Cooperation Clause: Definition & Examples

KEY TAKEAWAYS

• A cooperation clause is outlined in an insurance contract and it requires the policyholder to assist with the investigation when a claim happens. 
• A cooperation clause allows insurers to have access to extra information that might not otherwise be available. This leads to an easier and quicker claims process. 
• The policyholder is required to take part in the claim investigation by providing relevant and detailed information to the insurer.

What Is a Cooperation Clause? 

In an insurance contract, a cooperation clause outlines the requirements for a policyholder to work with an insurer when a policy claim occurs. Within the agreement, there will be details that specify how the policyholder needs to contribute or participate if there’s an investigation into the claim. 

In a standard claim, there isn’t a requirement for the insured person to be involved when it comes to unearthing relevant information. But the cooperation clause aids the insurance company in finding more information about what circumstances led to the claim in the first place. 

There can be cases where the insured could have details the insurance company doesn’t have about what happened before, during, and after the event occurred. In a lot of ways, the clause speeds up the claim paperwork process since information is available quickly. It can also be known in the policy as an assistance and cooperation provision.

Need for Cooperation Clauses 

In many insurance policy contracts, cooperation clauses are often considered to be an essential component. It helps the insurer gather details and facts in a quicker and more efficient manner. As well, it helps ensure that the insurance company doesn’t cover a fraudulent claim. 

This is important because if an insurer ends up paying out for a falsely submitted request, the total cost of the underwriting coverage for every member will end up increasing. In essence, a fraudulent claim will skew the actuarial risk that’s used to help determine other insurance applicant premiums. 

If the policyholder doesn’t agree to cooperate with the investigation they might forfeit any opportunity to claim coverage. As well, a court could also end up determining that they’re not acting in good faith or are withholding information, which can lead to the insurer claiming breach of contract. 

If this ends up happening, the policyholder would lose their insurance coverage and also have to pay for their own court costs. 

Cooperation Clause Examples 

Let’s say that there ends up being a medical malpractice claim against a hospital. In the claim, the client is accusing the hospital of an operation that wasn’t completed correctly. In order to do an efficient and thorough investigation, the hospital will need to cooperate with the insurer with whatever they might need. 

This is because there is a cooperation clause outlined in the hospital insurance policy. So, since the hospital is the subject of the lawsuit, they’re going to have first-hand information about what happened before, during, and after the operation occurred. 

That information is going to be critical for the hospital when it comes to their defense. Without having a cooperation clause in place, it could be very difficult for the insurance company to move forward with an actionable case regarding the insurance claim. 

Requirements for Policyholders 

Even though the insured person is required to cooperate with the insurer through the investigation, they don’t necessarily have to conduct extensive research or appear in court. It might depend on the policy and the amount of the claim. 

In this case, the insured might only have to discuss the details and present the information through emails, on the phone, or via a video conference. When this happens, they will need to present the information they have about their actions and the events in question. 

That said, the policyholder might also find themselves having to verify certain information and items. This can mean keeping copies of written communication or receipts. 

There are some cooperation clauses that have extra, more detailed language in them. These clauses could go into in-depth detail about the level of cooperation that needs to be provided throughout an investigation. As well, they might include the length of time that’s required to help.

Summary

A cooperation clause is outlined in an insurance contract and it requires a policyholder to cooperate with an insurer if a claim occurs. There will be details that describe how the policyholder needs to contribute if a claim requires investigation. 

Sometimes, there can be instances where the policyholder has details that the insurance company doesn’t. These can include what happened before, during, and after the claim or event occurred. This helps to speed up the claims process and have information readily available.