Claims Settlement and Subrogation

Claims SettlementThe liability of the insurer attaches the moment the risk insured against causes lost to the insured. Sec 241 of the Insurance code:Sec. 241. (1) No insurance company doing business in the Philippines shall refuse, without just cause, to pay or settle claims arising under coverages provided by its policies, nor shall any such company engage in unfair claim settlement practices. Any of the following acts by an insurance company, if committed without just cause and performed with such frequency as to indicate a general business practice, shall constitute unfair claim settlement practices:

Adjusting- term used to denote the function of loss payment. Adjuster is the person employed by the insurer in property and casualty insurance to settle in behalf of the insurer the claim of the insured. The adjuster evaluates the insurance claim and makes the proper recommendation to the insurer. An adjuster may be an Independent Adjuster or a Public Adjuster.

Sec. 324. An adjuster may be an independent adjuster or a public adjuster.

The term "independent adjuster" means any person, partnership, association or corporation which, for money, commission or any other thing of value, acts for or on behalf of an insurer in the adjusting of claims arising under insurance contracts or policies issued by such insurer.

The term "public adjuster" means any person, partnership, association or corporation which, for money, commission or any other thing of value, acts on behalf of an insured in negotiating for, or effecting, the settlement of a claim or claims of the said insured arising under insurance contracts or policies, or which

advertises for or solicits employment as an adjuster of such claims.

The adjuster’s function is merely to settle and adjust claims in behalf of the principal. He does not assume personal responsibility.

Article 241 states the following acts of an insurance company, that if committed without just cause and performed with such frequency as to indicate a general business practice shall constitute unfair claim settlement practices which may result in the suspension or revocation of the certificate of authority of the insurer by the Insurance Commission.

Thus: (a) knowingly misrepresenting to claimants pertinent facts or policy provisions relating to coverage at issue;

(b) failing to acknowledge with reasonable promptness pertinent communications with respect to claims arising under its policies;

(c) failing to adopt and implement reasonable standards for the prompt investigation of claims arising under its policies;

(d) not attempting in good faith to effectuate prompt, fair and equitable settlement of claims submitted in which liability has become reasonably clear; or

(e) compelling policyholders to institute suits to recover amounts due under its policies by offering without justifiable reason substantially less than the amounts ultimately recovered in suits brought by them.

(2) Evidence as to numbers and types of valid and justifiable complaints to the Commissioner against an insurance company, and the Commissioner's complaint experience with other insurance companies writing similar lines of insurance shall be admissible in evidence in an administrative or judicial proceeding brought under this section.

Life Insurance Policy

The proceeds of a Life Insurance Policy shall be paid immediately upon maturity of the policy. However the policy may provide that the proceeds are made payable in installments or as an annuity, in which case the installments, or annuities shall be paid as they become due.

Sec. 242. The proceeds of a life insurance policy shall be paid immediately upon maturity of the policy, unless such proceeds are made payable in installments or as an annuity, in which case the installments, or annuities shall be paid as they become due: Provided, however, That in the case of a policy maturing by the death of the insured, the proceeds thereof shall be paid within sixty days after presentation of the claim and filing of the proof of the death of the insured.

Refusal or failure to pay the claim within the time prescribed herein will entitle the beneficiary to collect interest on the proceeds of the policy for the duration of the delay at the rate of twice the ceiling prescribed by the Monetary Board, unless such failure or refusal to pay is based on the ground that the claim is fraudulent.

The proceeds of the policy maturing by the death of the insured payable to the beneficiary shall include the discounted value of all premiums paid in advance of their due dates, but are not due and payable at maturity.

Non-Life Insurance Policy

Shall be paid after 30 days after proof of loss is received by the insurer and ascertainment of the loss or damage is made either by agreement between the insured and the insurer or by arbitration.

Sec. 243. The amount of any loss or damage for which an insurer may be liable, under any policy other than life insurance policy, shall be paid within thirty days after proof loss is received by

the insurer and ascertainment of the loss or damage is made either by agreement between the insured and the insurer or by arbitration; but if such ascertainment is not had or made within sixty days after such receipt by the insurer of the proof of loss, then the loss or damage shall be paid within ninety days after such receipt. Refusal or failure to pay the loss or damage within the time prescribed herein will entitle the assured to collect interest on the proceeds of the policy for the duration of the delay at the rate of twice the ceiling prescribed by the Monetary Board, unless such failure or refusal to pay is based on the ground that the claim is fraudulent.

The double interest referred to in Section 243 means 24% or twice the 12% prescribed by the monetary board.

