Almost every policy that insures against the risk of loss of property requires the insured to submit a sworn proof of loss, usually within 60 days of the loss that states, under oath, the date, time, and cause of loss, the actual cash value of the property, and the amount of loss.
The insurer need only respond to the insured's proof of loss after it is submitted by either accepting it or rejecting it.
Technically, if the wording of the policy was followed literally the insurer could sit back, do nothing, and wait for the proof. If the insured was late in submitting the proof the insurer could reject the claim.
Insureds and insurers were not happy with that system. It made it too difficult for a lay person to successfully present a claim. The system, as written into the standard fire policy seemed to run counter to the covenant of good faith and fair dealing that had been the basis of the insurance contract for centuries. Most insurers understood that their insureds were mostly incapable of complying with the strict enforcement of the policy conditions. To fulfill the covenant of good faith and fair dealing insurers created the insurance adjuster to fulfill its obligation to deal fairly and in good faith with the insured.
The chief purpose of a proof of loss "is to acquaint the insurance company with certain facts and circumstances relative to the loss, forming a basis for further steps to be taken by the company, ranging from full settlement to absolute repudiation of liability."1 "A person seeking to recover on an insurance policy has the burden of proving a loss from causes within the terms of the policy and if such proof of loss is made within the contract of insurance, the burden is on the insurer to establish that the loss arose from a cause that is excepted from the policy."2
An insured's failure to provide timely written proof of loss is generally an absolute defense to an action to recover on the policy.3 However, this absolute defense may be waived.4 Therefore, the adjuster must advise the insured of his or her obligations under the policy, including the obligation to submit a sworn proof of loss within 60 days of the date of the loss or, applying modern policies, within 60 to 90 days after the insurer requests a proof of loss. In so doing the adjuster should also make it clear to the insured that if there is difficulty in preparing the proof of loss within the time required, the adjuster will obtain, on the insured's behalf, an extension of time to submit a proof of loss. As a result of the wording of modern policies, the adjuster should, immediately upon the first meeting with the insured, require—in writing— that the insured is obligated to submit a sworn proof of loss within 60 days of the letter demanding a proof of loss.
When left undefined, as in almost all commercial property policies, the generally accepted meaning of proof of loss is "[a]n insured's formal statement of loss required by an insurance company before it will determine whether the policy covers the loss."5 The chief purpose of a proof of loss "is to acquaint the insurance company with certain facts and circumstances relative to the loss, forming a basis for further steps to be taken by the company, ranging from full settlement to absolute repudiation of liability."6
Since the requirement that the insured submit a proof of loss has nothing to do with the condition requiring prompt notice of loss, the insurer need not show actual prejudice to deny the claim. The notice prejudice rule is inapplicable because a "proof of loss" is not equivalent to a failure to notify and is a strict condition precedent to recovery of indemnity.7
The proof of loss is a key document that should be obtained and executed under oath by all insureds on every loss. A proof of loss is the sworn statement of the insured required by the conditions of the policy of insurance. When the insured and insurer agree on the fact that the loss was one due to a peril insured against, the actual...
