What is a forfeiture provision in an insurance policy (particularly a first party policy such as a property insurance policy)?
Basically, these are provisions in an insurance policy where an insured through its conduct can arguably forfeit coverage under the policy. Examples of forfeiture provisions include submitting to an examination under oath, submitting timely notice of a claim or lawsuit, or submitting a sworn proof of loss. These are generally called post-loss obligations in the insurance policy since they pertain to what the insured is required to do in the event of a loss.
Just because an insurer argues that the insured forfeited rights under the policy does not mean that the insurer is correct. An insurer can waive its rights to argue forfeiture and, under some circumstances, even if the insurer argues forfeiture, it has to establish how it was prejudiced by the conduct it asserts created the forfeiture.
The bottom line is that in the event of an insured experiencing loss or damage, the insured should act prudently and consult with counsel to ensure it is properly preserving its rights under its insurance policy and maximizing potential insurance coverage. There is generally no reason to ever give the insurer the “forfeiture of coverage” argument to avoid paying an otherwise legitimate covered claim.
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