An arsonist set fire to Colleen Wood’s house at Lake Station, Indiana on January 29, 1991. The house was destroyed in the fire. Allstate Insurance, Wood’s insurer, thinks there was at least some chance that Wood herself is the arsonist. They are therefore investigating her claim, and have refused to pay until their investigation is complete. Unsatisfied, Wood brought this action against Allstate demanding payment.
Wood’s homeowner’s insurance policy, purchased from Allstate, became effective August 17, 1990. The policy insured Wood’s house and property against “sudden and accidental physical loss,” including loss caused by fire. R. 36, Exh. 1, p. 7. The policy expressly excluded from its coverage any loss caused by the “[i]ntentional or criminal acts of any insured person.” But even had the insurance contract lacked such a provision, Indiana law (which governs this diversity action), would of course — as a matter of public policy — imply such a term rather than permit a homeowner who burned down her own house to collect insurance proceeds.
American Economy Ins. Co. v. Liggett,
Wood’s house caught fire late at night on January 29, 1991, and the fire was extinguished by the early morning hours on January 30, 1991. Police and fire investigators found accelerant and suspected arson. Wood does not deny that the fire was deliberately set, only that she set it. Allstate has not denied Wood’s claim, but is -continuing its investigation. But because under the insurance policy Wood is required to sue Allstate, if she is to do so at all, “within one year after the date of loss,” R. 36, Exh. 1, p. 22, Wood brought this action demanding payment.
The insurance policy contains two provisions that are at issue here. The first is the contractual limitations provision, declaring that if Wood wants to sue Allstate on the insurance contract, she must do so “within one year after the date of loss.” This suit was filed on January 30,1992. That was one year from the date that the fire was extinguished, but a year and a day from the date on which it began.
The second provision, a “cooperation clause,” says that “no suit or action may be brought against us unless there has been full compliance with all of the policy terms.” R. 36, Exh. 1, p. 22. The policy terms here in question require Wood to provide “all ac *743 counting records, bills, invoices, and other vouchers, or certified copies,” that Allstate “may reasonably request.” R. 36, Exh. 1, pp. 17-18. Wood must also “submit to examinations under oath and sign a transcript of .the same” as often as Allstate may “reasonably require.” R. 36, Exh. 1, p. 18.
Allstate moved for summary judgment, contending both that the suit was barred by the contractual limitations period and that Wood breached her contractual duty to cooperate with the investigation. The district court agreed on both counts, and entered summary judgment in favor of Allstate.
I. Limitations period.
While Indiana’s ten-year statute of limitations for breach of contract actions would otherwise apply,
see
IC 34-1-2-2(6);
Panos v. Perchez,
The policy says that any suit against Allstate needs to be brought “within one year of the date of loss.” The fire began on January 29, 1991, and was extinguished on January 30, 1991. The complaint was filed (and therefore the suit was brought) on January 30, 1992. The question is whether this was “within one year after the date of loss.”
We note at the outset that this interpretive difficulty, like too many others, could have been eluded had counsel filed the relevant papers a day earlier.
See United States v. Locke,
Insurance policies are contractual agreements, and in divining their terms the starting point is of course the intent of the parties.
Evans v. National Life Acc. Ins. Co.,
The court found that its conclusion was further supported by the Indiana Court of Appeals decision in
Brunner v. Economy Preferred Ins. Co.,
Brunner holds that if the contract requires an insured to sue within a year of the date of loss, the clock begins on the date of loss, not when the insured first discovers the damage. That much is clear. But Wood is not claiming that the beginning of the limitations period should be tolled until she learned of the loss. Rather, she argues that the “date of loss” is January 30. Brunner tells us nothing about that question: whether the “date of loss” is the day the fire begins or ends. On this central question, Indiana law unfortunately provides no guidance.
We therefore turn to the first principles of contractual interpretation, principles firmly ensconced in Indiana law. Surely, if the contract said that in order to bring suit an insured must do so “within one year after the date the fire is ignited,” this suit would be barred by the contractual limitations period. By contrast, if the language read “within a year after the date the fire is extinguished,” it would be clear that this suit was brought within the limitations period. But rather than definite terms like “ignited” or “extinguished”, the contract says “date of loss.” At least in this context, that language is undoubtedly ambiguous.
