How Different States Treat Proof of Loss Mistakes and Deficiencies

Many public adjusters and claims professionals reading about the recent decision of Tower Crossing v. Affiliated FM in yesterday’s post, Signed, Sworn, and Sealed: The Tower Crossing Lesson Every Public Adjuster Must Learn, probably shook their heads in disbelief. A multimillion-dollar hail loss was thrown out of court, not over a finding of fraud or coverage, but because a notarization page was reused. Illinois law left no room for mercy. The Proof of Loss wasn’t signed and sworn as required, so the court said the claim was void and the lawsuit time-barred. No signature, no seal, no case.

But before you think all courts would do the same, let’s take a trip across state lines. I practice in many different states. If there is one thing I learned about the rule of insurance law, it varies from state to state.

In my view, Illinois and New York courts tend to read Proof of Loss requirements like the Ten Commandments, which are not to be broken or bent. For example, Judge Hunt’s decision in the Tower Crossing case held that “sworn” means notarized, and if the insured doesn’t physically sign before a notary, the proof is invalid. Even if the insurer knows the loss and investigates it, the clock doesn’t stop unless that paper meets every technical requirement.

New York’s Finley v. Erie and Niagara Insurance Association ¹ took the same hard line. The court ruled that failing to file a sworn proof within 60 days is an “absolute defense.” The court didn’t care that the insurer made settlement offers or that the insured thought he had complied. The rule is the rule. If you are late with a proof of loss in New York, you will often lose all policy benefits.

In both states, the Proof of Loss isn’t a formality. It’s a gatekeeper to recovery and the courthouse. These decisions reflect a judicial philosophy that insurance contracts are private bargains. If the policy says, “signed and sworn,” then compliance isn’t optional. It is mandatory. Public adjusters in those states tend to be more perfectionists and are always concerned about proof of loss technicalities and deadlines.

The Forgiving States: California’s Substantial Compliance Doctrine

Now fly west to California, where I find myself today at the Pacific Coast Association of Public Insurance Adjusters (PCAPIA). The same fact patterns found in Illinois or New York might have ended very differently here in California.

In Chierfue Her v. State Farm, ² the insureds’ Proof of Loss was riddled with defects. It had missing values, incomplete signatures, and inconsistent lists. State Farm argued that the claim should be void for noncompliance. The federal court disagreed, noting that California law focuses on substance over form.

Because the insureds:

1. Gave recorded statements,
2. Submitted receipts and photos,
3. Sat for examinations under oath, and
4. Cooperated fully with the inspection,

the insurer had everything it needed to evaluate the claim. The court found no prejudice from the incomplete proof and allowed the breach of contract claim to proceed.

Under California law, “substantial compliance” and lack of prejudice can save a claim even when the paperwork is imperfect. The emphasis is on fairness of substance and the insurer’s ability to investigate, rather than forfeiture when catching a technical slip by a policyholder.

To me, substance over technical precision is what good faith claims handling is about.  I recognize, however, that states and people have different views. In my business and for those on my side of the business, I generally tell myself and others that perfection should be strived for to avoid disaster.

Lessons for Public Adjusters and Claims Professionals When Dealing with Proofs of Loss

1. Know Your Jurisdiction.
   What saves a claim in California may doom it in Illinois. Each state’s law governs whether proof of loss requirements are strict conditions precedent or flexible obligations. Every state has its own rules about proofs of loss, and a claims professional must know the rules thoroughly in the state they practice.
2. Don’t Rely on “Substantial Compliance.”
   Even in forgiving states, perfection prevents litigation. Always ensure the Proof of Loss is signed, sworn, dated, and complete.
3. Educate the Client.
   A policyholder may think, “We already told the insurer everything.” Not true. What matters is whether the sworn proof was executed properly and timely under the policy terms. Greater cooperation is safer than less.
4. Document Cooperation.
   In lenient jurisdictions, demonstrating cooperation and transparency may save a claim, but only if well-documented. In strict states, document cooperation is mandatory.

The bottom line is that some states treat the Proof of Loss as a sacred oath; others as a procedural tool. The difference can be the difference between recovery and ruin.

In Tower Crossing, a reused notary seal ended the case. In Her, cooperation and good faith saved it. Both remind us that a Proof of Loss is more than a piece of paper. It’s the bridge between claim and coverage.

Thought for the Day

“The law is reason, free from passion.” 
— Aristotle

¹ Finley v. Erie and Niagara Ins. Assoc., 162 A.D.3d 1644 (N.Y. Sup.Ct. – App. Div. 2018).

² Her v. State Farm Ins. Co., 92 F.Supp.3d 957 (E.D. Cal. 2015).