The “Duty To Cooperate” Defense

I came across a case the other day where an insurance company sued its policyholder for failing to cooperate.  See The Hanover Ins. Co. v. The Law Office of John E. Cerza, Esq., Case No. 2:26-cv-07755-CCC-LDW (D. NJ. 2026).  I do not know the merits of that case, but it got me to thinking about how this relatively innocuous requirement has morphed from a common sense insurance policy provision into abusive insurer behavior.   Insurers routinely tell corporate policyholders that they must cooperate.  What insurers really mean is, if you make a claim, they have the absolute right to make your life a living hell.  This may sound extreme, but it is an observation based on decades of experience responding to onerous insurer requests for information on behalf of corporate policyholders.

I don’t think that anyone would argue with me about how large corporate insurance claims transpire.  A corporate policyholder provides notice to its insurance carrier of a valid insurance claim.  Rather than accepting coverage for the claim, the insurer asks for information.  Not just a document or two, but large volumes of information akin to discovery in litigation.  The insurer provides the policyholder with pages of detailed information requests.  Retrieving that information is expensive and time-consuming, but the policyholder complies, only to get another set of information requests, leading to a never ending cycle of repeated information requests.

Each information request closes with a policy quotation stating that the policyholder has a duty to cooperate, along with the implied threat that if the policyholder does not jump through all of the hoops put in front of them like a well-trained circus animal, coverage will be forfeited.

Delay, Deny, Defend (and add to this, Blame)

Virtually every commercial insurance policy — whether it is a commercial general liability (CGL), directors and officers (D&O), errors and omissions (E&O), property, or professional liability policy — contains a “cooperation clause.”  This clause requires the policyholder to cooperate with the insurer in the investigation, settlement, and defense of covered claims.  When an insurer believes the policyholder has breached the cooperation clause, it may assert “failure to cooperate” as an affirmative defense.

This fits in nicely with the three D’s — Delay, Deny, Defend.  But, it is also gives insurers the opportunity to play the blame game.   Ask a policyholder for information that cannot reasonably be provided and blame the policyholder when they fall short.   Throw stones at a policyholder when Delaying.  Creating a defense that did not otherwise exist will earn insurance company lawyers a gold star when insurers move on to the Deny phase.  And, if the policyholder refuses to withdrawal the claim, the lack of cooperation defense helps an insurer when they Defend against a policyholder claim in litigation.   So goes the thinking.  Insurance companies do everything they can to manufacture this affirmative defense, and they do so with well crafted letter writing campaigns. Insurers do this for a living and they are quite good at it.

The Three-Part Test – A High Bar For Insurers

The duty-to-cooperate defense is an affirmative defense on which the insurer bears the burden of proof. The prevailing standard across most jurisdictions requires the insurer to establish three elements before it may deny coverage based on a policyholder’s failure to provide requested information.  A policyholder’s failure to comply with a cooperation clause supports an insurer’s refusal to provide coverage only when the insurance carrier can show that: (1) the policyholder materially breached the cooperation clause; (2) the insurer was substantially prejudiced as a result of the insured’s breach; and (3) the insurer exercised reasonable diligence to secure the insured’s cooperation.  See Northrop Grumman Guidance and Electronics Company, Inc. v. Employers Insurance Company of Wausau, 612 S.W.3d 1 (Mo. Ct. App. 2020).  This three-part test, or a close variant of it, has been adopted in Washington, Oregon, Utah, Nebraska, Vermont, Maryland, Louisiana, Minnesota, Kansas, Indiana, Florida, and many other jurisdictions.  A survey of case law illustrates the heavy burden that insurers face.

For example, the Washington Supreme Court’s landmark decision in Staples v. Allstate Ins. Co., 176 Wash.2d 404 (2013), held that noncooperation does not absolve an insurer of liability unless the insurer was actually prejudiced.  The court defined actual prejudice as requiring affirmative proof of an advantage lost or disadvantage suffered as a result of the breach, which has an identifiable detrimental effect on the insurer’s ability to evaluate or present its defenses to coverage or liability

Similarly, the Ninth Circuit applied the prejudice requirement under Alaska law in Allstate Ins. Co. v. Herron, 634 F.3d 1101 (2011), holding that an insurance company must establish that it suffered the prejudice that a cooperation clause was intended to avoid in order to escape liability, and that the insurer bears the burden of proving such prejudice.

