Published 22 June 2018, The Daily Tribune

Every now and then, beneficiaries of insurance policy, life or property, complain about the inordinate delay in the processing of their insurance claims. Delay, in this context, means payment beyond the period set out by law. Within what period then should the insurer pay the beneficiary in case the risk insured against occurs and what are the monetary consequences in case of delay ?

Under the Insurance Code, the proceeds of a life insurance policy shall be paid immediately upon maturity of the policy, unless the proceeds are payable by installments or as an annuity, in which case installments or annuities shall be paid as they become due. However, if the policy matures by the death of the insured, payment should be made within 60 days from presentation of claim and filing of proof of death. (Article 248). For property insurance, payment should be made within 30 days after proof of loss is received by insurer and ascertainment of loss or damage is made either by agreement or arbitration but if such ascertainment is not had or made within 60 days after receipt by the insurer of the proof of loss, then loss or damage shall be paid within 90 days after such receipt. Otherwise, the beneficiary shall be entitled to collect interest on the proceeds of the policy for the duration of the delay at the rate of twice the ceiling imposed by the Monetary Board of the Bangko Sentral ng Pilipinas (“BSP”) (Article 249). What is this interest rate?  The Supreme Court held in Stronghold Insurance vs Pamana Island Resort Hotel and Marina Club, G.R. No. 174838, June 1, 2016, that given the provisions of the Insurance Code, which is a special law, the applicable rate of interest shall be that imposed in a loan or forbearance of money as imposed by the Bangko Sentral ng Pilipinas (BSP), even irrespective of the nature of the insurer’s liability. In the past years, this rate was at 12% per annum. However, in light of Circular No. 799 issued by the BSP on June 21, 2013 decreasing interest on loans or forbearance of money, the rate of 12% per annum has been reduced to 6% per annum from the time of the circular’s effectivity on July 1, 2013.  Since the penalty is pegged at twice the legal rate, then the insurer is liable to pay 12% interest on the insurance proceeds for the duration of the delay. The monetary consequences of delay hopefully deter inordinate processing of insurance claims.

Speaking of claims settlement, here are some practical reminders to protect your interest.

  1. Notice of loss must be given to the insurer within the period set out by the policy. Submission of the written notice of loss is a condition precedent in claiming the proceeds of the policy. Notice may also be given to the insurer’s agent, if one is actually or deemed appointed. In one case, the insured opened an account with a bank where, at the same time, he was automatically covered by an insurance policy against disability or death issued by the subsidiary insurance company of the depository bank. The bank was timely informed of the death of the depositor when his mother inquired about the deposit. It was only after two years thereafter that the mother discovered the Personal Accident Insurance Policy. Upon notice, the insurer refused to pay citing the failure of the beneficiary to notify the insurer about the death within the period set by the policy. The Supreme Court ruled against the insurer holding that the depositor bank acted as an agent of the insurer. Under the doctrine of representation, notice to the agent is notice to the principal. (Bank of the Philippine Islands vs Laingo, G.R. No. 205206, March 16, 2016)
  2. Proof of loss must accompany the notice of loss. In fire insurance, the insured should not bloat his claim. Fraudulent discrepancy between the actual loss and that claimed in the proof of loss voids the insurance policy (United Merchants Corporation vs Country Bankers Insurance Corporation, G.R. No. 198588, July 11, 2012)
  3. In case of rejection of the claim, the suit should be filed within ten years from time of rejection unless the policy provides for a shorter period. A cause of action based on a written contract, like an insurance policy, prescribes in ten years. The parties, however, may stipulate for a shorter period, provided that it is not less than one year from the time the cause of action accrued.
  4. The cause of action accrues from the rejection of the claim. The insured should not file a court suit unless the insurer has acted on his claim and denied it. Otherwise, his case may be dismissed for prematurity. (Summit Guaranty and Insurance vs Hon. De Guzman, G.R. No. L-50997, June 30, 1987)
  5. The prescriptive period for the insured’s action for indemnity should be reckoned from the final rejection of the claim. The final rejection simply means denial by the insurer of the claims of the insured and not the insured’s request for reconsideration. The rejection referred to should be construed as the rejection in the first instance. (H.H. Hollero Construction vs Government Service Insurance System, G.R. No. 152334, September 24, 2014)

The bottom line is the insured should not delay: a) filing his written notice of loss, b) submitting the proof of loss, and c) instituting the court suit in case his claim is denied, beyond the periods set out by the insurance policy. Otherwise, the insured’s right to recover may be gone forever.

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