Chapter 8 Claims Settlement and Subrogation

Claims Settlement

Fraudulent Claim

Prescriptive Period

Subrogation

Claim Settlement

The indemnification of that suffered by the insured

Claim Settlement in Life Insurance

1. The proceeds shall be paid immediately upon the maturity of the

policy

2. The policy may provide that the proceeds are made payable in
installments or as an annuity

3. If the policy matures by the death of the insured, the proceeds

thereof shall be paid within 60 days after presentation of the claim
and filing of the proof of the death of the insured.

Claim Settlement in Property Insurance

1. Proceeds shall be paid within 30 days after proof of loss is

received by the insurer and ascertainment of the loss or damage is
made either by agreement or by arbitration.

2. If no ascertainment is made within 60 days after receipt of proof

of loss, it shall be paid within 90 days after such receipt
Note: Settlement of claim can be made with or without the
participation of an insurance adjuster

Adjuster- the person employed by the insurer in property and

casualty insurance to settle in behalf of the insurer the claim of the
insured

- Evaluates the insurance claim and makes the proper

recommendation to the insurer

Who may claim:

1. Insured

2. Reinsured

3. Third Party who has a claim against the insured

Effect of Refusal or Failure to pay the claim, loss or damage

1. The beneficiary/ assured is entitled to collect interest on the

proceeds of the policy for the duration of the delay at the rate of
12% (twice the ceiling prescribed by the Monetary Board)

Purpose of the rule:

To eliminate unfair claim settlement practices

Section 247 of the Insurance Code

“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”.
Unfair Settlement Practices:

1. Knowingly misrepresenting to claimant’s pertinent facts or policy

provisions relating to coverage at issue

2. Failing to acknowledge with reasonable promptness pertinent

communications with respect to claims arising under its policies

3. Failing to adopt and implement reasonable standards for the

prompt investigation of claims arising under its policies

4. Not attempting in good faith to effectuate prompt, fair, and

equitable settlement of claims submitted in which liability has
become reasonably clear; or

5. 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

Sanctions for the Insurance Companies Engaged in Unfair

Settlement Practices

1. Suspension; or

2. Revocation of the certificate of authority by the Insurance

Commission

Rules on the prescriptive period for filing a complaint for the

recovery of the proceeds of the insurance

1. Stipulation of the parties

- Limitation- less than 1 year

Section 63 of the Insurance Code:

A condition, stipulation, or agreement in any policy of insurance,

limiting the time for commencing an action thereunder to a period of
less than 1 year from the time when the cause of action accrues is
void

2. No stipulation- Article 1144 of the New Civil Code – 10 years

Article 1144 of the New Civil Code

The following actions must be brought within 10 years from the time
the right of action accrues:

1. Upon a written contract;

2. Upon an obligation created by law;

3. Upon a judgment.

3. In case of Compulsory Third Party Liability Insurance under

section 397 of the Insurance Code- 1 year

Accrual

*Right of the insured to the payment of his loss accrues from the
happening of the loss

*Cause of action- FINAL REJECTION (initial rejection by the

insurance company)

Stipulation- Any action or suit must be filed within 1 year after the
rejection of the claim

February 28 1994- insurance company denied the claim

April 3, 1994- the insured sought reconsideration of the denial

(denied as well)
March 20, 1995- The insured initiated a judicial action against the
insurance company

THE FILING OF THE CASE ON MARCH 20, 1995 WAS ALREADY

TIME- BARRRED.

╺ determining the liability of the insurance company and the

amount of the payment
The objectives of any claim settlement is to verify the loss and that it was covered by the
policy; to pay the claim promptly and fairly; and, in some cases, to provide personal
assistance to the insured. Investigations are necessary to prevent fraud and to reduce
exaggerated claims: in essence, to verify the amount of the loss. Fair and prompt
payment is required because that is the function of insurance. If insurance companies
could wiggle their way out of most payments, people would not buy insurance, since they
could never be sure that they would be paid. Additionally, because insurance serves an
important function in any society, states have laws prohibiting unfair claims
practices, including: refusing any claim without an adequate investigation; not paying
promptly and fairly when liability is clear; routinely underpaying claims, forcing many of
the insured to file lawsuits to recover the underpayments. An insurance company that
loses many of these underpayment lawsuits is good evidence that the insurance company
is routinely underpaying its claims.

Claim Settlement

When presented with a claim, the insurance company either pays the claim or denies it.
Most claims are paid, but a few will be denied, either because the loss did not occur or
because it is not covered by the policy. A loss may not be covered because it was
excluded, the policy lapsed, the loss was not within the scope of the insurance
agreement, or the insured violated a policy condition.