Indiana has long accepted the canon of construction under which ambiguous insurance policies are interpreted in the light most favorable to the insured.
E.g. Tate v. Secura Ins.,
II. Failure to cooperate.
The policy says that in the event of a loss, the insured must provide Allstate with “all accounting records, bills, invoices, and other vouchers, or certified copies, which we may reasonably request,” and, “as often as wé may reasonably require,” to “submit to examinations under oath and sign a transcript of the same.” R. 36, Exh. 1, pp. 17-18. The policy further notes that “no suit or action may be brought against us unless there has been full compliance with all the policy terms.” R. 36, Exh. 1, p. 22. Sufficiently cooperating with Allstate’s investigation, then, is a condition precedent to the company’s obligations under the contract.
Wood has undeniably been lackluster in cooperating with Allstate’s investigation. Allstate argiies that Wood has breached the policy’s cooperation clause, and that it therefore is not liable under the contract. Cooperation clauses are particularly important in the liability insurance context. The insured injures the plaintiff, and the plaintiff sues the *745 insured. The insurance company will pay the judgment, and therefore has an interest in seeing that the insured puts on a good defense. In fact, the insurance agreements will typically provide that the insurance company will pay the cost of the defense. But even so, its ability to defend its interests will depend on the insured’s cooperation in defending against the lawsuit. The concern is that the plaintiff and the insured might collude, to the detriment of the insurance com-' pany. See Note, Conduct of the Insured Under Cooperation Clauses in Policies of Liability Insurance, 22 Notre Dame L. 118 (1946).
But cooperation clauses are clearly enforceable in other insurance contexts as well, as such provisions “enable the company to possess itself of all knowledge, and all information as to other sources and means of knowledge, in regard to facts, material to their rights, to enable them to decide upon their obligations, and to protect them against false claims.”
Claflin v. Commonwealth Ins. Co. of Boston, Mass.,
Unless the insurer waives the clause or is estopped from asserting it, a “breach of the cooperation clause by the insured will operate to relieve the insurer of liability under the policy.”
Id.,
§ 4772;
Motorists Mut. Ins. Co. v. Johnson,
In
Miller v. Dilts,
The district court here granted summary judgment in favor of Allstate, as an alternative ground, because of Wood’s failure to cooperate. A month after the fire, Wood submitted a proof of loss claiming more than $80,000 in damages. An attorney for Allstate requested that Wood submit to an examination under oath (EUO), and Wood did so. At the April 1,1991 examination, Wood said that she did not remember a number of details of her personal and financial history, and said that a number of records that Allstate requested (including her 1990 tax returns) were destroyed in the fire. When a copy of the transcript was sent to Wood, she did not sign and return it as requested, nor did she respond to Allstate’s request to continue the examination on April 23, 1991. Allstate’s attorney then wrote to Wood advising her that her failure to continue the EUO could result in the denial of her claim, and requested that she continue the examination on May 6, 1991. On May 6, Wood called Allstate’s attorney to cancel the EUO scheduled for that day, and asked to reschedule it for May 28, 1991.
*746 Wood did submit to the examination on May 28. Allstate also asked Wood to provide authorizations that would allow Allstate access to.Wood’s tax returns and Florida vehicle registration records (Wood owned real estate in Florida where she said she planned to move as soon as she resolved family matters in Indiana). Wood never provided the requested authorizations, though she had earlier given Allstate a “general authorization.” The district court, in granting summary judgment, relied on (1) Wood’s alleged failure, when she submitted to the EUO, to remember relevant information and her claim, that relevant documents were destroyed, (2) her failure to sign the EUO, and (3) her refusal to provide Allstate with authorizations that would allow the company to gain access to her tax records and Florida vehicle registration information. To affirm the district court’s grant of summary judgment, we must find — with respect to at least one of these theories — that Wood’s conduct amounts to a breach of the cooperation clause and that Allstate was prejudiced by it.
Summary judgment is appropriate, of course, only where there is no genuine issue of material fact. Fed.R.Civ.P: 56(e);
Celotex Corp. v. Catrett,
The district court relied first on Wood’s failure to remember relevant information when she submitted to the EUO and her failure to bring certain documents to the examination, claiming that they were de-' stroyed in the fire. To refuse to submit to an EUO is to breach a policy’s cooperation clause, and an insured who does so is not entitled to recover proceeds under the' policy.
