Claims Settlement: Title 11

CLAIMS SETTLEMENT
TITLE 11
CLAIMS SETTLEMENT
Indemnification of the loss of the insured.
Primary purpose:
 Expectation of repayment for his loss. It
is imperative that the insurer effect a
fair and prompt payment for his loss.
“The repayment for the values which have been
lost is often the point at which the policyholder
has the strongest possible realization of why he
purchased the insurance contract.
“The insured who has honestly suffered loss or

damage need not approach the insurance
company in no apologetic frame of mind. The
claim settlement which he asks is for his by right
of purchase.”
-- David Bickelhaupt,
Section 247
 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
The liability of the insurer attaches the moment

the risk insured against causes loss to the
insured.
Insurance adjusting
Denotes function of loss
payment
Adjuster
Person employed by the insurer in
property and casualty insurance to settle
in behalf of the insurer the claim of the
insured.
He evaluates the claim and makes proper

recommendation to the insurer.
Independent Adjuster or Public

Adjuster
Independent Adjuster
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
Public Adjuster
An 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
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 or such claims.
Note:
 Adjuster does not assume personal
liability. He is merely acting to settle and
adjust claims in behalf of his principal.
 Smith Bell & Co., Inc. v. Court of Appeals and
Joseph Bengson Chua, G.R. no. 110668,
February 6, 1997.
Unfair Claims Settlement
Practices (UCSP)
(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.
Re: Filing of action in case of USCP
(3) If it is found, after notice and an

opportunity to be heard, that an insurance
company has violated this section, each
instance of non-compliance with paragraph (1)
may be treated as a separate violation of this
section and shall be considered sufficient
cause for the suspension or revocation of the
company's certificate of authority.
-
Section 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.
Policy maturing by the death of the
insured
 Proceeds shall be paid within sixty (60)
days after the presentation of the claim
and filing of the proof of death of the
insured.
 Proceeds shall include the discounted
value of all premiums paid in advance of
their due dates, but are not due and
payable at maturity.
Refusal or failure to pay the claim
 The beneficiary will be entitled to collect
the 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 is base on the ground that the
claim is fraudulent.
* Note: rate is12% since the legal rate by MB is

6%
The insured can recover:
1) attorney’s fees;
2) expenses incurred by reason of the
unreasonable withholding;
3) interest at double the legal interest rate
fixed by the Monetary Board; and
4) the amount of the claim.
Zenith Insurance Corp. vs. CA, 185
SCRA 398
Section 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 (30) 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;
Ascertainment of loss is not had or
made within sixty days
If such ascertainment is not had or made

within sixty (60) days after such receipt
by the insurer of the proof of loss, then
the loss or damage shall be paid
within ninety days (90) after such
receipt.
Refusal or failure to pay the loss or
damage within the time prescribed
herein
the assured is entitled 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
Confused?
Let’s summarize the difference

between life and non-life policies
LIFE POLICIES
a. Maturing upon the expiration of the term – The proceeds are

immediately payable to the insured, unless they are made
payable in installments or as annuity, in which case, the installments
or annuities shall be paid as they become due.
b. Maturing at the death of the insured, occurring prior to the

expiration of the term stipulated – The proceeds are payable to
the beneficiaries within 60 days after presentation and filing of
proof of death.
NON-LIFE POLICIES
The proceeds shall be paid within 30 days after the receipt by the
insurer of proof of loss, and ascertainment of the loss or damage by
agreement of the parties or by arbitration but not later than 90
days from such receipt of proof of loss whether or not
ascertainment is had or made.
Section 244 (unreasonable
denial or withdrawal of claim)
 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;
Note
 Failure to pay any such claim within the
periods prescribed the this Code shall be
considered as prima facie evidence of
unreasonable delay in payment.
Timoteo B. Aquino,
Essentials of Insurance Law, Pg. 195
 For an insurance company to be held
liable for unreachably delaying and
withholding payment of insurance
proceeds, the delay must be wanton,
oppressive or malevolent
If no proof of unreasonable or
unjustified delay
 Interest is 6% per annum of the claim of
the insured from the time of the demand.
Re: moral damages and attorney’s

fees
 Mere denial does not warrant the damages above.
In order that a person may be liable to the
payment of moral damages, the law requires that
his acts be wrongful.
FRAUDULENT CLAIMS
Section 251
It is unlawful to:
a) Present or cause to be presented any fraudulent
claim for the payment of a loss under a contract of
insurance; and
b) Fraudulently prepare, make or subscribe any writing
with intent to present or use the same, or to allow it
to be presented in support of any such claim.
Any person who violates this section shall be punished by

a fine not exceeding twice the amount claimed or
imprisonment of two (2) years, or both, at the discretion
of the court.
Effects of Fraud
 Since presentation of a fraudulent claim is illegal,
the insurer is not obligated to pay the insured or
beneficiary who submitted the fraudulent claim.
“Fraudulently” in par. b indicates that a claim

was already presented. Fraud presupposes the
presence of another person against whom the
fraud is committed or is being misled.
 The insured is not entitled to the return of

premiums in accordance with Section 82 of the
Insurance code. Insurer is not liable to pay interest
for its refusal to pay the claim.
PRESCRIPTIVE PERIOD
Rules:
1. In the absence of an express stipulation
in the policy, it being based on a written
contract, the action prescribes in 10 years.
2. However the parties may validly agree on
a shorter period provided it is not less
than one year from the time the cause of
action accrues.
3. The cause of action accrues from the
rejection of the claim of the insured and
not from the time of loss.
It shall commence from the denial of the claim,
not from the resolution of the motion for
reconsideration, otherwise it can be used by the
insured as a scheme or device to waste time until
the evidence which may be used against him is
destroyed.
(Sun Insurance Office, Ltd. v. CA, 195 SCRA)
4. In CMVLI, the written notice of claim must
be filed within 6 months from the date of
the accident otherwise the claim is deemed
waived.
The suit for damages either with the proper

court or with the Insurance Commissioner
should be filed within 1 year from the date
of the denial of the claim by the insurer,
otherwise claimant’s right of action shall
prescribe. (Sec. 384)
End of the report

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CLAIMS SETTLEMENT

Indemnification of the loss of the insured.

“The insured who has honestly suffered loss or

The liability of the insurer attaches the moment

He evaluates the claim and makes proper

Independent Adjuster or Public

(3) If it is found, after notice and an

* Note: rate is12% since the legal rate by MB is

If such ascertainment is not had or made

Let’s summarize the difference

a. Maturing upon the expiration of the term – The proceeds are

b. Maturing at the death of the insured, occurring prior to the

Re: moral damages and attorney’s

Any person who violates this section shall be punished by

“Fraudulently” in par. b indicates that a claim

 The insured is not entitled to the return of

The suit for damages either with the proper

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