Cooperation Clause (Insurance) - Explained
What is a Cooperation Clause?
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Table of ContentsWhat is a Cooperation Clause in Insurance?How does a Cooperation Clause Work? Example of how a Cooperation Clause WorksPolicyholders RequirementWhy is the Cooperation Clause Important?Academic Research on Cooperation Clause
What is a Cooperation Clause in Insurance?
The cooperation clause refers to an insurance contracts passage requiring the holder of the policy to work closely with the insurer whenever a policy claim arises. As per the policy agreement, it is mandatory for him or her to take part in and contribute to any insurance claim investigation. Another term for this clause is the assistance and cooperation provision of the policy. Note that the activity in this claim is different from a standard claim where the policyholder has no direct involvement in uncovering pertinent information.
- The cooperation clause refers to an insurance contracts passage requiring the holder of the policy to work closely with the insurer whenever a policy claim arises.
- The main reason why most insurers provide policies that contain a cooperation clause is lack of transparency. So, the clause legally compels the policyholder to give out information.
- The cooperation clause assists the insurer to obtain more information on the circumstances surrounding the claim like the unfolding events before, during, and after an incident.
Back To: INSURANCE & RISK MANAGEMENT
How does a Cooperation Clause Work?
Typically, whenever there is a claim, the insurer will often want the cooperation of the policyholder during the claim process. Note that most commercial general liability insurance has a cooperation clause. In this clause, there is a requirement where the insurance company expects the cooperation of the policyholder to help it deal with a given claim. The insurer will often be in need of detailed information about the incident occurrence. The cooperation clause, therefore, assists the insurer to obtain more information on the circumstances surrounding the claim. For instance, the insurance may want to know the unfolding events of the incident in question before, during, and after. Also, a cooperation clause helps to speed up the paperwork process when working on a claim. It ensures that the information the insurer wants is quickly made available to help find a quick resolution. When there is a mystery surrounding a claim, it makes it difficult for insurers to determine the validity of the claim. Note that the main reason why most insurers provide policies that contain a cooperation clause is lack of transparency. The clause legally compels the policyholder to give out information about the incident.
Example of how a Cooperation Clause Works
For instance, lets assume that there is a medical malpractice claim against XYZ hospital, where a client is accusing it of a botched operation. To be able to conduct a proper investigation, the XYZ hospital, together with the insurer, must cooperate. Remember, the XYZ hospital is the subject in this lawsuit and, therefore, has the first-hand information on what actually happened during the operation. In this case, the information the hospital will give during the investigation is of utmost importance to its own defense. Without its cooperation, it will be difficult for the insurance company to go forward with the case.
In the cooperation clause, all that is required of the policyholder is to assist during the investigation regarding a claim. Note that it is not a must for the policyholder to appear in court, though it will also depend on the intensity of the claim. In most cases, the insurance company will only end up speaking with the policyholder to get the information it requires using the following means:
- Over the phone
- Through a video conference
- Through an email
- One-on-one (Face-to-face conversation)
Generally, good cooperation will help find a quick solution to the claim. So, to ensure this, the policyholder should ensure that the statements they give are nothing but the truth. Hiding vital information derails the efforts of the investigators who are trying to unfold the truth about a claim.
Why is the Cooperation Clause Important?
The following are reasons why cooperation clause is considered to be an important component of an insurance policy contract: It enables the insurer to get all the necessary information so that it does not cover a claim that is fraudulent. Secondly, it prevents insurers from paying a claim request that is falsely presented to them. Lack of cooperation clause may lead to an increment in the cost of underwriting as a result of paying for a false request. It will open room for more fraudulent claims within the community. When the cooperation clause is in place, it may prevent such things from happening as the insurance company will be acting on truthful information. In addition, there is a possibility of the policyholder forfeiting their ability to place coverage claim if he or she fails to cooperate. If the insurer is not able to get correct information from the insurer that will help to validate the claim, the insurer will not affect the compensation. Also, if a court finds out that the policyholder is withholding information, it may permit the insurance company to file a case against the policyholder for breach of contract. Lastly, in a case where the policyholder is found to be untruthful, he or she may also incur court-related costs apart from losing his or her insurance.
- What are the primary obligations of the insured?
- Insurance Premium
- Affidavit of Loss
Academic Research on Cooperation Clause