’t robotically void protection for unrelated property, just like the cattle. This favorable interpretation ought to have labored in Fairbank’s favor. But, regardless of this readability on the severability of protection, Fairbank’s failure to supply proof that he complied with the proof-of-loss requirement derailed his declare.
The proof-of-loss requirement is a cornerstone of most insurance coverage contracts. On this case, Fairbank’s coverage stipulated that proof needed to be submitted inside 30 days of the loss, with the insurer obligated to pay inside 90 days of receiving passable documentation. The Nebraska Supreme Court docket made it clear that if a policyholder needs to recuperate underneath a coverage, the onus is on them to indicate they adopted these steps—or that the insurer waived its proper to demand compliance. In Fairbank’s case, no such proof was offered, and with out it, his declare failed.
The lesson right here is twofold. First, submitting a proof of loss isn’t merely procedural; it’s typically a situation precedent to restoration underneath an insurance coverage coverage. With out documented proof that it was submitted, even a legitimate declare may be denied. Second, if the insurer waives this requirement, that waiver have to be clearly established. Silence or inaction by the insurer is never sufficient to represent waiver. Policyholders and their representatives should maintain meticulous data, guaranteeing that proof of loss isn’t solely filed but additionally verifiable if challenged.
The fashionable pattern is to excuse a late or non-filed proof of loss until the insurance coverage firm has been prejudiced by such late or non-filing. Nevertheless, the most effective apply is to keep away from this concern by submitting a well timed and correctly accomplished proof of loss.
This case serves as a timeless reminder that insurance coverage insurance policies are contracts, and courts will implement their phrases as written, though looking for causes to keep away from a forfeiture of insurance coverage advantages. For policyholders, the takeaway is straightforward but important: When proof is all the pieces, guarantee you may show it and that the proof of loss has been well timed and correctly filed to keep away from all these authorized points.
Thought For The Day
By no means kick a cow chip on a scorching day.
—Will Rogers
1 German Ins. Co. v. Fairbank, 32 Neb. 750, 49 N.W. 711 (Neb. 1891).