Standard Mut. Ins. Co. v. Boyd,
We agree that when an insured ostensibly submits to an EUO, but says she does not remember relevant information that in fact she does, or claims that relevant documents have been destroyed when in fact they were not, she has in effect refused to submit to the examination. But if the insured truly does not remember the information and the documents truly were destroyed, it cannot be said that the insured effectively refused to submit to the EUO. The question, therefore, is whether Wood’s claims— that she cannot remember her income and that the documents were destroyed — are true. If they are not, she has breached the contract and Allstate owes her nothing. But it is fundamental that where “an issue as to a material fact cannot be resolved without observation of the demeanor of witnesses in order to evaluate their credibility, summary judgment is not appropriate.” 10A Charles Alan Wright, Arthur Miller & Mary Kay Kane, Federal Practice and Procedure, § 2726 (1983) (quoting Fed.R.Civ.P. 56(e) advisory committee’s note).
The district court, in granting summary judgment, made an implicit determination that Wood was lying. Because at summary judgment inferences of this sort need to be drawn in favor of the nonmoving party, we think the court incorrectly granted summary judgment on this ground. We hasten to add, however, that an insured who claims to have lost all relevant documents and to have forgotten all relevant information is not summary judgment-proof. For one, summary judgment might still be appropriate if it is clear that the insured breached the cooperation clause in some other manner, and moreover, in our view, cooperation clauses should be construed to impose a heightened obligation on an insured to assist the insurance company in obtaining copies of documents that were lost or destroyed. But a court cannot, at the summary judgment stage, conclude that an insured who claims that documents were destroyed is lying, and dismiss her suit on that basis and that basis alone.
*747 Second, the court found that Wood’s failure to sign the EUO’s was a breach of the cooperation clause. While she was surely delinquent in doing so, Wood did ultimately sign the EUO’s on February 3, 1992, shortly after the complaint was filed. Moreover, the EUO’s were given under oath and transcribed before a court reporter. The question is therefore whether Allstate suffered any prejudice by virtue of the absence of Wood’s signature from the EUO’s for the months between the dates when the EUO’s were taken (April 1,1991 and May 28, 1991), and the time Wood signed them (February 3, 1992). Because whether Allstate suffered prejudice appears to us to be a contested issue of material fact, we conclude that the entry of summary judgment on this ground was inappropriate.
The court finally concluded that Wood’s failure to provide authorizations that would allow Allstate to obtain copies of Wood’s tax returns and Florida vehicle registration records constituted a breach of the cooperation clause. The authorization for the motor vehicle records is puzzling, because Allstate does not explain either , (1) what relevant information those records might contain (and surely the contractual language requiring Wood to provide information that Allstate “may reasonably request” limits Wood’s obligation to providing relevant information), or (2) why it could not easily obtain that information from the Florida division of motor vehicles.
2
It is easier to understand why Allstate wanted the tax returns. Where the possibility is raised that an insured torched her own house in order to collect on the insurance policy, the financial condition of the insured is plausibly at issue.
See Stover v. Aetna Casualty and Surety Co.,
Notes
. Because the district court concluded that the day on which the fire began was the "date of loss," it went on to address the questions of waiver and estoppel. In a number of letters addressed to Wood, Allstate apparently referred to the fire as occurring on January 30, 1991. Wood therefore argued that Allstate has waived the benefits of the contractual limitations period, or relatedly that it should now be estopped from asserting the clause. The district court rejected these arguments, and they are advanced again on appeal. Yet in light of our conclusion that this action was brought within the contractual limitations period, it is unnecessary for us to resolve these questions.
. While recent reform efforts have sought to limit the public availability of driving records, see Driver’s Privacy Protection Act of 1993, H.R. 3365, 103d Cong., 1st Sess. (1993); Driver's Privacy Protection Act of 1993, S. 1589, 103d Cong., 1st Sess. (1993), the pending legislation would allow the disclosure of motor vehicle records for "use by any insurer ... in connection with claims investigation activities or antifraud activities.” H.R. 3365 (proposed 18 U.S.C. § 2721(b)(9)). The Senate bill was incorporated into S. 1607, Violent Crime Control and Law Enforcement Act of 1993, which the Senate passed November 19, 1993.