Man loses fire claim after skipping insurance EUO

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The Court of Appeals District III ruled an Outagamie County man breached his contract with his insurance company and was not eligible for reimbursement after a home fire after he failed to participate in an examination under oath (EUO).

According to court records, Robert Prunty of Hortonville purchased homeowner’s insurance from Maple Valley Mutual Insurance Company in 2021. At the time, an inspector noticed a woodburning stove in the garage with its exhaust piping not connected to an opening in the garage. The matter was brought up to Prunty’s agent, who relayed that Prunty said the stove was not used. The insurer said he would not be required to remove the stove, but he could not reinstall the stove pipe to the stove or install any other wood stove in the garage. Prunty signed a document agreeing to the fact.

On Jan. 3, 2023, there was a fire at Prunty’s home, which he promptly reported to Maple Valley. The insurer investigated, reporting in its initial findings that the fire appeared to have started in and/or around the exhaust piping of the wood burning stove located in the attached garage. Maple Insurance said that in reliance upon Prunty’s signed statement, it did not cancel the policy pursuant to Wisconsin Statute 631.36(2) (c) but noted “our investigation to date indicates that the wood burning unit remained in your garage, was connected to the exhaust system and was the source of the fire. Consequently, your statement in the (LPSF) was untrue and that truth contributed to the loss.”

Maple Valley told Prunty that it would continue to provide coverage until the investigation was complete and revealed whether the loss was covered. Maple Valley conducted another inspection on Feb. 27, 2023, and released the scene so Prunty could begin repairs. Afterwards, Maple Valley’s counsel informed Prunty’s counsel by email that there were coverage concerns regarding the woodburning unit that appeared to have contributed to the fire.

On March 8, 2023, Prunty submitted a sworn statement in proof of loss. Among the questions in the statement, Maple Valley asked if he notified the insurer he was using the wood burner in the attached garage. Prunty responded, “Maple Valley’s records indicate they knew about the wood burner in 2001” — 20 years before Prunty applied for the policy.

A month later, the insurer asked Prunty to provide an EUO pursuant to the policy. Rather than consent to the EUO, Prunty determined Maple Valley “was making the matter contentious” and authorized his counsel to file a lawsuit against the insurer alleging breach of contract, bad faith and statutory interest.

In its reply to the lawsuit, Maple Valley said it “exercised its right to an (EUO)” under the terms of the insurance contract.

Maple Valley deposed Prunty on Sept. 6, 2023. The parties then filed cross-motions for summary judgement. In his motion, Prunty argued Maple Valley could not deny the claim based on a misrepresentation defense because it did not meet the requirements to rescind the policy under Wisconsin Statute 631.11(1)(a) or (4)(b).

Maple Valley’s motion for summary judgment sought denial of Prunty’s motion and dismissal of all his claims on the basis that his lie about the woodburning unit “trigger[ed] the misrepresentation, concealment or fraud provision” of the policy. Maple Valley also argued that coverage was precluded because Prunty violated the EUO clause in the policy by failing to sit for the EUO prior to filing his suit. The insurer also denied it was trying to rescind the policy.

Without hearing oral arguments, the circuit court entered a written order on the cross-motions for summary judgment, denying Prunty’s motion and granting Maple Valley’s motion. The court stated that “[t]here are unresolved issues of fact regarding Prunty’s intent to use the wood stove when he applied for the Maple Valley policy and when responding to the [LPSF].”

The circuit court also addressed Maple Valley’s assertion that Prunty materially breached the policy by failing to sit for the EUO. It found “that Prunty was obligated under the insurance policy to submit to an [EUO]” and that “(his) decision to commence litigation instead was a breach of the insurance contract.”

According to the court, “(t)he fact that he later gave sworn testimony at a deposition does not cure that breach.” The court granted summary judgment in favor of Maple Valley on all Prunty’s claims and dismissed the case.

The Appeals Court agreed with the lower court’s decision, stating Prunty was required by the terms of his policy to sit for the EUO and his failure to do so before filing a lawsuit was a material and prejudicial breach of the insurance contract.

An EUO also serves a different purpose than a deposition, the Appeals Court wrote. The purpose of the EUO provision in the policy is to permit Maple Valley to investigate prior to litigation to determine if there is coverage for an insured’s claim under the policy and to grant or deny the claim.

Rather than allow Maple Valley to continue its investigation of the claim — as Maple Valley told Prunty it needed to do in its January 9, 2023, letter — Prunty essentially became impatient with Maple Valley’s investigation, and he decided to file this suit rather than comply with the terms of the insurance contract, thereby thwarting Maple Valley’s investigation and coverage determination. The latter is particularly important since the insurer was unable to make a coverage determination subjected it to the risk of a bad faith claim.

“We conclude that Prunty breached his insurance policy with Maple Valley by failing to submit to an EUO and, instead, commencing this lawsuit,” the Appeals Court wrote.