Insured Must

Treat Insurer With Good Faith & Fair Dealing

Insured Must Treat Insurer With Good Faith & Fair Dealing Insured Must Cooperate in Insurer’s Investigation of Claim

The covenant of good faith and fair dealing goes in both directions. Neither party to the contract of insurance may do anything to deprive the other of the benefits of the contract of insurance.

When an insured makes a first party claim the insured is obligated to cooperate in the investigation of the insurer and provide documents required to be produced by the insurer. In addition the insured can be required to provide sworn testimony about the loss. The cooperation requirement is a condition precedent to indemnity. Since many insureds think insurers are evil and can be threatened to pay any claim presented if threatened with bad faith, when a claim is denied for failure to cooperate the insured will usually sue.

In Ngoc Tran v. Federal Insurance Company, Case No. 17-3921, United States Court Of Appeals For The Sixth Circuit (April 18, 2018) the Sixth Circuit dealt with an interesting case presented by Ngoc Tran. She owned a great deal of gold jewelry: $374,330 worth, to be exact. A few years ago, she decided it was time to insure her collection. She purchased a valuable-articles policy from Federal Insurance Company (“Federal”). About eight months later, Tran reported the jewelry stolen and sought to collect on the policy.


Federal suspected that the burglary was an inside job. For starters, the responding officer did not think the crime scene—which would have required the purported burglar to make a rather acrobatic leap through a window—looked like a break-in. And Federal spotted a number of other inconsistencies and oddities in Tran’s story, including the substantial disparity between her reported annual income ($0) and monthly living expenses (sometimes in excess of $5000). As a result, the company asked Tran to provide various business and personal records to corroborate her story. For one reason or another, Tran failed substantially to do provide the business and personal records. After several unsuccessful attempts to obtain the records, Federal denied Tran’s claim, citing her “failure to cooperate.”


Tran filed suit, seeking to compel Federal to cover the claimed loss. The district court granted Federal summary judgment, holding that Tran had failed to cooperate with the company’s investigation. Tran appealed.


Insurance policies often include “cooperation clause[s]” that impose certain duties on the insured party in the event of a loss. Tran’s policy had a cooperation clause requiring her to “produce all records and documents” that the insurance company requested. Because Tran failed to produce many requested documents, Federal maintains that it does not have to pay out her claim.

Under Ohio law, an insured party’s failure to comply with a cooperation clause lets the insurer off the hook if the insured’s noncooperation result[s] in material and substantial prejudice to the insurance company.

Federal repeatedly requested records from Tran, and Tran repeatedly failed to produce many of those records. Initially, Tran claimed that she did not have the records. Then, instead of retrieving copies of those records from third parties—such as her bank and accountant—she gave Federal written authorization to get the documents. The problem is, even with Tran’s written authorization, many of the third parties would not provide the records directly to the company.

When Federal eventually received some records Tran refused to confirm their accuracy. For example, the company obtained a few years’ tax returns from Tran’s accountant, but Tran would not verify that they accurately represented her income. In another instance, Federal got Tran’s phone records from AT&T, but Tran claimed not to remember the identities of eight key telephone numbers listed in the log. And when Federal obtained win/loss statements from local casinos (Tran’s live-in boyfriend was a gambler), Tran disputed the statements’ accuracy.

Federal was never able to obtain, in the course of its claims, investigation Tran’s complete bank account information, as well as two years’ tax returns. Tran initially told Federal that she did not have any bank accounts. After further questioning, she admitted to having two accounts, but she still never gave Federal complete account information. Tran also claimed that two years of missing tax returns simply did not exist, but did not offer evidence to support that claim. When all was said and done, Tran provided the insurance company only some of the documents and information it requested and refused to confirm the accuracy of several key documents Federal obtained on its own accord.

This level of noncompliance was material and substantial. Federal had reason to question Tran’s story about the burglary. And Tran’s failure to provide the requested records impeded its ability to investigate the truth of her claims. The bank records and tax returns would have shed light on Tran’s financial situation in the years surrounding the alleged burglary. So too would the casino records reflecting her boyfriend’s gambling habit.

Federal was confronted with a record that suggested Tran had no annual income, yet somehow maintained monthly expenses sometimes exceeding $5,000 around the time of the loss. Tran’s obstinacy frustrated the company’s ability to determine Tran’s motive, alibi, or any other aspect of her involvement (or non-involvement) in the alleged burglary. Moreover, because Tran’s noncooperation persisted for months and affected several categories of information, it impaired Federal’s ability to complete a full and fair investigation. Her noncooperation was clearly prejudicial.

Tran nevertheless insisted that her attempted compliance was enough. She reasons that she provided some records and made an effort to obtain others. But Tran sets the bar for compliance too low. A party’s compliance with some of a policy’s requirements does not excuse the party’s material failure to comply with others. Although Tran provided Federal with authorizations to obtain records from third parties, it was Tran’s undisputed responsibility under the contract to obtain the requested documents—not Federal’s.

Tran also argues that Federal cannot prove that her failure to cooperate was willful, because she did not destroy any documents or fail to produce documents that she had in her possession. Maybe so, but she missed the point since, if Tran did not currently have the requested records, the cooperation clause obligated her to make an effort to obtain them. While Tran suggests that she did eventually make an effort to obtain her tax returns, she did not do so until more than a year after she filed this suit. That is not “cooperation.”

The district court thus properly granted summary judgment to Federal on the grounds that Tran failed to cooperate.


Federal went beyond the call of duty required by the covenant of good faith and fair dealing. It was patient and waited for production from Tran after multiple requests. It took authorizations and tried to get the records which were withheld and it was met with an impossible fact that she earned nothing but spent $5,000 a month. Unable to complete the investigation Federal rightfully and fairly rejected the claim. Failure to cooperate is a breach of a material condition and a failure to deal in good faith.

To learn more, check out Barry's course on Good Faith and Fair Dealing on Illumeo.