What Is a Sworn Statement in Proof of Loss?
A sworn statement in proof of loss is a formal document provided by an insured party to their insurance company during the claims settlement process. Specifically, it is signed and certified by the insured that the information, statements, and documents submitted in support of their claim to the insurer are true accurate and that all known applicable coverage available under the policy has been included. As such, it is the insured’s sworn testimony regarding their claim.
The purpose of the sworn statement in proof of loss is to allow the insured to prove that they are entitled to payment under their insurance policy . This document contains important information about the claim, including details about the loss, the amount being claimed, and any surrounding circumstances that may have contributed to the loss.
Once the insured submits the sworn statement in proof of loss, the insurance company may conduct any further investigation necessary to confirm the validity of the claim, including retaining forensic experts, engineers, accountants, and others for examination of the claim and supporting documents.
When Is a Sworn Statement Required?
Sworn Statements in Proof of Loss are almost always required in Conventional Insurance Policies. These are some of the common types of policies that mandate a sworn statement under oath:
- Dwelling forms (also referred to as "Homeowners" or "HO") require a sworn statement in proof of loss if the loss is over $2500.
- Wind/Hail Dwelling Forms require a sworn statement in proof of loss for every residential and commercial claim.
- Condominium Dwelling Forms require a sworn statement in proof of loss if the claim is over $1000.
- Business Interruption and Civil Authority Dwelling Forms require a sworn statement in proof of loss.
Elements of a Sworn Statement
The date must be included in the Statement. A witness, either disinterested or hired by the insurance carrier, should sign the document, attesting to the truth of the statement under oath, and include the following:
The Location
Identification of the Insured/Business Name and legal entity type (LLC, Corp, Partnership, etc)
Insured’s address
Date of loss
Detailed schedule of loss and Itemization
Repair or replacement costs of property, including parts, labor, fees, etc. and amount of insurance on each item of property
Actual cash value amount on each item of property and deductible amount included in loss amount
Depreciation amount on each item of property with calculations attached. Depreciation calculation and condition schedule (examples below).
Lost income calculation and schedule
Confirmation that testimony can be given in court/jurisdiction and provide witnesses’ full name, address and telephone number
Confirmation that no significant changes were made to property after loss except mitigation and minimization activities
List of documents that were furnished prior to signing the statement
References and location of information to be kept available for inspection and copy
Confirmation that witnesses can be made available at trial
Definition of "actual cash value"
Within the field of insurance, there are two points of view on the definition: an insurance company uses actual cash value to lower their financial obligation, while the insured generally tries to get a better estimate of the current value of their property.
An answer as to what actual cash value means can be found in the following definition:
The actual cash value of property is defined as the cost to repair with a deduction for depreciation.
Depreciation is the decline in value of an item of property, whether it be a roof or another object, as a result of wear and tear or other factors over time. Therefore, the actual cash value of property is determined after calculating the cost to repair or replace the property and applying a deduction for depreciation.
The depreciation amount contemplated in the contract of insurance should correspond to the actual deterioration of property at the time of the loss. The insurance company must adhere to the depreciation amount agreed on in the contract of insurance. However, some insurance companies prefer to set the amount of depreciation on property with reference to their own depreciation schedules, which usually are not equivalent to the actual conditions of the property at the time of the loss.
In a majority of insurance policies, the word ‘depreciation’ is interpreted in two ways, these two ways being:
The insurance policy signed by an insured defines its burden.
How to Create a Sworn Statement
Preparing a sworn statement in proof of loss is virtually always required as part of the proof of loss process. Indeed, some policies require a sworn proof of loss and do not even allow an unsworn proof of loss to be filed in the first place.
The following is a step-by-step process for preparing a sworn statement in proof of loss. Preparation takes time. Take your time, and make sure it’s accurate.
Step 1. Make sure it applies.
If the sworn statement in proof of loss requirement is in the insurance policy, you must provide one, whether required by law or not. If it is not in the insurance policy (and required by law), it may be prudent not to provide such a statement unless it is advantageous to do so.
Step 2. Gather the necessary documents.
Spend time gathering the necessary documents to create an accurate preliminary estimate of your damages. The more accurate your estimate, the more accurate your sworn statement can be. If you are missing documents, the sworn statement can always be signed on information and belief under oath (in cases where a sworn statement in proof of loss is not legally required as part of your proof of loss).
Step 3. Prepare the Sworn Statement in Proof of Loss.
Include (and attach) the following:
Do not alter the documents referenced above. Enclose them as they are, in the same form in which they were received. Be sure to provide the specific value of each item of property claimed so that the insurer will be able to adjust properly. A simple catch-all statement at the end stating that other damages are also being claimed may help.
Step 4. Sign and date the Sworn Statement in Proof of Loss.
An unsworn (and unsigned) statement in proof of loss is not valid, and thus should not be filed. Sign and date your statement in proof of loss.
Include the following certification and heading (at the top of the page):
U.S.C. Title 18, Section 1621
U.S.C. Title 18, Section 1622
U.S.C. Title 18, Section 1623
U.S.C. Title 28, Sections 1746(1)
U.S.C. Title 28, Sections 1746(2)
I certify (or declare, under penalty of perjury) that the foregoing is true and correct to the best of my knowledge, information, and belief. I understand that under the laws of the United States, any false statements made herein are punishable by fine or imprisonment, or both.
