What is a Cooperation Clause
A cooperation clause is an insurance contract clause that requires the policyholder to assist the insurance company in the event that a claim is filed against the policy. The policyholder must participate in and contribute to the investigation of the claim, as opposed to a standard claim, in which the policyholder is not involved with unearthing information. A cooperation clause gives the insurance company an advantage in that it allows it to obtain more information about the nature of the circumstances behind the claim, since the insured party is more likely to have detailed information about what happened. The clause can be useful in speeding up the processing of the claim, if having more information made available more quickly then enables the insurance company to move faster on its decision.
Breaking Down Cooperation Clause
Insurance companies will often underwrite policies for thousands of policyholders across a wide geographic area. The insurers are unlikely to know all the day-to-day activities of the insured, and are even less likely to know the events or details of what transpired in the moments or days before another party made a claim against the insured. This can put the insurance company at a disadvantage, as it attempts to piece together information that will help it determine whether it needs to pay out the claim. This lack of transparency is the primary reason why insurance policies contain provisions like the cooperation clause, as it compels the insured to provide information about what happened if an accident or other event occurs.
Assisting an insurance company in the case of a claim does not mean that the insured has to appear in court or compile extensive information and research. Depending on the policy and the amount of claim, the insured may wind up only speaking with the insurer over the phone or over Skype or other video conferencing software in order to present his or her side of the events. The insured may need to provide verification that certain events transpired, such as receipts or any other written communication, but that is often not necessary, as a verbal recounting of the incident is often sufficient. The insurance policy language may specify the level of cooperation that the insured must provide, such as how much assistance in an investigation and for how long a period of time. The insured is expected to provide completely accurate information and to desist from lying.
The Need for Cooperation Clauses
Cooperation clauses are often considered essential or material components of an insurance policy contract. The ultimate reasoning for the importance of the clauses is that the insurer wants to know as much information as possible in order to avoid paying for a claim that it should not have to pay for. If the insured decides not to cooperate, or if the courts determine that the insured is withholding information and is not acting in good faith, the insurance company may determine that the insured is in breach of contract and therefore, forfeit his/her coverage.