The Utah Supreme Court in Doctors’ Co. v. Drezga, 218 P.3d 598 (2009), faced a different situation.  A medical malpractice insurer’s noncooperation defense was held invalid even though the physician defendant had disappeared. The court found the insurer’s sole evidence of prejudice — a self-serving, conclusory affidavit, was unpersuasive.  Insurers love self-serving, conclusory affidavits.

In Smith v. Nationwide Mut. Ins. Co., 175 Vt. 355 (2003), the Vermont Supreme Court held that the insurer could not assert prejudice with regard to its ability to conduct a defense that it never attempted to mount. The court found that the insurer had several viable options available to it — including moving to intervene, filing a declaratory judgment action, or notifying plaintiff’s counsel of its predicament — but chose to remain silent and let a default judgment be entered. The court held that a cooperation clause should not function as a technical escape-hatch by which to deny coverage in the absence of prejudice

Likewise, the Illinois Appellate Court in American Access Cas. Co. v. Alassouli, 2015 IL App (1st) 141413 (2015), denied the insurer’s noncooperation defense on all three elements. On prejudice specifically, the court held that the insurer could not prove substantial prejudice in its investigation when it failed to even conduct a proper investigation. The court reasoned that allowing the insurer to prevail on the duty to cooperate defense without a showing of prejudice would be tantamount to a questionable windfall for the insurer at the expense of the public.

Practical Tips for Policyholders

The good news for policyholders is that the failure to cooperate defense is a high bar for insurers to clear.  As with all areas of insurance coverage law, the answer can vary from state to state.  But one thing is abundantly clear, unreasonable information requests are not sanctioned by the courts.

In dealing with information requests, policyholders should:

• Understand that requests for information are designed to do one and only one thing – support a denial of coverage.
• With this in mind, policyholders should analyze what defenses the insurer is seeking to bolster with each request for information.  If unclear, ask the insurer how the request is relevant, and put the timeline back on them to respond.
• Draft each and every response to eliminate the potential for prejudice.  Do not prejudice the insurer.
• Respond to every request in writing by letter. Emails are easier, but letters are better.
• The audience for every letter you send should be a judge or jury, not the insurer.  Write every letter so that a judge or jury can easily follow your story and understand why the insurance company is behaving badly.
• Respond to every information request within a reasonable time.
• Close out every response by stating that you have provided all of the information requested and that there are no outstanding requests for information. Don’t let requests for information hang out there without a response.  Policyholders should not permit an insurer to say that information was not provided as this is evidence they will use to show prejudice.
• If the insurer says that information was not provided, which they will, counter that by letter, explaining where the information can be found, and close the letter out by again stating that there are no outstanding information requests and that everything requested has been provided.
• Insurance company counsel are trained to throw stones; to point out what has not been done; to scold the policyholder for not complying with their requests.  Don’t allow them to throw stones.
• Make requests for the insurer to address. Don’t permit requests for information to be one sided.    Call the insurance company out for their failures and do this repeatedly.   Point out that the information they seek is not relevant to providing coverage.  Demand a coverage determination.
• Document everything. Insurance companies are experts at letter writing campaigns.  They have internal tracking technology to help.  Policyholders generally do not have access to such systems.  Keep a written record of all communications with the insurer, maintain a timeline of events, and retain copies of all correspondence and submissions.
• Create ample evidence that the insurance carriers breached their coverage obligations, and repeatedly explain that to them by letter.
• And last of all, don’t rely on AI. AI letters make simple things more difficult to follow.  The words they generate can be lovely but they are never something that you would want a judge to read and attempt to understand.  AI does many things well, but, for now, writing is not one of them.

Conclusion

With insurer requests for information, three things should be considered.  First, information requests should not be viewed as an honest insurance carrier attempt to evaluate a claim.  They are not.  Insurer requests for information are expertly drafted to gather information to support a denial of coverage.  They are designed to eliminate coverage for covered claims.  Second, information requests should be viewed as a opportunity to bolster a policyholder’s right to coverage.  The claims process is not a one way street.  Requests for information afford a policyholder the opportunity to advocate their rights to coverage and to expose unscrupulous insurer conduct.  And third, the failure to cooperate defense is not the silver bullet that insurers often portray it to be. Courts have consistently held that forfeiture of insurance coverage is a disfavored remedy that requires insurers to meet exacting standards.  Among other things, the insurer must prove a material breach and actual prejudice.  Prejudice is very difficult to prove because it rarely if ever exists.