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In a recorded phone call, Krikor Karamanoukian reported a claim to United Financial Casualty Company (UFCC) for vehicle property damage, which the insurer later found to be similar to a prior loss. During UFCC’s investigation, the Karamanoukians retained counsel, who advised that any request by UFCC for their statements would be “deferred” and claimed UFCC was acting in bad faith when an authorization for an accident reconstructionist to inspect the vehicle was requested.

UFCC sent a reservation of rights letter, requiring statements from the Karamanoukians so the information about how the damage allegedly occurred could be obtained. The Karamanoukians’ counsel demanded a transcript of the initial phone call, which UFCC agreed to provide following its coverage determination. In response to the attorney’s repeated rejection of UFCC’s request for a statement, UFCC hired counsel to request an Examination Under Oath (EUO).

The Karamanoukians refused to submit to an EUO and filed a complaint for breach of good faith and fair dealing, fraud, and intentional and negligent misrepresentation (Karamanoukian I). During discovery, the transcript of the initial phone call was produced by UFCC. At that point, the Karamanoukians’ attorney offered to produce the Karamanoukians for EUO. UFCC responded that the Karamanoukians had forfeited coverage by previously refusing to give the EUOs, which were a prerequisite to coverage. Summary judgment in favor of UFCC was granted in the litigation. The ruling was affirmed by the California Court of Appeal, which found that UFCC was not required to provide a transcript of the initial call and the request for EUOs was reasonable. UFCC declined counsel’s subsequent offers to allow the Karamanoukians EUOs to be obtained.

The Karamanoukians filed a second suit for breach of contract on the same claim (Karamanoukian II), alleging that they fulfilled their obligations, including an agreement to provide additional information. UFCC filed a motion for summary judgment on the grounds that the second suit was barred by the claim preclusion doctrine. The court rejected the Karamanoukians argument that the first suit involved the UFCC’s refusal to provide a transcript of the statement, while the second suit involved UFCC’s refusal to take the EUOS after they were offered. The California Court of Appeal, in an unpublished opinion, again affirmed the ruling in favor of the insurer on December 15, 2015, inKaramanoukian v. United Financial Casualty Company, 2015 WL 8821427.

The court found that both suits involved UFCC’s alleged failure to pay the claim for damage to the vehicle. While Karamanoukian I did not seek a declaration of the parties’ rights and obligations under the policy, the court found that the “gravamen of the action was to obtain payment of damages for their claim.” The breach of contract claim made in Karamanoukian II was, therefore, encompassed in Karamanoukian I. Because Karamanoukian II sought damages for the same claim, which was determined to have been forfeited in Karamanoukian I, the trial court properly concluded Karamanoukian II was barred.

Tressler Comments

An EUO is an important tool in evaluating an insured’s first-party claim. When required as a condition of coverage, the insured’s failure to provide an EUO can allow the insurer to decline coverage for the claim. In this case, the insureds’ subsequent offers to submit to EUOs, after the court ruled in the insurer’s favor that the EUO was a precedent condition, were ineffective to resurrect coverage forfeited by the initial refusal.