What Not to Do
Common pitfalls when completing a sworn statement in proof of loss include: not providing all the information necessary for your insurer to investigate your claim properly, such as missing identifying numbers or information about other policies that may also cover your loss. If you have multiple policies covering any part of the same loss, you should disclose all the policies. If you have another policy covering any part of your loss, disclose it.
Another common example relates to underestimating the value of your loss. In particular, there is an old belief among some that, if a sworn statement is required, the insurance company is conducting its own investigation to determine the "price" it will pay for your loss. Therefore, the "correct" approach is to give the insurance company exactly what it thinks the loss is worth, which usually leaves you short of being made whole after the loss. However, there is no obligation to provide the insurance company with a valuation that is less than you think it is worth. In fact, the insurance company is expecting you to give your best estimate of the value of the loss .
While the insurer is entitled to an honest good faith estimate regarding your loss, it is not entitled to the amount it hopes to pay for the claim. In fact, if the insurer demands an estimate lower than you believe the policy provides coverage for, it may be acting in bad faith. Further, underestimating the value of your loss may not only lower the amount the insurer may reasonably expect to investigate and pay, but it can also make all of your documents less reliable during the process of resolving the loss. For example, if you intentionally low-ball your value estimates on your sworn statement and then have to go back and increase them later, those misestimated values will always be your insurance company’s point of reference when evaluating your valuation. Again, if you believe there is a good deal of uncertainty as to the true value of certain items, you should consider having an appraisal conducted as soon as the entire list is ready, to estimate the true value of the entire loss so you can proceed without delay during litigation.
Legal Consequences of a Sworn Statement
In a sworn statement in proof of loss, an insured is expected to state the truth in the matter. A sworn statement in proof of loss is something similar to an affidavit or a document such as an oath that states the facts and lists the losses that were incurred. A sworn statement is something serious so there are severe legal implications if the statement is found to be false. If the statement is incorrect, admitted to be incorrect, or found to be incorrect by the carrier after the fact, there will be a question about whether there was a willful misrepresentation of the facts.
The insurance company may decide to file a criminal charge of insurance fraud against the insured if the willful misrepresentation of facts is severe and noteworthy. However, it’s not only a willful misrepresentation that can occur. A negligent misrepresentation can be made if the person didn’t do their due diligence to make sure the statement was accurate or the person had no idea it was inaccurate. Because of this, the penalties for a negligent misrepresentation are not going to be as severe but are instead going to be at the discretion of the insurance carrier who is the victim.
An insurance carrier is going to have 3 substantial choices. The first choice is to reopen the claim and accept the new proof of loss. The second choice is to deny the claim based on the fact that it was misrepresented. The third option is to sue to rescind the contract and refuse to provide any type of coverage or benefits for the claim.
How to Submit the Sworn Statement
Submitting the sworn statement is completed within 60 days from the filing of a proof of loss unless the insurer, for good cause shown, shall have granted in writing a reasonable extension thereof. In addition, when the insurer requires the insured to submit a sworn proof of loss for any specific building damage as part of an appraisal, the insured may submit a proof of loss for that portion of the building damage appraisal within 60 days after the completion of the appraisal unless that portion of the appraised loss is sooner paid or unless the insurer, for good cause shown, grants in writing a reasonable extension thereof. The insurance company must pay the sworn proof of loss within 90 days from the time it is submitted. If the insurer, notwithstanding failure to pay the sworn proof of loss, refuses to pay the amount of the sworn proof of loss and if no other portion of the loss is payable to the insured, then interest at the rate specified in the policy shall begin to accrue 30 days after expiration of the time specified in the policy within which the insurer is required to pay the loss.
What Happens Now?
A common question we get is what happens after I turn in a sworn statement in proof of loss? First, remember that the insurance company has already sent an engineer out to investigate. After you submit the sworn statement in proof of loss, the next step that most companies will do, unfortunately, is get a second engineer out. They will also have an adjuster review the documentation and file a supplemental report on the file. This report will set out the insurance company’s position as to the amount owed and the coverage provided by the policy. In practice, this leads to delays because most likely they will then say that they need another engineer.
In the context of a business interruption claim, large businesses will likely have several engineers out to determine the amount of damages. The insurance company knows this and is almost always looking for greater documentation to support their estimate against the insured . The goal for insurance companies is to seek out the supplemental reports that estimate the least damages payable under the policy, so insurers will constantly rehash the same issues over and over. If a smaller business had, for example two employees, that business would likely not have a need for constant supplemental reports and therefore there would be other problems you must address. In either case, the insurance company will need to admit that the claim remains open and that it is their burden to supplement the documents and information.
This might be different from the insurer’s perception of the claim. At the end of the day, a sworn statement in proof of loss and other documentation is merely a tool to help you build the case for damages. Your insurance claim is a legal matter, no matter how friendly the adjuster seems. The insurance company knows this and will try to pressure you into a low ball settlement. Remember, they do not have your best interests at heart.