The insurer must settle the claim even without the participation of an adjuster. There is nothing in the Insurance Code that makes the participation of an adjuster in the assessment of the loss imperative or indispensable.

Section 325 .,..

Sec. 325. For every line of insurance claim adjustment, adjusters shall be licensed either as independent adjusters or as public adjusters. No adjuster shall act on behalf of an insurer unless said adjuster is licensed as an independent adjuster; and no adjuster shall act on behalf of an insured unless said adjuster is licensed as a public adjuster: Provided, however, That when a firm or person has been licensed as public adjuster, he shall not be granted another license as independent adjuster and vice versa.

… speaks of licensing adjusters but this does not require as a prerequisite the assessment of adjusters in the settlement of the insurance claim.

UNREASONABLE DENIAL OR WITHHOLDING OF CLAIM.

Sec. 244. In case of any litigation for the enforcement of any policy or contract of insurance, it shall be the duty of the Commissioner or the Court, as the case may be, to make a finding as to whether the payment of the claim of the insured has been unreasonably denied or withheld; and in the affirmative case, the insurance company shall be adjudged to pay damages which shall consist of attorney's fees and other expenses incurred by the insured person by reason of such unreasonable denial or withholding of payment plus interest of twice the ceiling prescribed by the Monetary Board of the amount of the claim due the insured, from the date following the time prescribed in section two hundred forty-two or in section two hundred forty-three, as the case may be, until the claim is fully satisfied; Provided, That the failure to pay any such claim within the time prescribed in said sections shall be considered prima facie evidence of unreasonable delay in payment.

Failure to pay any such claim within the time prescribed in Sections 242 and 243 of the Insurance Code shall be considered prima facie evidence of unreasonable delay in payment.

Interest and damages. If the claim is unreasonably delayed then, the insured is entitled to:

1. Attorney’s fees2. Other expenses incurred by the insured

person by reason of such unreasonable denial

3. 24% interest (that twice prescribed by the monetary board)

4. The amount of calim.

Delay must be wanton, oppressive or malevolent. Such refusal must be willful and without reasonable cause. IF there was problem in settling as to whom the policy accrues, then there is no unjust delay.

If there is no unreasonable delay, then the insured is given 6% since it is not a loan or forbearance of money,. However after

litigation, allowed 12% because there is forbearance in accordance with EASTERN SHIPPING LINES vs. CA.

If insurance co. is acting in good faith, there is no right to claim for damages.

Fraudulent Claim. The insurer may reject a claim that is fraudulent, i.e. fraudulent policy papers, etc.

Prescriptive Period. Insurance Code does not provide for a prescriptive period for the filing of a complaint. Exception is the CTPL insurance, which must be made within one year under section 384 of the Insurance code.

Stipulation. A stipulation may however be made by the parties stipulating the period in the policy subject to the limitation under Section 63 of the IC.

Sec. 63. A condition, stipulation, or agreement in any policy of insurance, limiting the time for commencing an action thereunder to a period of less than one year from the time when the cause of action accrues, is void.

If there is such stipulation, the stipulation prevails. It is not a mere procedural requirement.

Accrual. The right of the insured to the payment of his loss accrues from the happening of the loss.

The cause of action agains the insurer does not accrue until the insured’s claim is rejected by the insurer. Rejection may be express or implied.

Rejection contemplated is rejection in the first instance. Not the one under reconsideration.

A stipulation may be made by the parties with regards to a period within which to file for such cause of action.

IF THERE IS NO STIPULATION. Or no prescriptive period given in the policy, then the prescriptive period is 10 years for being a written contract under article 1144 of the CIVIL CODE.

SUBROGATION.

Applies according to Article 2207 of NCC.

Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury

The right of subrogation does not arise out of a contract but out of law.It has its roots on equity. And is designed to promote and to accomplish justice and is the mode which equity adopts to compel the ultimate payment of a debt by one who in justice, equity and good conscience ought to pay.

Payment by the insurer to the assured operates as an equitable assignment to the former of all remedies which the latter may have against the third party whose negligence or wrongful act caused the loss.

Requisites of Subrogation

1. The insurance involved is property insurance.

2. There is a loss arising from the risk insured against.

3. The insured received indemnity from the insurer for the loss.

4. The indemnity is covered by the face value of the policy.

THERE IS NO SUBROGATION WHEN:

1. The assured by his own act releases the wrongdoer or third party liable for the loss or damage from liability, the insurers right of subrogation is defeated.

2. Where the insurer pays the assured the value od the lost goods without notifying the carrier whjo has in good faith settled the assured’s claim for loss, the settlement is binding on both the assured and the insurer, and the latter cannot bring an action against the carrier on his right of subrogation.

3. Where the insurer pays the assured for a loss which is not a risk covered by the policy, thereby effecting “voluntary payment” the former has no right of subrogation against the third party liable for the loss.

4. When life insurance is involved (ofcourse for there is no contract of indemnity in life insurance)

LIMITATIONS

When the rights of the insured is limited, the rights of the insurer are also limited, since it is only subrogation.

EG. If insurance company gets the whole value of the amount loss from the negligent party, then the insured may claim the balance from the insurance company, if the insurance company only pays for the value of the indemnity stipulated.

The insurance company is also bound by the laws wherein the insured is also bound by, such as the COGSA, in international carriage. In terms of prescriptive periods, etc.

DISCRETION TO USE THE RIGHT OF SUBROGATION. –It lies with the insurer who may opt not to use the said right.

DOUBLE INSURANCE

DEFINITION

Sec. 93. A double insurance exists where the same person is insured by several insurers separately in respect to the same subject and interest.

Requisites

(P2-SIP)1. The same person is insured2. There are two or more insurers that

insured the person separately3. The insurance is over the same subject4. The same interest is involved5. The same peril is insured against

OTHER INSURANCE CLAUSE

The implication of the rules on double-insurance under the insurance code is that double-insurance is NOT PROHIBITED. However, it may be prohibited by a stipulation known as the “other insurance clause”

FORMS OF THE OTHER INSURANCE CLAUSE.

1. A condition that states that procurement of additional insurance without the consent of the insurer renders the policy void ipso facto

2. A provision that required the insured to disclose the existence of any other insurance on the property, otherwise the contract may be avoided for material concealment

3. A warranty that there is no other existing insurance over the same property

A standard fire policy used by the insurance companies usually contains a condition that the insured shall give notice to the insurer of any insurance or insurances already effected, or which may subsequently be effected covering any property or properties and unless such

notice is given and the particulars of such insurance or insurances is stated, all the benefits under the policy shall be forfeited.

RATIOThe purpose is to avoid over insurance and thus avert the perpetration of fraud, or from the insured to make profit. ( SUNOG BAHAY)

VALIDITY. IF clearly prohibited by the stipulation, additional insurance may be a ground to hold the insurance contract void.

Santa ana v. Commercial union assurance co.

Additional insurance – Gonzalez La’O v. Yek Tong Lin Fire and Marine Insurance CO. => must be deemed abandoned if there are new circumstances because subject was not separated, and the same subject is insured with the same peril insured against.

OVERINSURANCE as a result of DOUBLE INSURANCE.If the insured takes out an insurance over the property insured in an amount which is in excess of the value of his insurable interest.

House worth 500K insured with ABC for 700K.

Over-insurance may also exist if there is double insurance: thus house worth 500K insured with ABC Ins Co. for 400K and YXZ Co. for 300K.

It does not however follow that just because there is double insurance that there is over insurance. EG. If ABC insures house worth 1M for 300k and with GHI co 200K.

RULES IN OVER-INSURANCE BY DOUBLE INSURANCE

Contract of insurance – Contract of Indemnity, thus the insured cannot recover more than what he lost.

Section 94.

Sec. 94. Where the insured is overinsured by double insurance:

(a) The insured, unless the policy otherwise provides, may claim payment from the insurers in such order as he may select, up to the amount for which the insurers are severally liable under their respective contracts;

(b) Where the policy under which the insured claims is a valued policy, the insured must give credit as against the valuation for any sum received by him under any other policy without regard to the actual value of the subject matter insured;

(c) Where the policy under which the insured claims is an unvalued policy he must give credit, as against the full insurable value, for any sum received by him under any policy;

(d) Where the insured receives any sum in excess of the valuation in the case of valued policies, or of the insurable value in the case of unvalued policies, he must hold such sum in trust for the insurers, according to their right of contribution among themselves;

(e) Each insurer is bound, as between himself and the other insurers, to contribute ratably to the loss in proportion to the amount for which he is liable under his contract.

Sundiang notes:Value of house 20 M

Insurer Amt of Policy PremiumA 10M 10KB 20M 20KC 10M 10K

Total 40M

Sum Total of Policy – Value of thing insuredRatio = Sum Total of Policy

(Ratio) * (Amount of premium) = proportionate amt.

Thus: 40M -20M = 20M

= 20M/40M

= 1/2

= ½ (10K) = 5K from A

= ½ (20K) = 10K from B

= ½ (10K) = 5K from C